Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Market Maker Plus Program Under Options 7, Section 3, 25097-25100 [2019-11235]
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Federal Register / Vol. 84, No. 104 / Thursday, May 30, 2019 / Notices
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
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
Paper Comments
jbell on DSK3GLQ082PROD with NOTICES
• 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–NYSEArca–2019–35. 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
18:08 May 29, 2019
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.28
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019–11234 Filed 5–29–19; 8:45 am]
BILLING CODE 8011–01–P
• 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–
NYSEArca–2019–35 on the subject line.
VerDate Sep<11>2014
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–NYSEArca–2019–35 and
should be submitted on or before June
20, 2019.
Jkt 247001
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–85923; File No. SR–ISE–
2019–15]
Self-Regulatory Organizations; Nasdaq
ISE, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend the
Exchange’s Market Maker Plus
Program Under Options 7, Section 3
May 23, 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 May 10,
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 the
Exchange’s Market Maker Plus program
under Options 7, Section 3.
The text of the proposed rule change
is available on the Exchange’s website at
28 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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25097
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 qualifications for
Market Makers to achieving Market
Maker Plus status.
The Exchange initially filed the
proposed pricing changes on May 1,
2019 (SR–ISE–2019–13). On May 10,
2019, the Exchange withdrew that filing
and submitted this filing.
As set forth in note 5 under Section
3 of the Pricing Schedule, the Exchange
operates a Market Maker Plus program
for regular orders in Select Symbols 3
that provides the below tiered rebates to
Market Makers 4 based on time spent
quoting at the National Best Bid or
National Best Offer (‘‘NBBO’’).5 This
program is designed to reward Market
Makers that contribute to market quality
by maintaining tight markets in Select
Symbols.
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 If a Market Maker would qualify for a different
Market Maker Plus tier in each of the two
successive 30 calendar day periods, then the lower
of the two Market Maker Plus tier rebates shall
apply to all contracts. The Market Maker Plus tiered
rebate amounts and the specified percentage
thresholds outlined in this filing will remain
unchanged under this proposal.
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Federal Register / Vol. 84, No. 104 / Thursday, May 30, 2019 / Notices
SELECT SYMBOLS OTHER THAN SPY, QQQ, IWM, AMZN, FB, AND NVDA
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
Regular
Maker rebate
Market Maker Plus tier (specified Percentage)
Tier
Tier
Tier
Tier
1
2
3
4
(70%
(80%
(85%
(90%
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)
AMZN, FB, AND NVDA
Market Maker Plus tier
(specified percentage)
Maker rebate
Tier 1 (70% to less than 85%) ............................................................................................................................................................
Tier 2 (85% to less than 95%) ............................................................................................................................................................
Tier 3 (95% or greater) ........................................................................................................................................................................
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Market Makers are evaluated each
trading day for the percentage of time
spent on the NBBO for qualifying series
that expire in two successive thirty
calendar day periods beginning on that
trading day.6 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.7
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. Thus, as
currently implemented in the
Exchange’s billing system, the rebates
are applied across the entire firm based
on the highest Market Maker Plus tier
achieved by one of the firm’s badge/
suffix combination in a particular
symbol within a particular billing
6 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.
7 Thus, for example, on May 1 the periods
referenced above would include all expirations: (1)
From May 1–May 30 and (2) from May 31–June 29.
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18:08 May 29, 2019
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month.8 Furthermore, a Market Maker’s
worst quoting day each month for each
of the two successive periods described
above, on a per symbol basis, is
excluded in calculating whether a
Market Maker qualifies for this rebate.9
While the Exchange believes that the
Market Maker Plus program has been
successful overall in encouraging better
market quality in Select Symbols, and
that the language selecting the highest
badge/suffix combination of a firm seeks
to reward the Market Maker for
consistent quoting, the Exchange has
also identified certain instances where
allowing the program benefits to accrue
to all badge/suffix combinations once a
single badge/suffix combination
qualifies for a Market Maker Plus tier
would not necessarily improve market
quality, particularly in instances where
a Market Maker shuts down one of its
badge/suffix combinations mid-month.
8 For example, assume Market Maker A is
configured to trade in AAPL in the following badge/
suffix combinations: 123A, 123B, and 123C, and is
on the NBBO 95% of the time in 123A, 85% of the
time in 123B, and 10% of the time in 123C. Based
on these facts, Market Maker A would qualify for
the Tier 3 rebate of $0.22 per contract in AAPL for
123A based on a time at the NBBO of 95% or
greater. In addition, Market Maker A would qualify
for the same Tier 3 rebate in AAPL for 123B and
123C as the highest tier achieved is applied to all
badge/suffix combinations.
9 In addition, the Exchange may exclude from any
member’s monthly Market Maker Plus tier
calculation any Unanticipated Event; provided that
the Exchange will only remove the day for members
that would have a lower time at the NBBO for the
specified series with the day included. See Options
7, Section 1(a)(2) for the definition of
‘‘Unanticipated Event.’’
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(0.15)
(0.18)
(0.22)
For example, assume Market Maker A
is configured to trade AAPL in the
following badge/suffix combinations:
123A, 123B, and 123C. Assume further
that Market Maker A’s performance for
the following trading days in May for
both successive 30 calendar day periods
are as follows:
• May 1: Market Maker A is at the
NBBO for 95% of the time in 123A, and
50% of the time in 123B and 123C. As
of May 1, Market Maker A would
qualify for Market Maker Plus Tier 3
based on the tier achieved by 123A.
• May 2: Market Maker A is at the
NBBO for 10% of the time in 123A,
123B, and 123C.
• May 3: Market Maker A decides to
shut down 123A, and quotes at the
NBBO for 50% of the time in 123B and
123C.
• Market Maker A is at the NBBO for
50% of the time in 123B and 123C for
the rest of May.
The Exchange currently rebates the
above example based on the Market
Maker Plus language which states that
the Exchange will apply the rebate for
the highest tier achieved for any badge/
suffix combination quoting that symbol
across all badge/suffix combinations
that the member uses to trade in that
symbol. The language also provides that
a Market Maker’s worst quoting day
each month will be thrown out. As a
result, Market Maker A would receive
the $0.22 per contract Tier 3 rebate for
May because the Exchange’s billing
system picked up 123A as the highest
achieving badge/suffix combination
within that month (which is then
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Federal Register / Vol. 84, No. 104 / Thursday, May 30, 2019 / Notices
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applied across all badge/suffix
combinations—i.e., 123B and 123C),
and also struck May 2 as its worst
quoting day. In this case, the market has
not necessarily improved in this symbol
because Market Maker A was quoting on
123A for only two days. This is further
compounded by the fact that one of
those days was thrown out under the
current rule, such that Market Maker A
only needed to quote above the Tier 3
threshold for one day in order to receive
the rebate.
The Exchange therefore proposes to
change its Market Maker Plus
qualifications to ensure that Market
Makers make quality markets for a
significant number of days within a
month. In particular, the Exchange
proposes to add the following language
in Section 3, note 5: ‘‘Only badge/suffix
combinations quoting a minimum of ten
trading days within the month will be
used to determine whether the Market
Maker Plus status has been met and the
specific tier to be applied to the Market
Maker’s performance for that month.’’
Thus under the proposal, Market
Makers would need to quote in a badge/
suffix combination for at least 10 trading
days within a given month as a
prerequisite to qualifying for Market
Maker Plus, and the Market Maker’s
quoting activity on such badge/suffix
combination would be used to
determine which Market Maker Plus tier
(if any) applies to that Market Maker for
that month.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,10 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,11 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
Market Maker Plus specification that the
highest badge/suffix combination will
be used for calculation honors the
Market Maker Plus participants in their
best efforts to improve the quality of the
markets. The Exchange, in light of the
above example and similar situations,
would like to ensure that the
participants of the Market Maker Plus
program are making quality markets for
an appreciable number of days in order
to qualify for the enhanced rebate. The
Exchange believes that the proposed
10 15
11 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4) and (5).
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18:08 May 29, 2019
Jkt 247001
changes to impose a minimum number
of trading days for quoting on a single
badge/suffix combination to include
that badge/suffix combination into the
calculation of Market Maker Plus status
are reasonable and equitable as these
changes are designed to encourage
Market Makers to make quality markets
in Select Symbols and thereby further
the goal of the Market Maker Plus
program. The Exchange believes that the
proposed minimum of ten trading days
is reasonable and equitable because it
requires a Market Maker to quote using
a badge/suffix combination for a
significant amount of days within a
month in order to receive the enhanced
rebates. The Exchange believes its
proposal is appropriate in light of how
the current program is implemented on
the billing system, and avoids situations
where members can glean program
benefits without particularly improving
market quality.
The Exchange believes that the
proposed changes to the qualifications
to Market Maker Plus are not unfairly
discriminatory as all Market Makers will
be subject to the same qualification
criteria for Market Maker Plus. The
Exchange also continues to believe that
it is not unfairly discriminatory to offer
rebates under this program to only
Market Makers since Market Makers
and, in particular, those Market Makers
that participate in the Market Maker
Plus Program and achieve Market Maker
Plus status, are subject to additional
requirements and obligations (such as
quoting obligations) 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
proposed changes are designed to
ensure that the goals of the Exchange’s
Market Maker Plus program are
furthered by ensuring that Market
Makers make quality markets in Select
Symbols for a significant amount of
days within the month. The Exchange
operates in a highly competitive market
in which market participants can
readily favor competing venues if they
deem fee levels at a particular venue to
be excessive, or rebate opportunities
available at other venues to be more
favorable. In such an environment, the
Exchange must continually adjust its
fees and rebates to remain competitive.
Because competitors are free to modify
their own fees in response, and because
market participants may readily adjust
their order routing practices, the
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25099
Exchange believes that the degree to
which fee changes in this market may
impose any burden on competition is
extremely limited.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act,12 and Rule
19b–4(f)(2) 13 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–2019–15 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–2019–15. 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
12 15
13 17
E:\FR\FM\30MYN1.SGM
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
30MYN1
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Federal Register / Vol. 84, No. 104 / Thursday, May 30, 2019 / Notices
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–2019–15 and should be
submitted on or before June 20, 2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019–11235 Filed 5–29–19; 8:45 am]
BILLING CODE 8011–01–P
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 new Rule 7.44
to operate its Retail Liquidity Program
on Pillar, the Exchange’s new
technology trading platform. The
proposed rule change is available on the
Exchange’s website at www.nyse.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
self-regulatory organization 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 those 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 parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–85930; File No. SR–NYSE–
2019–26]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change of New Rule
7.44 To Operate Its Retail Liquidity
Program on Pillar, the Exchange’s New
Technology Trading Platform
jbell on DSK3GLQ082PROD with NOTICES
May 23, 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 May 13,
2019, New York Stock Exchange LLC
(‘‘NYSE’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘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
14 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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18:08 May 29, 2019
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Rule 107C sets forth the Exchange’s
Retail Liquidity Program (the
‘‘Program’’). To support the transition of
NYSE-listed securities to the Exchange’s
Pillar trading platform, the Exchange
proposes to relocate the substance of
Rule 107C to Rule 7.44. As part of the
transition of the Program to Pillar, the
Exchange proposes the following
substantive differences: (i) Define Retail
Price Improvement Orders using Pillar
terminology based on text used by
NYSE Arca, Inc., the Exchange’s
affiliate, and new proposed rule text
that uses Pillar terminology to describe
the existing offset functionality and rank
such orders as Priority 3—Non-Display
Orders; (ii) remove unused functionality
by adopting a single category of Retail
Order and eliminating the Type 2 and
Type 3 Retail Orders; and (iii) trade
Retail Orders against eligible contra-side
orders at the best available prices rather
than a single ‘‘clean-up price’’ and
allocate resting orders at the same price
pursuant to the Exchange’s established
Pillar parity allocation process under
Rule 7.37(b).
The Exchange established the
Program on a pilot basis to attract retail
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order flow to the Exchange, and allow
such order flow to receive potential
price improvement.3 The Program is
limited to trades in NYSE-listed
securities occurring at prices equal to
and greater than $1.00 a share and was
recently approved by the Commission to
operate on a permanent, rather than
pilot, basis.4
Under Rule 107C, a class of market
participant called Retail Liquidity
Providers (‘‘RLPs’’) and non-RLP
member organizations are able to
provide potential price improvement to
retail investor orders in the form of a
non-displayed order that is priced at
least $0.001 better than the best
protected bid or offer (‘‘PBBO’’), called
a Retail Price Improvement Order
(‘‘RPI’’).5 When there is an RPI in a
particular security, the Exchange
disseminates an indicator, known as the
Retail Liquidity Identifier (‘‘RLI’’), that
such interest exists. Retail Member
Organizations (‘‘RMOs’’) can submit a
Retail Order to the Exchange, which
interacts, to the extent possible, with
available contra-side RPIs and orders
with a working price between the PBBO.
The segmentation in the Program allows
retail order flow to receive potential
price improvement as a result of their
order flow being deemed more desirable
by liquidity providers.6
Proposed Rule 7.44, Retail Liquidity
Program
The Exchange proposes that Rule 7.44
would set forth the Program under the
Exchange’s Pillar Platform Rules and
would use Pillar terminology based on
NYSE Arca, Inc. (‘‘NYSE Arca’’) Rule
7.44–E. Except for the differences
described below, proposed Rule 7.44 is
substantively based on Rule 107C:
Proposed Rules 7.44(a)(1)–(3), 7.44(b),
7.44(c), 7.44(d), 7.44(e), 7.44(f), 7.44(g),
7.44(h), 7.44(i), and 7.44(j) are based on
current rules 107C(a)(1)–(3), 107C (b),
107C (c), 107C (d), 107C (e), 107C (f),
107C (g), 107C (h), 107C (i), and 107C
(j), respectively, with only minor nonsubstantive differences to replace the
term ‘‘shall’’ with ‘‘will’’ and update
internal cross-references to the Pillar
rule. Proposed Rule 7.44(m) is based on
the last sentence of current Rule 107C(l).
3 See Securities Exchange Act Release No. 67347
(July 3, 2012), 77 FR 40673 (July 10, 2012) (SR–
NYSE–2011–55) (‘‘RLP Pilot Approval Order’’).
4 See Securities Exchange Act Release No. 85160
(February 15, 2019), 84 FR 5754 (February 22, 2019)
(SR–NYSE–2018–28) (‘‘RLP Permanent Approval
Order’’).
5 See Rule 107C(a)(4). The Program also allows for
RLPs to register with the Exchange. However, any
firm can enter RPI orders into the system.
6 RLP Pilot Approval Order, 77 FR at 40679–
40680.
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]]>Agencies
[Federal Register Volume 84, Number 104 (Thursday, May 30, 2019)]
[Notices]
[Pages 25097-25100]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-11235]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85923; File No. SR-ISE-2019-15]
Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the
Exchange's Market Maker Plus Program Under Options 7, Section 3
May 23, 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 May 10, 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 the Exchange's Market Maker Plus
program under Options 7, Section 3.
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
qualifications for Market Makers to achieving Market Maker Plus status.
The Exchange initially filed the proposed pricing changes on May 1,
2019 (SR-ISE-2019-13). On May 10, 2019, the Exchange withdrew that
filing and submitted this filing.
As set forth in note 5 under Section 3 of the Pricing Schedule, the
Exchange operates a Market Maker Plus program for regular orders in
Select Symbols \3\ that provides the below tiered rebates to Market
Makers \4\ based on time spent quoting at the National Best Bid or
National Best Offer (``NBBO'').\5\ This program is designed to reward
Market Makers that contribute to market quality by maintaining tight
markets in Select Symbols.
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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\ If a Market Maker would qualify for a different Market Maker
Plus tier in each of the two successive 30 calendar day periods,
then the lower of the two Market Maker Plus tier rebates shall apply
to all contracts. The Market Maker Plus tiered rebate amounts and
the specified percentage thresholds outlined in this filing will
remain unchanged under this proposal.
[[Page 25098]]
Select Symbols Other Than SPY, QQQ, IWM, AMZN, FB, and NVDA
------------------------------------------------------------------------
Market Maker Plus tier (specified percentage) Maker rebate
------------------------------------------------------------------------
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)
------------------------------------------------------------------------
SPY, QQQ, and IWM
------------------------------------------------------------------------
Market Maker Plus tier (specified Regular Maker Linked Maker
Percentage) rebate rebate
------------------------------------------------------------------------
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)
------------------------------------------------------------------------
AMZN, FB, and NVDA
------------------------------------------------------------------------
Market Maker Plus tier (specified percentage) Maker rebate
------------------------------------------------------------------------
Tier 1 (70% to less than 85%)........................... (0.15)
Tier 2 (85% to less than 95%)........................... (0.18)
Tier 3 (95% or greater)................................. (0.22)
------------------------------------------------------------------------
Market Makers are evaluated each trading day for the percentage of
time spent on the NBBO for qualifying series that expire in two
successive thirty calendar day periods beginning on that trading
day.\6\ 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.\7\
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\6\ 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.
\7\ Thus, for example, on May 1 the periods referenced above
would include all expirations: (1) From May 1-May 30 and (2) from
May 31-June 29.
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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. Thus,
as currently implemented in the Exchange's billing system, the rebates
are applied across the entire firm based on the highest Market Maker
Plus tier achieved by one of the firm's badge/suffix combination in a
particular symbol within a particular billing month.\8\ Furthermore, a
Market Maker's worst quoting day each month for each of the two
successive periods described above, on a per symbol basis, is excluded
in calculating whether a Market Maker qualifies for this rebate.\9\
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\8\ For example, assume Market Maker A is configured to trade in
AAPL in the following badge/suffix combinations: 123A, 123B, and
123C, and is on the NBBO 95% of the time in 123A, 85% of the time in
123B, and 10% of the time in 123C. Based on these facts, Market
Maker A would qualify for the Tier 3 rebate of $0.22 per contract in
AAPL for 123A based on a time at the NBBO of 95% or greater. In
addition, Market Maker A would qualify for the same Tier 3 rebate in
AAPL for 123B and 123C as the highest tier achieved is applied to
all badge/suffix combinations.
\9\ In addition, the Exchange may exclude from any member's
monthly Market Maker Plus tier calculation any Unanticipated Event;
provided that the Exchange will only remove the day for members that
would have a lower time at the NBBO for the specified series with
the day included. See Options 7, Section 1(a)(2) for the definition
of ``Unanticipated Event.''
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While the Exchange believes that the Market Maker Plus program has
been successful overall in encouraging better market quality in Select
Symbols, and that the language selecting the highest badge/suffix
combination of a firm seeks to reward the Market Maker for consistent
quoting, the Exchange has also identified certain instances where
allowing the program benefits to accrue to all badge/suffix
combinations once a single badge/suffix combination qualifies for a
Market Maker Plus tier would not necessarily improve market quality,
particularly in instances where a Market Maker shuts down one of its
badge/suffix combinations mid-month.
For example, assume Market Maker A is configured to trade AAPL in
the following badge/suffix combinations: 123A, 123B, and 123C. Assume
further that Market Maker A's performance for the following trading
days in May for both successive 30 calendar day periods are as follows:
May 1: Market Maker A is at the NBBO for 95% of the time
in 123A, and 50% of the time in 123B and 123C. As of May 1, Market
Maker A would qualify for Market Maker Plus Tier 3 based on the tier
achieved by 123A.
May 2: Market Maker A is at the NBBO for 10% of the time
in 123A, 123B, and 123C.
May 3: Market Maker A decides to shut down 123A, and
quotes at the NBBO for 50% of the time in 123B and 123C.
Market Maker A is at the NBBO for 50% of the time in 123B
and 123C for the rest of May.
The Exchange currently rebates the above example based on the
Market Maker Plus language which states that the Exchange will apply
the rebate for the highest tier achieved for any badge/suffix
combination quoting that symbol across all badge/suffix combinations
that the member uses to trade in that symbol. The language also
provides that a Market Maker's worst quoting day each month will be
thrown out. As a result, Market Maker A would receive the $0.22 per
contract Tier 3 rebate for May because the Exchange's billing system
picked up 123A as the highest achieving badge/suffix combination within
that month (which is then
[[Page 25099]]
applied across all badge/suffix combinations--i.e., 123B and 123C), and
also struck May 2 as its worst quoting day. In this case, the market
has not necessarily improved in this symbol because Market Maker A was
quoting on 123A for only two days. This is further compounded by the
fact that one of those days was thrown out under the current rule, such
that Market Maker A only needed to quote above the Tier 3 threshold for
one day in order to receive the rebate.
The Exchange therefore proposes to change its Market Maker Plus
qualifications to ensure that Market Makers make quality markets for a
significant number of days within a month. In particular, the Exchange
proposes to add the following language in Section 3, note 5: ``Only
badge/suffix combinations quoting a minimum of ten trading days within
the month will be used to determine whether the Market Maker Plus
status has been met and the specific tier to be applied to the Market
Maker's performance for that month.'' Thus under the proposal, Market
Makers would need to quote in a badge/suffix combination for at least
10 trading days within a given month as a prerequisite to qualifying
for Market Maker Plus, and the Market Maker's quoting activity on such
badge/suffix combination would be used to determine which Market Maker
Plus tier (if any) applies to that Market Maker for that month.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\10\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\11\ 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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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes that the Market Maker Plus specification that
the highest badge/suffix combination will be used for calculation
honors the Market Maker Plus participants in their best efforts to
improve the quality of the markets. The Exchange, in light of the above
example and similar situations, would like to ensure that the
participants of the Market Maker Plus program are making quality
markets for an appreciable number of days in order to qualify for the
enhanced rebate. The Exchange believes that the proposed changes to
impose a minimum number of trading days for quoting on a single badge/
suffix combination to include that badge/suffix combination into the
calculation of Market Maker Plus status are reasonable and equitable as
these changes are designed to encourage Market Makers to make quality
markets in Select Symbols and thereby further the goal of the Market
Maker Plus program. The Exchange believes that the proposed minimum of
ten trading days is reasonable and equitable because it requires a
Market Maker to quote using a badge/suffix combination for a
significant amount of days within a month in order to receive the
enhanced rebates. The Exchange believes its proposal is appropriate in
light of how the current program is implemented on the billing system,
and avoids situations where members can glean program benefits without
particularly improving market quality.
The Exchange believes that the proposed changes to the
qualifications to Market Maker Plus are not unfairly discriminatory as
all Market Makers will be subject to the same qualification criteria
for Market Maker Plus. The Exchange also continues to believe that it
is not unfairly discriminatory to offer rebates under this program to
only Market Makers since Market Makers and, in particular, those Market
Makers that participate in the Market Maker Plus Program and achieve
Market Maker Plus status, are subject to additional requirements and
obligations (such as quoting obligations) 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 proposed changes are
designed to ensure that the goals of the Exchange's Market Maker Plus
program are furthered by ensuring that Market Makers make quality
markets in Select Symbols for a significant amount of days within the
month. The Exchange operates in a highly competitive market in which
market participants can readily favor competing venues if they deem fee
levels at a particular venue to be excessive, or rebate opportunities
available at other venues to be more favorable. In such an environment,
the Exchange must continually adjust its fees and rebates to remain
competitive. Because competitors are free to modify their own fees in
response, and because market participants may readily adjust their
order routing practices, the Exchange believes that the degree to which
fee changes in this market may impose any burden on competition is
extremely limited.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act,\12\ and Rule 19b-4(f)(2) \13\ 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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\12\ 15 U.S.C. 78s(b)(3)(A)(ii).
\13\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-ISE-2019-15 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-2019-15. 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
[[Page 25100]]
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-
2019-15 and should be submitted on or before June 20, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-11235 Filed 5-29-19; 8:45 am]
BILLING CODE 8011-01-P
