Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchanges Pricing Schedule at Options 7, Section 4, Titled Complex Order Fees and Rebates, 17123-17126 [2020-06287]
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Federal Register / Vol. 85, No. 59 / Thursday, March 26, 2020 / Notices
is unable to comply with such
Exempted Provisions; and
(3) If a transfer agent knows or
believes that it has been unable to
maintain the books and records it is
required to maintain pursuant to
Section 17A and the rules thereunder, a
complete and accurate description of
the type of books and records that were
not maintained, the names of the issuers
for whom such books and records were
not maintained, the extent of the failure
to maintain such books and records, and
the steps taken to ameliorate any such
failure to maintain such books and
records.
(b) The Exempted Provisions do not
include, and this order does not provide
relief from, Rule 17Ad–12 under the
Exchange Act. Transfer agents affected
by COVID–19 that have custody or
possession of any security holder or
issuer funds or securities shall continue
to comply with the requirements of Rule
17Ad–12 under the Exchange Act. If a
transfer agent’s operations, facilities, or
systems are significantly affected as a
result of COVID–19 such that the
transfer agent believes its compliance
with Rule 17Ad–12 could be negatively
affected, to the extent possible, all
security holder or issuer funds that
remain in the custody of the transfer
agent should be maintained in a
separate bank account held for the
exclusive benefit of security holders
until such funds are properly processed,
transferred, or remitted.
The notification required under (a)
above shall be emailed to:
tradingandmarkets@sec.gov.
The Commission encourages
registered transfer agents and the issuers
for whom they act to inform affected
security holders whom they should
contact concerning their accounts, their
access to funds or securities, and other
shareholder concerns. If feasible, issuers
and their transfer agents should place a
notice on their websites or provide toll
free numbers to respond to inquiries.
By the Commission.
J. Matthew DeLesDernier,
Assistant Secretary.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88459; File No. SR–CBOE–
2020–010]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Withdrawal
of Proposed Rule Change To Adopt
Flexible Exchange Options (‘‘FLEX
Options’’) With a Contract Multiplier of
One (‘‘FLEX Micro Options’’)
March 23, 2020.
On February 4, 2020, Cboe Exchange,
Inc. (‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Exchange Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to adopt flexible exchange
options (‘‘FLEX options’’) with a
contract multiplier of one (‘‘FLEX Micro
Options’’).
The proposed rule change was
published for comment in the Federal
Register on February 24, 2020.3 The
Commission has received no comments
on the proposed rule change. On March
11, 2020, the Exchange withdrew the
proposed rule change (SR–CBOE–2020–
010).
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.
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88443; File No. SR–ISE–
2020–12]
Self-Regulatory Organizations; Nasdaq
ISE, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend the Exchanges
Pricing Schedule at Options 7, Section
4, Titled Complex Order Fees and
Rebates
March 20, 2020.
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 88232
(Feb. 18, 2020), 85 FR 10491.
4 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
1 15
Jkt 250001
The Exchange proposes to amend the
Exchange’s Pricing Schedule at Options
7, Section 4, titled ‘‘Complex Order Fees
and Rebates.’’
The Exchange originally filed the
proposed pricing changes on March 2,
2020 (SR–ISE–2020–09). On March 10,
2020, the Exchange withdrew that filing
and submitted this filing.
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.
[FR Doc. 2020–06391 Filed 3–25–20; 8:45 am]
2 17
17:20 Mar 25, 2020
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
[FR Doc. 2020–06292 Filed 3–25–20; 8:45 am]
VerDate Sep<11>2014
notice is hereby given that on March 10,
2020, Nasdaq ISE, LLC (‘‘ISE’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘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.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.4
J. Matthew DeLesDernier,
Assistant Secretary.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
BILLING CODE 8011–01–P
17123
Sfmt 4703
The Exchange proposes to amend the
Exchange’s Pricing Schedule at Options
7, Section 4, titled ‘‘Complex Order Fees
and Rebates’’ to decrease certain rebate
tiers to attract Priority Customer
Complex Order flow to ISE.
Today, ISE offers a nine tier Priority
Customer Complex Order rebate
structure as follows:
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Federal Register / Vol. 85, No. 59 / Thursday, March 26, 2020 / Notices
Total affiliated member or affiliated entity complex order volume
(excluding crossing orders and responses to crossing orders)
calculated as a percentage of customer total consolidated volume
Priority customer complex
tier (7) (13) (16)
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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%–2.75% .........................................................................
Above 2.75% ........................................................................................
Specifically, with respect to the Tier
4 Priority Customer Complex Order
rebate, a Member must execute a
Complex Order volume percentage of
above 0.600% to 0.750% to qualify for
the $0.40 per contract rebate in Select
Symbols and a $0.75 per contract rebate
in Non-Select Symbols. Also, with
respect to the Tier 3 Priority Customer
Complex Order rebate, a Member must
execute a Complex Order volume
percentage 3 of above 0.400 to 0.600% to
qualify for a $0.35 per contract rebate in
Select Symbols and an $0.70 per
contract rebate in Non-Select Symbols.
The Exchange proposes to amend the
Tier 4 rebate from above 0.600% to
0.750% to above 0.450% to 0.750%.
Further, the Exchange proposes to make
a corresponding change to the
qualifications for the Tier 3 volume
qualification to amend it from above
0.400 to 0.600% to above 0.400 to
0.450% to align the qualifications for
Tier 3 to the qualifications proposed for
Tier 4.
Specifically, with respect to the Tier
6 Priority Customer Complex Order
rebate, a Member must execute a
Complex Order volume percentage of
above 1.000% to 1.500% to qualify for
a $0.46 per contract rebate in Select
Symbols and an $0.80 per contract
rebate in Non-Select Symbols. Also,
with respect to the Tier 7 Priority
Customer Complex Order rebate, a
Member must execute a Complex Order
volume percentage of above 1.500% to
2.000% to qualify for the $0.48 per
contract rebate in Select Symbols and an
$0.80 per contract rebate in Non-Select
Symbols. The Exchange proposes to
amend the Tier 7 volume qualification
from above 1.500% to 2.000% to above
1.350% to 2.000%. Further, the
Exchange proposes to make a
corresponding change to the
qualifications for the Tier 6 rebate to
amend it from above 1.000% to 1.500%
3 Complex Order volume percentage is described
as Total Affiliated Member or Affiliated Entity
Complex Order Volume (Excluding Crossing Orders
and Responses to Crossing Orders) calculated as a
percentage of Customer Total Consolidated Volume.
VerDate Sep<11>2014
17:20 Mar 25, 2020
Rebate for
select symbols (1)
Jkt 250001
to above 1.000% to 1.350% to align the
qualifications for Tier 6 to the
qualifications proposed for Tier 7.
Further, with respect to the Priority
Customer Complex Tier 8 rebate, a
Member must execute a Complex Order
volume percentage of above 2.000% to
2.75% to qualify for the $0.50 per
contract rebate in Select Symbols and an
$0.85 per contract rebate in Non-Select
Symbols. Also, with respect to the
Priority Customer Complex Tier 9
rebate, a Member must execute a
Complex Order volume percentage of
above 2.75% to qualify for the $0.52 per
contract rebate in Select Symbols and an
$0.85 per contract rebate in Non-Select
Symbols. The Exchange proposes to
amend the Tier 9 volume qualification
from above 2.75% to above 2.600%.
Further, the Exchange proposes to make
a corresponding change to the
qualifications for the Tier 8 rebate to
amend it from above 2.000% to 2.75%
to above 2.000% to 2.600% to align the
qualifications for Tier 8 to the
qualifications proposed for Tier 9.
The Exchange notes that all Members
may elect to qualify for the Priority
Customer Complex Order rebates by
submitting Complex Order flow to the
Exchange and earning a rebate on their
Priority Customer Complex Order
volume. Accordingly, the proposed
changes are designed to increase the
amount of Complex Order flow that
Members submit to ISE, particularly
Priority Customer Complex Order
volume, and further encourage Members
to contribute to a deeper, more liquid
market to the benefit of all market
participants.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,4 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,5 in particular, in that it
provides for the equitable allocation of
reasonable dues, fees, and other charges
among members and issuers and other
4 15
5 15
PO 00000
U.S.C. 78f(b).
U.S.C. 78f(b)(4) and (5).
Frm 00084
Fmt 4703
Sfmt 4703
($0.25)
(0.30)
(0.35)
(0.40)
(0.45)
(0.46)
(0.48)
(0.50)
(0.52)
Rebate for
non-select
symbols (1) (4)
($0.40)
(0.55)
(0.70)
(0.75)
(0.80)
(0.80)
(0.80)
(0.85)
(0.85)
persons using any facility, and is not
designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers.
The proposed changes to its Pricing
Schedule are reasonable in several
respects. As a threshold matter, the
Exchange is subject to significant
competitive forces in the market for
options transaction services that
constrain its pricing determinations in
that market. The fact that this market is
competitive has long been recognized by
the courts. In NetCoalition v. Securities
and Exchange Commission, the D.C.
Circuit stated as follows: ‘‘[n]o one
disputes that competition for order flow
is ‘fierce.’ . . . As the SEC explained,
‘[i]n the U.S. national market system,
buyers and sellers of securities, and the
broker-dealers that act as their orderrouting agents, have a wide range of
choices of where to route orders for
execution’; [and] ‘no exchange can
afford to take its market share
percentages for granted’ because ‘no
exchange possesses a monopoly,
regulatory or otherwise, in the execution
of order flow from broker dealers’
. . . .’’ 6
The Commission and the courts have
repeatedly expressed their preference
for competition over regulatory
intervention in determining prices,
products, and services in the securities
markets. In Regulation NMS, while
adopting a series of steps to improve the
current market model, the Commission
highlighted the importance of market
forces in determining prices and SRO
revenues and, also, recognized that
current regulation of the market system
‘‘has been remarkably successful in
promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 7
Numerous indicia demonstrate the
competitive nature of this market. For
6 NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir.
2010) (quoting Securities Exchange Act Release No.
59039 (December 2, 2008), 73 FR 74770, 74782–83
(December 9, 2008) (SR–NYSEArca–2006–21)).
7 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
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Federal Register / Vol. 85, No. 59 / Thursday, March 26, 2020 / Notices
example, clear substitutes to the
Exchange exist in the market for options
transaction services. The Exchange is
only one options venue to which market
participants may direct their order flow.
Competing options exchanges offer
similar tiered pricing structures to that
of the Exchange, including schedules of
rebates and fees that apply based upon
Members achieving certain volume
thresholds.8
Within this environment, market
participants can freely and often do shift
their order flow among the Exchange
and competing venues in response to
changes in their respective pricing
schedules. As such, the proposal
represents a reasonable attempt by the
Exchange to increase its liquidity and
market share relative to its competitors.
The Exchange’s proposal to decrease
the volume requirements for Priority
Customer Complex Order rebate Tiers 4,
7 and 9, and also make conforming
changes to Priority Customer Complex
Order rebate Tiers 3, 6 and 8 to align
those tier qualifications with the
proposed qualification amendments to
Tiers 4, 7 and 9, is reasonable. The
Exchange believes that the proposed
amendments to Tiers 4, 7 and 9 of the
Priority Customer Complex Order rebate
program, which lower the volume
qualifications for those tiers, represents
a reasonable attempt by the Exchange to
fortify participation in the Priority
Customer Complex Order rebate
program. In particular, the Exchange’s
proposal is intended to encourage
Members to submit additional amounts
of Priority Customer Complex Order
volume to obtain a higher rebate. The
Exchange notes that the proposed
amendments should not result in lower
rebates for any Member submitting the
same volume as the Member submitted
in the prior month. The Exchange is
lowering the qualification criteria for
various tiers within Options 7, Section
4 to provide a more deterministic
outcome for an array of Members to
qualify for the same Customer Complex
Order rebates as in prior months. The
Exchange believes that lowering the
volume requirements for Tiers 4, 7 and
9 of the Priority Customer Complex
Order rebate program will further
incentivize Members to transact
additional Complex Order flow,
including Priority Customer Complex
Order flow, to achieve higher rebates.
Lowering the volume requirements for
Tiers 4, 7, and 9 of the Priority
Customer Complex Order rebate
program makes these tiers more
8 See, generally, Nasdaq Phlx LLC and The
Nasdaq Options Market LLC as examples of options
exchanges with tiered pricing structures.
VerDate Sep<11>2014
17:20 Mar 25, 2020
Jkt 250001
achievable and attractive to existing and
potential program participants. As noted
above, the Priority Customer Complex
Order rebate program is optional and
available to all Members that choose to
transact Complex Order flow on ISE in
order to earn a rebate on their Priority
Customer Complex Order volume. To
the extent the program, as modified,
continues to attract Complex Order
volume to the Exchange, the Exchange
believes that the proposed changes
would improve the Exchange’s overall
competitiveness and strengthen its
market quality for all market
participants.
The Exchange’s proposal to decrease
the volume requirements for Priority
Customer Complex Order rebate Tiers 4,
7 and 9, and also make conforming
changes to Priority Customer Complex
Order rebate Tiers 3, 6 and 8 to align
those tier qualifications with the
proposed qualification amendments to
Tiers 4, 7 and 9, is equitable and not
unfairly discriminatory. Any Member
may choose to qualify for the rebate
program by transacting the requisite
amount of Priority Customer Complex
Order flow on ISE. By encouraging all
Members to transact significant amounts
of Priority Customer Complex Order
flow (i.e., to qualify for the higher tiers)
in order to earn a higher rebate on their
Priority Customer Complex Orders, the
Exchange seeks to provide more trading
opportunities for all market
participants, thereby promoting price
discovery, and improving the overall
market quality of the Exchange.
Furthermore, the proposed changes to
the Priority Customer Complex Order
rebate program to lower the volume
requirements for Tiers 4, 7 and 9 are
equitable and not unfairly
discriminatory because any Member
who transacts Priority Customer
Complex Order flow on ISE may qualify
for the rebates. The Tier 1 Priority
Customer Complex Order rebate does
not require a minimum amount of
volume to qualify for the rebate tier.
Any volume up to .20% would earn a
Tier 1 Priority Customer Complex Order
rebate of $0.25 for Select Symbols and
a $0.40 rebate in Non-Select Symbols.
The Exchange believes that the
proposed changes will further
incentivize all Members to transact a
significant amount of Priority Customer
Complex Order volume on ISE in order
to obtain the highest range of Priority
Customer Complex Order rebate offered
under this program. The Exchange
anticipates all Members that currently
qualify for these rebates will continue to
do so under this proposal. To the extent
the proposed changes encourage
PO 00000
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Sfmt 4703
17125
additional Members to strive for the
modified tiers and thus attract more
Priority Customer Complex Order
volume to the Exchange, this increased
order flow would improve the overall
quality and attractiveness of the
Exchange. The Exchange notes that all
market participants stand to benefit
from increased liquidity as such
increase promotes market depth,
facilitates tighter spreads and enhances
price discovery. Accordingly, the
Exchange believes that the proposed
amendments are reasonably designed to
provide further incentives for all
Members interested in meeting the tier
criteria to submit additional Priority
Customer Complex Order volume to
achieve the higher rebates.
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.
Inter-Market Competition
The proposal does not impose an
undue burden on inter-market
competition. The Exchange believes its
proposal remains competitive with
other options markets and will offer
market participants with another choice
of where to transact options. The
Exchange notes that it operates in a
highly competitive market in which
market participants can readily favor
competing venues if they deem fee
levels at a particular venue to be
excessive, or rebate opportunities
available at other venues to be more
favorable. In such an environment, the
Exchange must continually adjust its
fees to remain competitive with other
exchanges that have been exempted
from compliance with the statutory
standards applicable to exchanges.
Because competitors are free to modify
their own fees in response, and because
market participants may readily adjust
their order routing practices, the
Exchange believes that the degree to
which fee changes in this market may
impose any burden on competition is
extremely limited.
Intra-Market Competition
The proposed pricing amendments do
not impose an intra-market burden on
competition. The Exchange’s proposal
to decrease the volume requirements for
Priority Customer Complex Order rebate
Tiers 4, 7 and 9 and also make
conforming changes to the qualifications
for Tiers 3, 6 and 8 to align those
qualifications with the proposed
qualifications to Tiers 4, 7 and 9, does
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Federal Register / Vol. 85, No. 59 / Thursday, March 26, 2020 / Notices
not impose an intra-market burden on
competition. Any Member may choose
to qualify for the rebate program by
transacting the requisite amount of
Priority Customer Complex Order flow
on ISE. By encouraging all Members to
transact significant amounts of Priority
Customer Complex Order flow (i.e., to
qualify for the higher tiers) in order to
earn a rebate on their Priority Customer
Complex Orders, the Exchange seeks to
provide more trading opportunities for
all market participants, thereby
promoting price discovery, and
improving the overall market quality of
the Exchange. Furthermore, the
proposed changes to the Priority
Customer Complex Order rebate
program to lower the volume
requirements for Tiers 4, 7 and 9 are
equitable and not unfairly
discriminatory because any Member
who transacts Complex Order flow on
ISE may qualify for the rebates. The Tier
1 Priority Customer Complex Order
rebate does not require a minimum
amount of volume to qualify for the
rebate tier. Any volume up to .20%
would earn a Tier 1 Priority Customer
Complex Order rebate of $0.25 for Select
Symbols and a $0.40 rebate in NonSelect Symbols. The Exchange
anticipates all Members that currently
qualify for these rebates will continue to
do so under this proposal. The
Exchange notes that all market
participants stand to benefit from
increased liquidity as such increase
promotes market depth, facilitates
tighter spreads and enhances price
discovery.
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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,9 and Rule
19b–4(f)(2) 10 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
9 15
U.S.C. 78s(b)(3)(A)(ii).
10 17 CFR 240.19b–4(f)(2).
VerDate Sep<11>2014
18:10 Mar 25, 2020
Jkt 250001
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–2020–12 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–2020–12. 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–2020–12 and should be
submitted on or before April 16, 2020.
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Frm 00086
Fmt 4703
Sfmt 4703
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–06287 Filed 3–25–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88456; File No. SR–ISE–
2020–11]
Self-Regulatory Organizations; Nasdaq
ISE, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Related to the Removal of
Obsolete Listing Rules
March 23, 2020.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on March 18,
2020, 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
Rules at Options 2, Options Market
Participants; Options 3, Section 2, Units
of Trading and Meaning of Premium
Quotes and Orders; Options 3, Section
3, Minimum Trading Increments;
Options 4, Section 5, Series of Options
Contracts Open for Trading; Options 4A,
Section 2, Definitions; Options 4A,
Section 6, Position Limits for BroadBased Index Options; Options 4A,
Section 8, Position Limits for Foreign
Currency Index Options; Options 4A,
Section 10, Exercise Limits; Options 4A,
Section 11, Trading Sessions; Options
4A, Section 12, Terms of Index Options
Contracts; Options 6, Options Trade
Administration; Options 6C, Section 3,
Margin Requirements; Options 6C,
Section 4, Meeting Margin Calls by
Liquidation Prohibited; Options 9,
Section 4, Disruptive Quoting and
Trading Activity Prohibited; Options 9,
Section 13, Position Limits; Options 9,
Section 14, Exemptions from Position
Limits; and Options 9, Section 15,
11 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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]]>Agencies
[Federal Register Volume 85, Number 59 (Thursday, March 26, 2020)]
[Notices]
[Pages 17123-17126]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-06287]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88443; File No. SR-ISE-2020-12]
Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the
Exchanges Pricing Schedule at Options 7, Section 4, Titled Complex
Order Fees and Rebates
March 20, 2020.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on March 10, 2020, Nasdaq ISE, LLC (``ISE'' or ``Exchange'') filed with
the Securities and Exchange Commission (``SEC'' or ``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 Pricing Schedule at
Options 7, Section 4, titled ``Complex Order Fees and Rebates.''
The Exchange originally filed the proposed pricing changes on March
2, 2020 (SR-ISE-2020-09). On March 10, 2020, the Exchange withdrew that
filing and submitted this filing.
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 Exchange proposes to amend the Exchange's Pricing Schedule at
Options 7, Section 4, titled ``Complex Order Fees and Rebates'' to
decrease certain rebate tiers to attract Priority Customer Complex
Order flow to ISE.
Today, ISE offers a nine tier Priority Customer Complex Order
rebate structure as follows:
[[Page 17124]]
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Total affiliated member or
affiliated entity complex order
volume (excluding crossing orders Rebate for Rebate for non-
Priority customer complex tier \(7)\ and responses to crossing orders) select symbols select symbols
\(13)\ \(16)\ calculated as a percentage of \(1)\ \(1)\ \(4)\
customer total consolidated
volume
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Tier 1................................... 0.000%-0.200%.................... ($0.25) ($0.40)
Tier 2................................... Above 0.200%-0.400%.............. (0.30) (0.55)
Tier 3................................... Above 0.400%-0.600%.............. (0.35) (0.70)
Tier 4................................... Above 0.600%-0.750%.............. (0.40) (0.75)
Tier 5................................... Above 0.750%-1.000%.............. (0.45) (0.80)
Tier 6................................... Above 1.000%-1.500%.............. (0.46) (0.80)
Tier 7................................... Above 1.500%-2.000%.............. (0.48) (0.80)
Tier 8................................... Above 2.000%-2.75%............... (0.50) (0.85)
Tier 9................................... Above 2.75%...................... (0.52) (0.85)
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Specifically, with respect to the Tier 4 Priority Customer Complex
Order rebate, a Member must execute a Complex Order volume percentage
of above 0.600% to 0.750% to qualify for the $0.40 per contract rebate
in Select Symbols and a $0.75 per contract rebate in Non-Select
Symbols. Also, with respect to the Tier 3 Priority Customer Complex
Order rebate, a Member must execute a Complex Order volume percentage
\3\ of above 0.400 to 0.600% to qualify for a $0.35 per contract rebate
in Select Symbols and an $0.70 per contract rebate in Non-Select
Symbols. The Exchange proposes to amend the Tier 4 rebate from above
0.600% to 0.750% to above 0.450% to 0.750%. Further, the Exchange
proposes to make a corresponding change to the qualifications for the
Tier 3 volume qualification to amend it from above 0.400 to 0.600% to
above 0.400 to 0.450% to align the qualifications for Tier 3 to the
qualifications proposed for Tier 4.
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\3\ Complex Order volume percentage is described as Total
Affiliated Member or Affiliated Entity Complex Order Volume
(Excluding Crossing Orders and Responses to Crossing Orders)
calculated as a percentage of Customer Total Consolidated Volume.
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Specifically, with respect to the Tier 6 Priority Customer Complex
Order rebate, a Member must execute a Complex Order volume percentage
of above 1.000% to 1.500% to qualify for a $0.46 per contract rebate in
Select Symbols and an $0.80 per contract rebate in Non-Select Symbols.
Also, with respect to the Tier 7 Priority Customer Complex Order
rebate, a Member must execute a Complex Order volume percentage of
above 1.500% to 2.000% to qualify for the $0.48 per contract rebate in
Select Symbols and an $0.80 per contract rebate in Non-Select Symbols.
The Exchange proposes to amend the Tier 7 volume qualification from
above 1.500% to 2.000% to above 1.350% to 2.000%. Further, the Exchange
proposes to make a corresponding change to the qualifications for the
Tier 6 rebate to amend it from above 1.000% to 1.500% to above 1.000%
to 1.350% to align the qualifications for Tier 6 to the qualifications
proposed for Tier 7.
Further, with respect to the Priority Customer Complex Tier 8
rebate, a Member must execute a Complex Order volume percentage of
above 2.000% to 2.75% to qualify for the $0.50 per contract rebate in
Select Symbols and an $0.85 per contract rebate in Non-Select Symbols.
Also, with respect to the Priority Customer Complex Tier 9 rebate, a
Member must execute a Complex Order volume percentage of above 2.75% to
qualify for the $0.52 per contract rebate in Select Symbols and an
$0.85 per contract rebate in Non-Select Symbols. The Exchange proposes
to amend the Tier 9 volume qualification from above 2.75% to above
2.600%. Further, the Exchange proposes to make a corresponding change
to the qualifications for the Tier 8 rebate to amend it from above
2.000% to 2.75% to above 2.000% to 2.600% to align the qualifications
for Tier 8 to the qualifications proposed for Tier 9.
The Exchange notes that all Members may elect to qualify for the
Priority Customer Complex Order rebates by submitting Complex Order
flow to the Exchange and earning a rebate on their Priority Customer
Complex Order volume. Accordingly, the proposed changes are designed to
increase the amount of Complex Order flow that Members submit to ISE,
particularly Priority Customer Complex Order volume, and further
encourage Members to contribute to a deeper, more liquid market to the
benefit of all market participants.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\4\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,\5\ 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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\4\ 15 U.S.C. 78f(b).
\5\ 15 U.S.C. 78f(b)(4) and (5).
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The proposed changes to its Pricing Schedule are reasonable in
several respects. As a threshold matter, the Exchange is subject to
significant competitive forces in the market for options transaction
services that constrain its pricing determinations in that market. The
fact that this market is competitive has long been recognized by the
courts. In NetCoalition v. Securities and Exchange Commission, the D.C.
Circuit stated as follows: ``[n]o one disputes that competition for
order flow is `fierce.' . . . As the SEC explained, `[i]n the U.S.
national market system, buyers and sellers of securities, and the
broker-dealers that act as their order-routing agents, have a wide
range of choices of where to route orders for execution'; [and] `no
exchange can afford to take its market share percentages for granted'
because `no exchange possesses a monopoly, regulatory or otherwise, in
the execution of order flow from broker dealers' . . . .'' \6\
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\6\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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The Commission and the courts have repeatedly expressed their
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. In Regulation
NMS, while adopting a series of steps to improve the current market
model, the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \7\
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\7\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70
FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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Numerous indicia demonstrate the competitive nature of this market.
For
[[Page 17125]]
example, clear substitutes to the Exchange exist in the market for
options transaction services. The Exchange is only one options venue to
which market participants may direct their order flow. Competing
options exchanges offer similar tiered pricing structures to that of
the Exchange, including schedules of rebates and fees that apply based
upon Members achieving certain volume thresholds.\8\
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\8\ See, generally, Nasdaq Phlx LLC and The Nasdaq Options
Market LLC as examples of options exchanges with tiered pricing
structures.
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Within this environment, market participants can freely and often
do shift their order flow among the Exchange and competing venues in
response to changes in their respective pricing schedules. As such, the
proposal represents a reasonable attempt by the Exchange to increase
its liquidity and market share relative to its competitors.
The Exchange's proposal to decrease the volume requirements for
Priority Customer Complex Order rebate Tiers 4, 7 and 9, and also make
conforming changes to Priority Customer Complex Order rebate Tiers 3, 6
and 8 to align those tier qualifications with the proposed
qualification amendments to Tiers 4, 7 and 9, is reasonable. The
Exchange believes that the proposed amendments to Tiers 4, 7 and 9 of
the Priority Customer Complex Order rebate program, which lower the
volume qualifications for those tiers, represents a reasonable attempt
by the Exchange to fortify participation in the Priority Customer
Complex Order rebate program. In particular, the Exchange's proposal is
intended to encourage Members to submit additional amounts of Priority
Customer Complex Order volume to obtain a higher rebate. The Exchange
notes that the proposed amendments should not result in lower rebates
for any Member submitting the same volume as the Member submitted in
the prior month. The Exchange is lowering the qualification criteria
for various tiers within Options 7, Section 4 to provide a more
deterministic outcome for an array of Members to qualify for the same
Customer Complex Order rebates as in prior months. The Exchange
believes that lowering the volume requirements for Tiers 4, 7 and 9 of
the Priority Customer Complex Order rebate program will further
incentivize Members to transact additional Complex Order flow,
including Priority Customer Complex Order flow, to achieve higher
rebates. Lowering the volume requirements for Tiers 4, 7, and 9 of the
Priority Customer Complex Order rebate program makes these tiers more
achievable and attractive to existing and potential program
participants. As noted above, the Priority Customer Complex Order
rebate program is optional and available to all Members that choose to
transact Complex Order flow on ISE in order to earn a rebate on their
Priority Customer Complex Order volume. To the extent the program, as
modified, continues to attract Complex Order volume to the Exchange,
the Exchange believes that the proposed changes would improve the
Exchange's overall competitiveness and strengthen its market quality
for all market participants.
The Exchange's proposal to decrease the volume requirements for
Priority Customer Complex Order rebate Tiers 4, 7 and 9, and also make
conforming changes to Priority Customer Complex Order rebate Tiers 3, 6
and 8 to align those tier qualifications with the proposed
qualification amendments to Tiers 4, 7 and 9, is equitable and not
unfairly discriminatory. Any Member may choose to qualify for the
rebate program by transacting the requisite amount of Priority Customer
Complex Order flow on ISE. By encouraging all Members to transact
significant amounts of Priority Customer Complex Order flow (i.e., to
qualify for the higher tiers) in order to earn a higher rebate on their
Priority Customer Complex Orders, the Exchange seeks to provide more
trading opportunities for all market participants, thereby promoting
price discovery, and improving the overall market quality of the
Exchange. Furthermore, the proposed changes to the Priority Customer
Complex Order rebate program to lower the volume requirements for Tiers
4, 7 and 9 are equitable and not unfairly discriminatory because any
Member who transacts Priority Customer Complex Order flow on ISE may
qualify for the rebates. The Tier 1 Priority Customer Complex Order
rebate does not require a minimum amount of volume to qualify for the
rebate tier. Any volume up to .20% would earn a Tier 1 Priority
Customer Complex Order rebate of $0.25 for Select Symbols and a $0.40
rebate in Non-Select Symbols. The Exchange believes that the proposed
changes will further incentivize all Members to transact a significant
amount of Priority Customer Complex Order volume on ISE in order to
obtain the highest range of Priority Customer Complex Order rebate
offered under this program. The Exchange anticipates all Members that
currently qualify for these rebates will continue to do so under this
proposal. To the extent the proposed changes encourage additional
Members to strive for the modified tiers and thus attract more Priority
Customer Complex Order volume to the Exchange, this increased order
flow would improve the overall quality and attractiveness of the
Exchange. The Exchange notes that all market participants stand to
benefit from increased liquidity as such increase promotes market
depth, facilitates tighter spreads and enhances price discovery.
Accordingly, the Exchange believes that the proposed amendments are
reasonably designed to provide further incentives for all Members
interested in meeting the tier criteria to submit additional Priority
Customer Complex Order volume to achieve the higher rebates.
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.
Inter-Market Competition
The proposal does not impose an undue burden on inter-market
competition. The Exchange believes its proposal remains competitive
with other options markets and will offer market participants with
another choice of where to transact options. The Exchange notes that it
operates in a highly competitive market in which market participants
can readily favor competing venues if they deem fee levels at a
particular venue to be excessive, or rebate opportunities available at
other venues to be more favorable. In such an environment, the Exchange
must continually adjust its fees to remain competitive with other
exchanges that have been exempted from compliance with the statutory
standards applicable to exchanges. Because competitors are free to
modify their own fees in response, and because market participants may
readily adjust their order routing practices, the Exchange believes
that the degree to which fee changes in this market may impose any
burden on competition is extremely limited.
Intra-Market Competition
The proposed pricing amendments do not impose an intra-market
burden on competition. The Exchange's proposal to decrease the volume
requirements for Priority Customer Complex Order rebate Tiers 4, 7 and
9 and also make conforming changes to the qualifications for Tiers 3, 6
and 8 to align those qualifications with the proposed qualifications to
Tiers 4, 7 and 9, does
[[Page 17126]]
not impose an intra-market burden on competition. Any Member may choose
to qualify for the rebate program by transacting the requisite amount
of Priority Customer Complex Order flow on ISE. By encouraging all
Members to transact significant amounts of Priority Customer Complex
Order flow (i.e., to qualify for the higher tiers) in order to earn a
rebate on their Priority Customer Complex Orders, the Exchange seeks to
provide more trading opportunities for all market participants, thereby
promoting price discovery, and improving the overall market quality of
the Exchange. Furthermore, the proposed changes to the Priority
Customer Complex Order rebate program to lower the volume requirements
for Tiers 4, 7 and 9 are equitable and not unfairly discriminatory
because any Member who transacts Complex Order flow on ISE may qualify
for the rebates. The Tier 1 Priority Customer Complex Order rebate does
not require a minimum amount of volume to qualify for the rebate tier.
Any volume up to .20% would earn a Tier 1 Priority Customer Complex
Order rebate of $0.25 for Select Symbols and a $0.40 rebate in Non-
Select Symbols. The Exchange anticipates all Members that currently
qualify for these rebates will continue to do so under this proposal.
The Exchange notes that all market participants stand to benefit from
increased liquidity as such increase promotes market depth, facilitates
tighter spreads and enhances price discovery.
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,\9\ and Rule 19b-4(f)(2) \10\ 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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\9\ 15 U.S.C. 78s(b)(3)(A)(ii).
\10\ 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-2020-12 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-2020-12. 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-2020-12 and should be submitted on
or before April 16, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-06287 Filed 3-25-20; 8:45 am]
BILLING CODE 8011-01-P
