Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend ISE's Pricing Schedule at Options 7, Section 5, for NQX Index Options Fees and Rebates for Regular and Complex Orders, 28918-28921 [2021-11290]
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28918
Federal Register / Vol. 86, No. 102 / Friday, May 28, 2021 / Notices
public attendance. The public is invited
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COMMISSION
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[FR Doc. 2021–11485 Filed 5–26–21; 4:15 pm]
BILLING CODE 7590–01–P
The Closed
Meeting scheduled for Thursday, May
27, 2021 at 2:00 p.m., has been
cancelled.
CHANGES IN THE MEETING:
CONTACT PERSON FOR MORE INFORMATION:
For further information; please contact
Vanessa A. Countryman from the Office
of the Secretary at (202) 551–5400.
Dated: May 26, 2021.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2021–11500 Filed 5–26–21; 4:15 pm]
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
ISE’s Pricing Schedule at Options 7,
Section 5, Index Options Fees and
Rebates.
The Exchange originally filed the
proposed pricing change on April 30,
2021 (SR–ISE–2021–10). On May 11,
2021, 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://listingcenter.nasdaq.com/
rulebook/ise/rules, 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
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91976; File No. SR–ISE–
2021–11]
Self-Regulatory Organizations; Nasdaq
ISE, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend ISE’s Pricing
Schedule at Options 7, Section 5, for
NQX Index Options Fees and Rebates
for Regular and Complex Orders
May 24, 2021.
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 11,
2021, 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, II, and
III, below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
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
Options 7, Section 5, Index Options
Fees and Rebates. Specifically, the
Exchange proposes to amend Part B,
NQX Index Options Fees and Rebates
for Regular and Complex Orders. NQX
is a proprietary index based on 1⁄5 the
value of the Nasdaq–100 Index.
Currently, the fees and rebates
assessed for NQX regular and complex
orders are as follows:
Maker
fee/rebate
Market participant
Market Maker ...........................................................................................................................................................
Market Maker (for orders sent by Electronic Access Members) .............................................................................
Non-Nasdaq ISE Market Maker (FarMM) ...............................................................................................................
Firm Proprietary/Broker-Dealer ................................................................................................................................
Professional Customer ............................................................................................................................................
1 15
U.S.C. 78s(b)(1).
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CFR 240.19b–4.
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($0.25)
(0.25)
0.25
0.25
0.25
Taker
fee/rebate
$0.00
0.00
0.25
0.25
0.25
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Federal Register / Vol. 86, No. 102 / Friday, May 28, 2021 / Notices
Maker
fee/rebate
Market participant
Priority Customer .....................................................................................................................................................
NQX Taker Fees apply to the
originating and contra side of Crossing
Orders and to Responses to Crossing
Orders. The Exchange proposes to
amend this pricing.
First, the Exchange proposes to
amend the NQX regular and complex
order pricing for Market Makers,3
including for orders sent by Electronic
Access Members, to remove the current
Maker Rebates of $0.25 per contract.
The Exchange proposes to instead assess
a Maker Fee of $0.25 per contract to
Market Makers, including for orders
sent by Electronic Access Members,
similar to other Non-Priority
Customers 4 in NQX. Since no market
participants would be subject to an NQX
Maker Rebate with the removal of the
Market Maker rebates, the Exchange also
proposes to amend the column header
from ‘‘Maker Fee/Rebate’’ to ‘‘Maker
Fee.’’ The Exchange also proposes to
amend the column header ‘‘Taker Fee/
Rebate’’ to ‘‘Taker Fee’’ as there are no
Taker Rebates.
Second, the Exchange proposes to
amend the current regular and complex
order NQX Taker Fees for Market
Makers, including for orders sent by
Electronic Access Members, from $0.00
per contract to $0.25 per contract.
With this proposal, ISE would
uniformly assess a $0.25 per contract
NQX Maker and Taker Fee to all market
participants for regular and complex
orders, except Priority Customers.
Priority Customers will continue to pay
no NQX Maker or Taker Fee.
3 The term Market Makers refers to ‘‘Competitive
Market Makers’’ and ‘‘Primary Market Makers’’
collectively. See Options 1, Section 1(a)(21). The
term Competitive Market Maker means a Member
that is approved to exercise trading privileges
associated with CMM Rights. See Options 1,
Section 1(a)(12). The term Primary Market Maker
means a Member that is approved to exercise
trading privileges associated with PMM Rights. See
Options 1, Section 1(a)(36).
4 A ‘‘Priority Customer’’ is a person or entity that
is not a broker/dealer in securities, and does not
place more than 390 orders in listed options per day
on average during a calendar month for its own
beneficial account(s), as defined in Nasdaq ISE
Options 1, Section 1(a)(37). Unless otherwise noted,
when used in this Pricing Schedule the term
‘‘Priority Customer’’ includes ‘‘Retail’’ as defined
below. A Non-Priority Customer would include a
Market Maker, Non-Nasdaq ISE Market Maker
(FarMM), Firm Proprietary/Broker-Dealer, and
Professional Customer.
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2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,5 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,6 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 proposed changes to the Pricing
Schedule are reasonable in several
respects. As a threshold matter, the
Exchange is subject to significant
competitive forces in the market for
options securities 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’. . .
.’’ 7
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
5 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4) and (5).
7 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)).
6 15
PO 00000
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0.00
Taker
fee/rebate
0.00
broader forms that are most important to
investors and listed companies.’’ 8
Numerous indicia demonstrate the
competitive nature of this market. For
example, clear substitutes to the
Exchange exist in the market for options
security transaction services. The
Exchange is only one of sixteen options
exchanges to which market participants
may direct their order flow. 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 amend its
NQX regular and complex order pricing
for Market Makers, including for orders
sent by Electronic Access Members, to
remove the $0.25 per contract Maker
Rebate and instead assess a $0.25 per
contract Maker Fee, and start assessing
a $0.25 per contract Taker Fee 9 is
reasonable. The Exchange initially paid
NQX Maker Rebates to Market Makers,
including for orders sent by Electronic
Access Members, to encourage Market
Maker activity in NQX and offset the
NQX license surcharge of $0.25 per
contract, which is paid by all market
participants. The Exchange desired to
incentivize Market Makers to provide
liquidity in the new product during the
initial months of trading when it
initially offered Market Makers these
incentives in 2018.10 As NQX has been
trading for over 2 years at this time, the
Exchange proposes to align the pricing
for Market Makers, including for orders
sent by Electronic Access Members,
with other Non-Priority Customer
participants that currently pay $0.25 per
contract Maker and Taker Fees. Also,
the proposed pricing aligns with pricing
for the Nasdaq–100 Index (‘‘NDX’’),
8 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
9 Market Makers, including for orders sent by
Electronic Access Members, currently pay no NQX
regular or complex order Taker Fees.
10 See Securities Exchange Act Release No. 83639
(July 16, 2018), 83 FR 34625 (July 20, 2018) (SR–
ISE–2018–61) (Notice of Filing and Immediate
Effectiveness of Proposed Rule Change To Amend
the Exchange’s Schedule of Fees To Add Establish
Fees and Rebates for NQX Options and Make
Several Clarifying Changes).
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Federal Register / Vol. 86, No. 102 / Friday, May 28, 2021 / Notices
another proprietary product, in that
Non-Priority Customers are uniformly
assessed a transaction fee for regular
orders, regardless of whether they are
making or taking liquidity, and Priority
Customers are not assessed any fees.
The $0.25 per contract fee is reasonable
as NQX is an exclusively listed product
on ISE only. Also, the $0.25 per contract
fee is well within the range of amounts
assessed for NDX options, another
Exchange proprietary product which
assesses a $0.75 per contract fee to NonPriority Customers. The lower fee
amount of $0.25 per contract for NQX
options as compared to $0.75 per
contract for NDX options is reasonable
because NQX options is based on 1⁄5 of
the value of the Nasdaq–100 Index
whereas NDX options are based on the
full value of the Nasdaq–100 Index, and
the Exchange therefore seeks to assess
corresponding reduced fees for NQX
options. The Exchange notes that market
participants are offered an opportunity
to either transact NDX options, the
Nasdaq 100 Micro Index Options or
‘‘XND,’’ 11 or PowerShares QQQ Trust
(‘‘QQQ’’) options.12 Although all of the
products are based on the Nasdaq–100
Index, and collectively they offer
various notional sizes as well as
different fees.13 These products all offer
exposure to the Nasdaq–100 Index
which is different from exposure to
competing products. Finally, pricing by
symbol is a common practice on many
U.S. options exchanges as a means to
incentivize order flow to be sent to an
exchange for execution in particular
products. Other options exchanges price
by symbol.14
The Exchange’s proposal to amend its
NQX regular and complex order pricing
for Market Makers, including for orders
sent by Electronic Access Members, to
remove the $0.25 per contract Maker
Rebate and instead assess a $0.25 per
contract Maker Fee, and start assessing
11 XND is based on 1/100th of the value of the
Nasdaq–100 Index.
12 QQQ is an exchange-traded fund based on the
Nasdaq–100 Index. Products such as QQQ provides
market participants with a variety of choices in
selecting the product they desire to utilize to
transact the Nasdaq–100 Index as QQQ options
overlie the same index as NDX, namely the Nasdaq–
100 Index. This relationship between QQQ options
and NDX options is similar to the relationship
between RUT and the iShares Russell 2000 Index
(‘‘IWM’’), which is the ETF on RUT.
13 See ISE Options 7, Section 3 for simple orders
and Options 7, Section 4 for complex orders for
pricing on QQQ options. XND options pricing is
located within ISE Options 7, Section 5A. The
applicable ISE complex order fees for Non-Select
Symbols in Options 7, Section 4 apply to NDX
options. See also Nasdaq Phlx LLC (‘‘Phlx’’)
Options 7, Section 4 for XND pricing. XND is
currently listed only on Phlx.
14 See pricing for Russell 2000 Index (‘‘RUT’’) on
Cboe Exchange, Inc.’s Fees Schedule.
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a $0.25 per contract Taker Fee is
equitable and not unfairly
discriminatory as ISE would uniformly
assess a $0.25 per contract fee to all
market participants, except Priority
Customers. Priority Customers will
continue to pay no Maker or Taker Fee.
All other Non-Priority Customers would
uniformly be assessed a $0.25 per
contract fee regardless of whether the
Non-Priority Customer is making or
taking liquidity. The Exchange’s
proposal to amend the column headers
from ‘‘Maker Fee/Rebate’’ to ‘‘Maker
Fee’’ and ‘‘Taker Fee/Rebate’’ to ‘‘Taker
Fee’’ is reasonable, equitable and not
unfairly discriminatory as no Member
would be subject to a Maker Rebate with
the removal of the rebates for Market
Makers, including for orders sent by
Electronic Access Members and there
are no Taker Rebates today.
sizes as well as different fees.15 These
products all offer exposure to the
Nasdaq–100 Index which is different
from exposure to competing products.
The Exchange’s proposal to amend
the column headers from ‘‘Maker Fee/
Rebate’’ to ‘‘Maker Fee’’ and ‘‘Taker Fee/
Rebate’’ to ‘‘Taker Fee’’ does not impose
an undue burden on competition as no
Member would be subject to a Maker
Rebate with the removal of the rebates
for Market Makers, including Market
Maker (for orders sent by Electronic
Access Members) and there are no Taker
Rebates today.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
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.
In terms of intra-market competition,
the Exchange does not believe that the
proposed changes will place any
category of market participant at a
competitive disadvantage. Overall, the
Exchange’s proposal is designed to
incentivize participants to bring
additional order flow to the Exchange,
and create a more active and quality
market in NQX. While Market Makers
would pay a fee for either making or
taking liquidity in NQX with this
proposal, the Exchange believes that
Market Makers will continue to be
incentivized to offer liquidity in this
product which is based on the Nasdaq–
100 Index and offers investors similar
strategies for investors. Market Makers
on ISE are the only Market Makers
making a market in NQX. Also, the
Exchange would uniformly assess a
$0.25 per contract NQX fee to all market
participants for regular and complex
orders, except Priority Customers,
regardless of whether the Non-Priority
Customer is making or taking liquidity.
In terms of inter-market competition,
the Exchange notes that it operates in a
highly competitive market where other
options markets may create products
similar to those offered on ISE. There
are other products today which are
similarly based on the Nasdaq–100
Index. Market participants are offered
an opportunity to either transact NDX,
XND, or QQQ options. Although all of
the products are based on the Nasdaq–
100 Index and offer various notional
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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.
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act.16 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–2021–11 on the subject line.
15 See ISE Options 7, Section 3 for simple orders
and Options 7, Section 4 for Complex Orders for
pricing on QQQ options. XND options pricing is
located within Options 7, Section 5A. The
applicable Complex Order fees for Non-Select
Symbols in Options 7, Section 4 apply to NDX
options. See also Nasdaq Phlx LLC (‘‘Phlx’’)
Options 7, Section 4 for XND pricing. XND is
currently listed only on Phlx.
16 15 U.S.C. 78s(b)(3)(A)(ii).
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Federal Register / Vol. 86, No. 102 / Friday, May 28, 2021 / Notices
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–2021–11. 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–2021–11 and should be
submitted on or before June 18, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–11290 Filed 5–27–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meetings
Notice is hereby given,
pursuant to the provisions of the
Government in the Sunshine Act, Public
Law 94–409, that the Securities and
Exchange Commission Investor
Advisory Committee will hold a public
meeting on Thursday, June 10, 2021.
TIME AND DATE:
17 17
CFR 200.30–3(a)(12).
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The meeting will begin at 10:00 a.m.
(ET) and will be open to the public.
PLACE: The meeting will be conducted
by remote means and/or at the
Commission’s headquarters, 100 F St
NE, Washington, DC 20549. Members of
the public may watch the webcast of the
meeting on the Commission’s website at
www.sec.gov.
STATUS: This Sunshine Act notice is
being issued because a majority of the
Commission may attend the meeting.
On May 26, 2021, the Commission
published notice of the Committee
meeting (Release Nos. 33–10944, 34–
92018), indicating that the meeting is
open to the public and inviting the
public to submit written comments to
the Committee.
MATTER TO BE CONSIDERED: The agenda
for the meeting includes: Welcome
remarks; approval of previous meeting
minutes; a panel discussion regarding
best execution and its role in post-NMS
market structure; a panel discussion
regarding best execution issues unique
to wholesale brokers; a panel discussion
regarding 10b5–1 plans; a discussion of
a recommendation regarding individual
retirement accounts; subcommittee
reports; and a non-public administrative
session.
CONTACT PERSON FOR MORE INFORMATION:
For further information and to ascertain
what, if any, matters have been added,
deleted or postponed; please contact
Vanessa A. Countryman from the Office
of the Secretary at (202) 551–5400.
Dated: May 26, 2021.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2021–11502 Filed 5–26–21; 4:15 pm]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91975; File No. SR–NYSE–
2020–95]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Designation of a Longer Period for
Commission Action on Proceedings To
Determine Whether To Approve or
Disapprove a Proposed Rule Change,
as Modified by Amendment No. 1, To
Make Permanent Commentaries to
Rule 7.35A and Commentaries to Rule
7.35B and Make Related Changes to
Rules 7.32, 7.35C, 46B, and 47
May 24, 2021.
On November 13, 2020, New York
Stock Exchange LLC (‘‘NYSE’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
PO 00000
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28921
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
make permanent Commentaries .01(a)
and (b) and .06 to Rule 7.35A (DMMFacilitated Core Open and Trading Halt
Auctions) and Commentaries .01 and
.03 to Rule 7.35B (DMM-Facilitated
Closing Auctions) and to make related
changes to Rules 7.32 (Order Entry),
7.35C (Exchange-Facilitated Closing
Auctions), 46B (Regulatory Trading
Official), and 47 (Floor Officials—
Unusual Situations). The proposed rule
change was published for comment in
the Federal Register on December 1,
2020.3 On January 13, 2020, the
Commission extended to March 1, 2021,
the time period in which to approve the
proposal, disapprove the proposal, or
institute proceedings to determine
whether to approve or disapprove the
proposal.4 On March 1, 2021, the
Commission instituted proceedings
under Section 19(b)(2)(B) of the Act 5 to
determine whether to approve or
disapprove the proposed rule change.6
On April 12, 2021, the Exchange filed
Amendment No. 1 7 to the proposed rule
change with the Commission and
submitted Amendment No. 1 for
inclusion in the public comment file.8
The Commission has received no other
comment letters on the proposed rule
change, as modified by Amendment No.
1.
Section 19(b)(2) of the Act 9 provides
that, after initiating proceedings, the
Commission shall issue an order
approving or disapproving the proposed
rule change not later than 180 days after
the date of publication of notice of filing
of the proposed rule change. The
Commission may extend the period for
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 90495
(Nov. 24, 2020), 85 FR 77304 (Dec. 1, 2020) (SR–
NYSE–2020–95) (‘‘Notice’’).
4 See Securities Exchange Act Release No. 90917
(Jan. 13, 2021), 86 FR 6403 (Jan. 21, 2020).
5 15 U.S.C. 78s(b)(2)(B).
6 See Securities Exchange Act Release No. 91227,
(Mar. 1, 2021), 86 FR 12991 (Mar. 5, 2021).
7 In Amendment No. 1, the Exchange proposes
that the percentage parameter that would be
applicable to when a DMM may electronically
facilitate a Trading Halt Auction or would be
required to publish a pre-opening indication would
be 5% instead of 10%. See Letter from Martha
Redding Associate General Counsel, NYSE LLC, to
Secretary, Commission (April 12, 2021).
Amendment No. 1 is available at https://
www.sec.gov/comments/sr-nyse-2020-95/
srnyse202095-8662901-235314.pdf.
8 Comments received on the proposed rule
changes, as modified by Amendment No. 1, are
available on the Commission’s website at https://
www.sec.gov/comments/sr-nyse-2020-95/
srnyse202095.htm.
9 15 U.S.C. 78s(b)(2).
2 17
E:\FR\FM\28MYN1.SGM
28MYN1
]]>Agencies
[Federal Register Volume 86, Number 102 (Friday, May 28, 2021)]
[Notices]
[Pages 28918-28921]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-11290]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-91976; File No. SR-ISE-2021-11]
Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend ISE's
Pricing Schedule at Options 7, Section 5, for NQX Index Options Fees
and Rebates for Regular and Complex Orders
May 24, 2021.
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 11, 2021, 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, II, and III, below, which
Items have been prepared by the Exchange. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
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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 ISE's Pricing Schedule at Options 7,
Section 5, Index Options Fees and Rebates.
The Exchange originally filed the proposed pricing change on April
30, 2021 (SR-ISE-2021-10). On May 11, 2021, 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://listingcenter.nasdaq.com/rulebook/ise/rules, 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 Options 7, Section 5, Index Options
Fees and Rebates. Specifically, the Exchange proposes to amend Part B,
NQX Index Options Fees and Rebates for Regular and Complex Orders. NQX
is a proprietary index based on \1/5\ the value of the Nasdaq-100
Index.
Currently, the fees and rebates assessed for NQX regular and
complex orders are as follows:
------------------------------------------------------------------------
Maker fee/ Taker fee/
Market participant rebate rebate
------------------------------------------------------------------------
Market Maker............................ ($0.25) $0.00
Market Maker (for orders sent by (0.25) 0.00
Electronic Access Members).............
Non-Nasdaq ISE Market Maker (FarMM)..... 0.25 0.25
Firm Proprietary/Broker-Dealer.......... 0.25 0.25
Professional Customer................... 0.25 0.25
[[Page 28919]]
Priority Customer....................... 0.00 0.00
------------------------------------------------------------------------
NQX Taker Fees apply to the originating and contra side of Crossing
Orders and to Responses to Crossing Orders. The Exchange proposes to
amend this pricing.
First, the Exchange proposes to amend the NQX regular and complex
order pricing for Market Makers,\3\ including for orders sent by
Electronic Access Members, to remove the current Maker Rebates of $0.25
per contract. The Exchange proposes to instead assess a Maker Fee of
$0.25 per contract to Market Makers, including for orders sent by
Electronic Access Members, similar to other Non-Priority Customers \4\
in NQX. Since no market participants would be subject to an NQX Maker
Rebate with the removal of the Market Maker rebates, the Exchange also
proposes to amend the column header from ``Maker Fee/Rebate'' to
``Maker Fee.'' The Exchange also proposes to amend the column header
``Taker Fee/Rebate'' to ``Taker Fee'' as there are no Taker Rebates.
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\3\ The term Market Makers refers to ``Competitive Market
Makers'' and ``Primary Market Makers'' collectively. See Options 1,
Section 1(a)(21). The term Competitive Market Maker means a Member
that is approved to exercise trading privileges associated with CMM
Rights. See Options 1, Section 1(a)(12). The term Primary Market
Maker means a Member that is approved to exercise trading privileges
associated with PMM Rights. See Options 1, Section 1(a)(36).
\4\ A ``Priority Customer'' is a person or entity that is not a
broker/dealer in securities, and does not place more than 390 orders
in listed options per day on average during a calendar month for its
own beneficial account(s), as defined in Nasdaq ISE Options 1,
Section 1(a)(37). Unless otherwise noted, when used in this Pricing
Schedule the term ``Priority Customer'' includes ``Retail'' as
defined below. A Non-Priority Customer would include a Market Maker,
Non-Nasdaq ISE Market Maker (FarMM), Firm Proprietary/Broker-Dealer,
and Professional Customer.
---------------------------------------------------------------------------
Second, the Exchange proposes to amend the current regular and
complex order NQX Taker Fees for Market Makers, including for orders
sent by Electronic Access Members, from $0.00 per contract to $0.25 per
contract.
With this proposal, ISE would uniformly assess a $0.25 per contract
NQX Maker and Taker Fee to all market participants for regular and
complex orders, except Priority Customers. Priority Customers will
continue to pay no NQX Maker or Taker Fee.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\5\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,\6\ 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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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(4) and (5).
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The proposed changes to the Pricing Schedule are reasonable in
several respects. As a threshold matter, the Exchange is subject to
significant competitive forces in the market for options securities
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'. . . .'' \7\
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\7\ 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.'' \8\
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\8\ 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 example, clear substitutes to the Exchange exist in the market for
options security transaction services. The Exchange is only one of
sixteen options exchanges to which market participants may direct their
order flow. 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 amend its NQX regular and complex order
pricing for Market Makers, including for orders sent by Electronic
Access Members, to remove the $0.25 per contract Maker Rebate and
instead assess a $0.25 per contract Maker Fee, and start assessing a
$0.25 per contract Taker Fee \9\ is reasonable. The Exchange initially
paid NQX Maker Rebates to Market Makers, including for orders sent by
Electronic Access Members, to encourage Market Maker activity in NQX
and offset the NQX license surcharge of $0.25 per contract, which is
paid by all market participants. The Exchange desired to incentivize
Market Makers to provide liquidity in the new product during the
initial months of trading when it initially offered Market Makers these
incentives in 2018.\10\ As NQX has been trading for over 2 years at
this time, the Exchange proposes to align the pricing for Market
Makers, including for orders sent by Electronic Access Members, with
other Non-Priority Customer participants that currently pay $0.25 per
contract Maker and Taker Fees. Also, the proposed pricing aligns with
pricing for the Nasdaq-100 Index (``NDX''),
[[Page 28920]]
another proprietary product, in that Non-Priority Customers are
uniformly assessed a transaction fee for regular orders, regardless of
whether they are making or taking liquidity, and Priority Customers are
not assessed any fees. The $0.25 per contract fee is reasonable as NQX
is an exclusively listed product on ISE only. Also, the $0.25 per
contract fee is well within the range of amounts assessed for NDX
options, another Exchange proprietary product which assesses a $0.75
per contract fee to Non-Priority Customers. The lower fee amount of
$0.25 per contract for NQX options as compared to $0.75 per contract
for NDX options is reasonable because NQX options is based on \1/5\ of
the value of the Nasdaq-100 Index whereas NDX options are based on the
full value of the Nasdaq-100 Index, and the Exchange therefore seeks to
assess corresponding reduced fees for NQX options. The Exchange notes
that market participants are offered an opportunity to either transact
NDX options, the Nasdaq 100 Micro Index Options or ``XND,'' \11\ or
PowerShares QQQ Trust (``QQQ'') options.\12\ Although all of the
products are based on the Nasdaq-100 Index, and collectively they offer
various notional sizes as well as different fees.\13\ These products
all offer exposure to the Nasdaq-100 Index which is different from
exposure to competing products. Finally, pricing by symbol is a common
practice on many U.S. options exchanges as a means to incentivize order
flow to be sent to an exchange for execution in particular products.
Other options exchanges price by symbol.\14\
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\9\ Market Makers, including for orders sent by Electronic
Access Members, currently pay no NQX regular or complex order Taker
Fees.
\10\ See Securities Exchange Act Release No. 83639 (July 16,
2018), 83 FR 34625 (July 20, 2018) (SR-ISE-2018-61) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
the Exchange's Schedule of Fees To Add Establish Fees and Rebates
for NQX Options and Make Several Clarifying Changes).
\11\ XND is based on 1/100th of the value of the Nasdaq-100
Index.
\12\ QQQ is an exchange-traded fund based on the Nasdaq-100
Index. Products such as QQQ provides market participants with a
variety of choices in selecting the product they desire to utilize
to transact the Nasdaq-100 Index as QQQ options overlie the same
index as NDX, namely the Nasdaq-100 Index. This relationship between
QQQ options and NDX options is similar to the relationship between
RUT and the iShares Russell 2000 Index (``IWM''), which is the ETF
on RUT.
\13\ See ISE Options 7, Section 3 for simple orders and Options
7, Section 4 for complex orders for pricing on QQQ options. XND
options pricing is located within ISE Options 7, Section 5A. The
applicable ISE complex order fees for Non-Select Symbols in Options
7, Section 4 apply to NDX options. See also Nasdaq Phlx LLC
(``Phlx'') Options 7, Section 4 for XND pricing. XND is currently
listed only on Phlx.
\14\ See pricing for Russell 2000 Index (``RUT'') on Cboe
Exchange, Inc.'s Fees Schedule.
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The Exchange's proposal to amend its NQX regular and complex order
pricing for Market Makers, including for orders sent by Electronic
Access Members, to remove the $0.25 per contract Maker Rebate and
instead assess a $0.25 per contract Maker Fee, and start assessing a
$0.25 per contract Taker Fee is equitable and not unfairly
discriminatory as ISE would uniformly assess a $0.25 per contract fee
to all market participants, except Priority Customers. Priority
Customers will continue to pay no Maker or Taker Fee. All other Non-
Priority Customers would uniformly be assessed a $0.25 per contract fee
regardless of whether the Non-Priority Customer is making or taking
liquidity. The Exchange's proposal to amend the column headers from
``Maker Fee/Rebate'' to ``Maker Fee'' and ``Taker Fee/Rebate'' to
``Taker Fee'' is reasonable, equitable and not unfairly discriminatory
as no Member would be subject to a Maker Rebate with the removal of the
rebates for Market Makers, including for orders sent by Electronic
Access Members and there are no Taker Rebates today.
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.
In terms of intra-market competition, the Exchange does not believe
that the proposed changes will place any category of market participant
at a competitive disadvantage. Overall, the Exchange's proposal is
designed to incentivize participants to bring additional order flow to
the Exchange, and create a more active and quality market in NQX. While
Market Makers would pay a fee for either making or taking liquidity in
NQX with this proposal, the Exchange believes that Market Makers will
continue to be incentivized to offer liquidity in this product which is
based on the Nasdaq-100 Index and offers investors similar strategies
for investors. Market Makers on ISE are the only Market Makers making a
market in NQX. Also, the Exchange would uniformly assess a $0.25 per
contract NQX fee to all market participants for regular and complex
orders, except Priority Customers, regardless of whether the Non-
Priority Customer is making or taking liquidity.
In terms of inter-market competition, the Exchange notes that it
operates in a highly competitive market where other options markets may
create products similar to those offered on ISE. There are other
products today which are similarly based on the Nasdaq-100 Index.
Market participants are offered an opportunity to either transact NDX,
XND, or QQQ options. Although all of the products are based on the
Nasdaq-100 Index and offer various notional sizes as well as different
fees.\15\ These products all offer exposure to the Nasdaq-100 Index
which is different from exposure to competing products.
---------------------------------------------------------------------------
\15\ See ISE Options 7, Section 3 for simple orders and Options
7, Section 4 for Complex Orders for pricing on QQQ options. XND
options pricing is located within Options 7, Section 5A. The
applicable Complex Order fees for Non-Select Symbols in Options 7,
Section 4 apply to NDX options. See also Nasdaq Phlx LLC (``Phlx'')
Options 7, Section 4 for XND pricing. XND is currently listed only
on Phlx.
---------------------------------------------------------------------------
The Exchange's proposal to amend the column headers from ``Maker
Fee/Rebate'' to ``Maker Fee'' and ``Taker Fee/Rebate'' to ``Taker Fee''
does not impose an undue burden on competition as no Member would be
subject to a Maker Rebate with the removal of the rebates for Market
Makers, including Market Maker (for orders sent by Electronic Access
Members) and there are no Taker Rebates today.
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.\16\ 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.
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-ISE-2021-11 on the subject line.
[[Page 28921]]
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-2021-11. 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-2021-11 and should be submitted on
or before June 18, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-11290 Filed 5-27-21; 8:45 am]
BILLING CODE 8011-01-P
