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 3, “Regular Order Fees and Rebates” and Section 4, “Complex Order Fees and Rebates”, 32997-33001 [2021-13098]
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Federal Register / Vol. 86, No. 118 / Wednesday, June 23, 2021 / Notices
The Exchange originally filed the
proposed pricing change on June 1,
2021 (SR–ISE–2021–12). On June 8,
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.
IV. Conclusion
On the basis of the foregoing, the
Commission finds that the proposed
rule change is consistent with the
requirements of the Act, and in
particular, with the requirements of
Section 17A(b)(3)(F) of the Act and
Rules 17Ad–22(e)(2)(i) and (v) and
17Ad–22(e)(6)(iv) thereunder.17
It is therefore ordered pursuant to
Section 19(b)(2) of the Act 18 that the
proposed rule change (SR–ICC–2021–
013), be, and hereby is, approved.19
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–13102 Filed 6–22–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–92190; File No. SR–ISE–
2021–13]
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 3,
‘‘Regular Order Fees and Rebates’’ and
Section 4, ‘‘Complex Order Fees and
Rebates’’
June 16, 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 June 8,
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.
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 3, ‘‘Regular Order Fees and
Rebates’’ and Section 4, ‘‘Complex
Order Fees and Rebates.’’
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17 17
CFR 240.17Ad–22(e)(6)(iv).
U.S.C. 78s(b)(2).
19 In approving the proposed rule change, the
Commission considered the proposal’s impact on
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
20 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
18 15
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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
ISE’s Pricing Schedule at Options 7,
Section 3, ‘‘Regular Order Fees and
Rebates’’ and Section 4, ‘‘Complex
Order Fees and Rebates.’’ Each change
is described below.
Options 7, Section 3 Regular Order Fees
and Rebates
Today, the Exchange assesses a Maker
Fee of $0.18 per contract in Select
Symbols 3 for Market Maker,4 NonNasdaq ISE Market Maker (FarMM),5
3 ‘‘Select Symbols’’ are options overlying all
symbols listed on the Nasdaq ISE that are in the
Penny Interval Program. See Options 7, Section 1.
4 This fee applies to Market Maker orders sent to
the Exchange by Electronic Access Members.
Market Makers that qualify for Market Maker Plus
will not pay this fee if they meet the applicable tier
thresholds set forth in Options 7, Section 3. Market
Makers will instead be assessed fees or rebates
based on the applicable tier for which they qualify.
See notes 5 and 8 within Options 7, Section 3.
Market Maker Plus for Select Symbols is not being
amended. The term ‘‘Market Makers’’ refers to
‘‘Competitive Market Makers’’ and ‘‘Primary Market
Makers’’ collectively. See Options 1, Section
1(a)(21).
5 A ‘‘Non-Nasdaq ISE Market Maker’’ is a market
maker as defined in Section 3(a)(38) of the
Securities Exchange Act of 1934, as amended,
registered in the same options class on another
options exchange. See Options 7, Section 1.
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32997
Firm Proprietary 6/Broker-Dealer,7 and
Professional Customer 8 orders. Priority
Customer 9 orders are not assessed a
Select Symbol Maker Fee.
Further, today, pursuant to Options 7,
Section 3, note 10, a Market Maker is
not charged a fee or paid a rebate when
trading against non-Priority Customer
Complex Orders 10 that leg into the
regular 11 order book. Also, today,
pursuant to Options 7, Section 3, note
11, a Market Maker, FarMM, Firm
Proprietary/Broker Dealer, and
Professional Customer are assessed a
$0.25 per contract fee, instead of the
applicable fee or rebate, when trading
against Priority Customer Complex
Orders that leg into the regular order
book. Today, Market Makers that qualify
for Market Maker Plus in Select
Symbols pay a $0.15 per contract fee in
the symbols for which they qualify for
Market Maker Plus when trading against
Priority Customer Complex Orders of
less than 50 contracts in Select Symbols
that leg into the regular order book.
Further, Market Makers that qualify for
Market Maker Plus in Select Symbols do
not pay any fee nor receive any rebate
in the symbols for which they qualify
for Market Maker Plus when trading
against Priority Customer Complex
Orders of 50 contracts or more in Select
Symbols that leg into the regular order
book.
The Exchange proposes to remove
rule text from Options 7, Section 3, note
11, which provides that Market Makers
that qualify for Market Maker Plus in
Select Symbols will pay a $0.15 per
contract fee in symbols for which they
6 A ‘‘Firm Proprietary’’ order is an order
submitted by a member for its own proprietary
account. See Options 7, Section 1.
7 A ‘‘Broker-Dealer’’ order is an order submitted
by a member for a broker-dealer account that is not
its own proprietary account. See Options 7, Section
1.
8 A ‘‘Professional Customer’’ is a person or entity
that is not a broker/dealer and is not a Priority
Customer. See Options 7, Section 1.
9 A ‘‘Priority Customer’’ is a person or entity that
is not a broker/dealer in securities, and does not
place more than 390 orders in listed options per day
on average during a calendar month for its own
beneficial account(s), as defined in ISE Options 1,
Section 1(a)(37). Unless otherwise noted, when
used in the Pricing Schedule the term ‘‘Priority
Customer’’ includes ‘‘Retail.’’ A ‘‘Retail’’ order is a
Priority Customer order that originates from a
natural person, provided that no change is made to
the terms of the order with respect to price or side
of market and the order does not originate from a
trading algorithm or any other computerized
methodology. See Options 7, Section 1.
10 A ‘‘Complex Order’’ is any order involving the
simultaneous purchase and/or sale of two or more
different options series in the same underlying
security, as provided in Nasdaq ISE Options 3,
Section 14, as well as Stock-Option Orders. See
Options 7, Section 1.
11 A ‘‘Regular Order’’ is an order that consists of
only a single option series and is not submitted
with a stock leg. See Options 7, Section 1.
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qualify for Market Maker Plus when
trading against Priority Customer
Complex Orders of less than 50
contracts in Select Symbols that leg into
the regular order book. Additionally, the
Exchange proposes to modify the
remainder of note 11 to provide,
‘‘Market Makers that qualify for Market
Maker Plus in Select Symbols will not
pay this fee nor receive any rebate in
symbols for which they qualify for
Market Maker Plus when trading against
Priority Customer Complex Orders leg
into the regular order book.’’
With the proposed amendments to
note 11 of Options 7, Section 3, a
Market Maker that qualifies for Market
Maker Plus when trading against
Priority Customer Complex Orders leg
into the regular order book would no
longer pay a $0.15 per contract fee,
rather, the Market Maker would pay no
fee, nor receive any rebate similar to the
manner in which Market Makers are
priced today for orders of 50 contracts
or more in Select Symbols, when those
Market Makers qualify for Market Maker
Plus and trade against Priority Customer
Complex Orders leg into the regular
order book. This proposal would align
pricing for Market Makers that qualify
for Market Maker Plus when trading
against Priority Customer Complex
Orders leg into the regular order book,
irrespective of the size of the order.
Market Makers that do not qualify for
Market Maker Plus would continue to
pay a $0.25 per contract fee when
trading against Priority Customer
Complex Orders that leg into the regular
order book similar to other market
participants.
The Exchange believes this pricing
will continue to incentivize Market
Makers to qualify for Market Maker Plus
in order to earn the associated rebates
for Market Maker Plus and also pay no
fees when trading against Priority
Customer Complex Orders leg into the
regular order book in Select Symbols.
The Exchange also proposes to make
a non-substantive amendment to
capitalize the term ‘‘Complex Order’’ in
current note 10 of Options 7, Section 3.
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Options 7, Section 4, Complex Order
Fees and Rebates
Currently, Options 7, Section 4
provides a fee structure for Complex
Orders that provides rebates to Priority
Customer Complex Orders in order to
encourage Members to bring that order
flow to the Exchange. Specifically,
Priority Customer Complex Orders are
provided rebates in Select Symbols and
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Non-Select Symbols 12 (other than NDX,
NQX, and MNX as noted within note 4
of Options 7, Section 4) based on
Priority Customer average daily volume
(‘‘ADV’’).13
Today, Options 7, Section 4, note 1
provides, ‘‘Rebate provided per contract
per leg if the order trades with nonPriority Customer orders in the Complex
Order Book. Rebate provided per
contract leg in Select Symbols where the
largest leg of the Complex Order is
under fifty (50) contracts and trades
with quotes and orders on the regular
order book. No Priority Customer
Complex Order rebates will be provided
in Select Symbols if any leg of the order
that trades with interest on the regular
order book is fifty (50) contracts or
more. No Priority Customer Complex
Order rebates will be provided in NonSelect Symbols if any leg of the order
trades with interest on the regular order
book, irrespective of order size.’’
The Exchange proposes to amend the
second sentence in note 1 of Options 7,
Section 4 to state, ‘‘This rebate will be
reduced by $0.15 per contract in Select
Symbols where the largest leg of the
complex order is under fifty (50)
contracts and trades with quotes and
orders on the regular order book.’’ The
proposed amendment to the second
sentence of note 1 of Options 7, Section
4, would reduce the current rebate paid
in Select Symbols, per contract, when
the largest leg of the Complex Order is
under fifty contracts and trades with
quotes and orders on the regular order
book. Today, the Exchange pays no
Priority Customer Complex Order
rebates in Select Symbols if any leg of
the order that trades with interest on the
regular order book is fifty contracts or
more, nor does the Exchange pay a
Priority Customer Complex Order rebate
in Non-Select Symbols if any leg of the
order trades with interest on the regular
order book, irrespective of order size.
The Exchange has observed in the past
that several market participants have
entered larger sized Priority Customer
Complex Orders with a leg of fifty or
more contracts to earn a rebate. When
these Complex Orders do not find a
counterparty in the Complex Order
Book, the orders may leg into the regular
order book where they are typically
executed by Market Makers on the
individual legs who pay a fee to trade
with this order flow.14 As a result, the
12 ‘‘Non-Select Symbols’’ are options overlying all
symbols excluding Select Symbols. See Options 7,
Section 1.
13 See tiered rebates within Options 7, Section 4.
14 For example, a Market Maker providing
liquidity on the individual leg would typically pay
a maker fee of only $0.18 per contract for trading
with orders originating from the regular order book,
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Market Maker’s ability to provide
liquidity on the Exchange is adversely
affected as they are charged to trade
against these larger complex orders
when they leg into the regular market
and execute against their quotes. For
this reason, the Exchange continues to
not pay Priority Customer Complex
Order rebates in Select Symbols if any
leg of the order that trades with interest
on the regular order book is fifty
contracts or more, including for Select
Symbols which do not pay a Priority
Customer Complex Order rebate if any
leg of the order trades with interest on
the regular order book, irrespective of
order size.
The Exchange’s proposal to reduce
the Select Symbol rebate when the
largest leg of the Complex Order is
under fifty contracts and trades with
quotes and orders on the regular order
book, by $0.15 per contract, is intended
to continue to incentivize Members to
send order flow to the Exchange despite
the reduction. Also, the Exchange will
continue to pay Priority Customer
rebates for Priority Customer Complex
Orders of any size which trades with
non-Priority Customer orders in the
Complex Order Book, based on the
Priority Customer Complex Tier
achieved, thereby continuing to
incentivize Members to bring Complex
Order flow to the Exchange to earn the
rebate on their Priority Customer
Complex Order volume.
Further, the proposal would close the
pricing gap as between Members who
receive a Priority Customer rebate,
which is being reduced by this proposal,
in Select Symbols where the largest leg
of the Complex Order is under fifty (50)
contracts and trades with quotes and
orders on the regular order book as
compared to both Members that do not
receive a Priority Customer rebate in
non-Select Symbols if any leg of the
order trades with interest on the regular
order book, irrespective of order size,
and Members that do not receive a
Priority Customer rebate in Select
Symbols where the largest leg of the
Complex Order is fifty contracts or more
and trades with quotes and orders on
the regular order book.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,15 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,16 in particular, in that it
or in the case of Market Makers that achieve Market
Maker Plus status, would earn certain maker rebates
instead of paying the $0.18 per contract maker fee.
See Options 7, Section 3, note 5.
15 15 U.S.C. 78f(b).
16 15 U.S.C. 78f(b)(4) and (5).
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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’. . . .’’ 17
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.’’ 18
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,
17 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)).
18 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
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the proposal represents a reasonable
attempt by the Exchange to increase its
liquidity and market share relative to its
competitors.
Options 7, Section 3 Regular Order Fees
and Rebates
The Exchange’s proposal to remove
certain rule text from Options 7, Section
3, note 11, and amend the remaining
rule text is reasonable as a Market
Maker that qualifies for Market Maker
Plus when trading against Priority
Customer Complex Orders that leg into
the regular order book would no longer
pay a $0.15 per contract fee, rather, the
Market Maker would pay no fee, nor
receive any rebate. This proposal would
align the pricing to the manner in which
Market Makers are priced today for
orders of 50 contracts or more in Select
Symbols, when those Market Makers
qualify for Market Maker Plus and trade
against Priority Customer Complex
Orders leg into the regular order book.
Specifically, Market Makers that qualify
for Market Maker Plus when trading
against Priority Customer Complex
Orders that leg into the regular order
book, would pay no fee, nor receive any
rebate, irrespective of the size of the
order. The Exchange believes this
pricing will continue to incentivize
Market Makers to qualify for Market
Maker Plus in order to earn the
associated rebates for Market Maker
Plus and also pay no fees when trading
against Priority Customer Complex
Orders leg into the regular order book in
Select Symbols. Market Makers that do
not qualify for Market Maker Plus
would continue to pay a $0.25 per
contract fee when trading against
Priority Customer Complex Orders that
leg into the regular order book similar
to other market participants.
The Exchange’s proposal to remove
certain rule text from Options 7, Section
3, note 11, and amend the remaining
rule text is equitable and not unfairly
discriminatory. Market Makers that
qualifies for Market Maker Plus when
trading against Priority Customer
Complex Orders leg into the regular
order book would uniformly pay no fee,
nor receive any rebate, irrespective of
the size of the order. The Exchange will
continue to assess a $0.25 per contract
fee to all other non-Priority Customer
market participants, including Market
Makers that do not qualify for Market
Maker Plus, when trading against
Priority Customer Complex Orders that
leg into the regular order book. The
Exchange believes that it is not unfairly
discriminatory to not assess Market
Makers a fee if they qualify for Market
Maker Plus because those Market
Makers are paid rebates within the
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32999
Market Maker Plus Program for adding
value for quoting at the NBBO for a
significant percentage of time. Further,
all Market Makers are subject to the
same qualification criteria for Market
Maker Plus.
The Exchange’s proposal to capitalize
the term ‘‘Complex Order’’ in current
note 10 of Options 7, Section 3 is nonsubstantive.
Options 7, Section 4, Complex Order
Fees and Rebates
The Exchange’s proposal to amend
the second sentence in note 1 of Options
7, Section 4 to state, ‘‘This rebate will
be reduced by $0.15 per contract in
Select Symbols where the largest leg of
the complex order is under fifty (50)
contracts and trades with quotes and
orders on the regular order book,’’ is
reasonable. The proposed amendment to
note 1 of Options 7, Section 4, would
reduce the current rebate paid in Select
Symbols, per contract, when the largest
leg of the Complex Order is under fifty
contracts and trades with quotes and
orders on the regular order book.
Overall, the Exchange believes that the
Priority Customer Complex Order rebate
program, as modified, is reasonable
because the program is optional and all
Members can choose to participate or
not. The Exchange’s proposal to reduce
the Select Symbol rebate when the
largest leg of the Complex Order is
under fifty contracts and trades with
quotes and orders on the regular order
book, by $0.15 per contract, is intended
to continue to incentivize Members to
send order flow to the Exchange despite
the reduction. Also, the Exchange will
continue to pay Priority Customer
rebates for Priority Customer Complex
Orders of any size which trades with
non-Priority Customer orders in the
Complex Order Book, based on the
Priority Customer Complex Tier
achieved, thereby continuing to
incentivize Members to bring Complex
Order flow to the Exchange to earn the
rebate on their Priority Customer
Complex Order volume. Further, the
proposal would close the pricing gap as
between Members who receive a
Priority Customer rebate, which is being
reduced by this proposal, in Select
Symbols where the largest leg of the
Complex Order is under fifty (50)
contracts and trades with quotes and
orders on the regular order book as
compared to both Members that do not
receive a Priority Customer rebate in
non-Select Symbols if any leg of the
order trades with interest on the regular
order book, irrespective of order size,
and Members that do not receive a
Priority Customer rebate in Select
Symbols where the largest leg of the
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Complex Order is fifty contracts or more
and trades with quotes and orders on
the regular order book. This fee remains
competitive with other options
markets.19
The Exchange’s proposal to amend
the second sentence in note 1 of Options
7, Section 4 to state, ‘‘This rebate will
be reduced by $0.15 per contract in
Select Symbols where the largest leg of
the complex order is under fifty (50)
contracts and trades with quotes and
orders on the regular order book,’’ is
equitable and not unfairly
discriminatory. The Exchange will
continue to uniformly pay rebates to
Priority Customer Complex Orders
trading with non-Priority Customer
orders in the Complex Order Book,
regardless of size, based on the Priority
Customer Complex Tier achieved.
Further, the Exchange would uniformly
pay a reduced rebate (reduced by $0.15
per contract) in Select Symbols where
the largest leg of the complex order is
under fifty contracts and trades with
quotes and orders on the regular order
book.
Exchange believes that the degree to
which fee changes in this market may
impose any burden on competition is
extremely limited.
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.
Options 7, Section 3 Regular Order Fees
and Rebates
The Exchange’s proposal to remove
certain rule text from Options 7, Section
3, note 11, and amend the remaining
rule text does not impose an undue
burden on competition. Market Makers
that qualifies for Market Maker Plus
when trading against Priority Customer
Complex Orders leg into the regular
order book would uniformly pay no fee,
nor receive any rebate, irrespective of
the size of the order. The Exchange will
continue to assess a $0.25 per contract
fee to all other non-Priority Customer
market participants, including Market
Makers that do not qualify for Market
Maker Plus, when trading against
Priority Customer Complex Orders that
leg into the regular order book. Today,
Market Makers that qualify for Market
Maker Plus are paid rebates based on
their tier qualification for adding value
for quoting at the NBBO for a significant
percentage of time. All Market Makers
are subject to the same qualification
criteria for Market Maker Plus.
The Exchange’s proposal to capitalize
the term ‘‘Complex Order’’ in current
note 10 of Options 7, Section 3 is nonsubstantive.
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
Options 7, Section 4, Complex Order
Fees and Rebates
The Exchange’s proposal to amend
the second sentence in note 1 of Options
7, Section 4 to state, ‘‘This rebate will
be reduced by $0.15 per contract in
Select Symbols where the largest leg of
the complex order is under fifty (50)
contracts and trades with quotes and
orders on the regular order book,’’ does
not impose an undue burden on
competition. The Exchange uniformly
pay rebates to Priority Customer
Complex Orders trading with nonPriority Customer orders in the Complex
Order Book, regardless of size, based on
the Priority Customer Complex Tier
achieved and will continue to pay
rebates. Further, the Exchange would
uniformly pay a reduced rebate
(reduced by $0.15 per contract) in Select
Symbols where the largest leg of the
complex order is under fifty contracts
and trades with quotes and orders on
the regular order book.
19 MIAX Emerald, LLC’s (‘‘Emerald’’) Pricing
Schedule provides that Priority Customer Complex
Orders contra to Priority Customer Complex Orders
are neither charged nor rebated for Penny and NonPenny Classes. Priority Customer Complex Orders
that leg into the Simple book are neither charged
nor rebated. See Emerald’s Pricing Schedule.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
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III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act.20 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–2021–13 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–2021–13. 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,
20 15
E:\FR\FM\23JNN1.SGM
U.S.C. 78s(b)(3)(A)(ii).
23JNN1
Federal Register / Vol. 86, No. 118 / Wednesday, June 23, 2021 / Notices
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–2021–13 and should be
submitted on or before July 14, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–13098 Filed 6–22–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–92193; File No. SR–NYSE–
2020–105]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Order
Approving a Proposed Rule Change,
as Modified by Amendment No. 1, To
Revise Rules 46 and 46A To Permit the
Appointment of Trading Officials
June 16, 2021.
jbell on DSKJLSW7X2PROD with NOTICES
I. Introduction
On December 15, 2020, New York
Stock Exchange LLC (‘‘NYSE’’ or
‘‘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 amend NYSE Rules 46 and
46A, and other related rules, to provide
for the appointment of Trading Officials.
The proposed rule change was
published for comment in the Federal
Register on December 30, 2020.3
On February 9, 2020, the Commission
designated a longer period within which
to approve the proposed rule change,
disapprove the proposed rule change, or
institute proceedings to determine
whether to approve or disapprove the
21 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 90776
(Dec. 22, 2020), 85 FR 86625 (Dec. 30, 2020)
(‘‘Notice’’).
1 15
VerDate Sep<11>2014
17:13 Jun 22, 2021
Jkt 253001
proposed rule change, extending the
date for Commission action until March
30, 2021.4 On March 25, 2021, the
Exchange submitted Amendment No. 1
to the proposed rule change.5
On March 30, 2021, the Commission
published notice of Amendment No. 1
and instituted proceedings to determine
whether to approve or disapprove the
proposed rule change, as modified by
Amendment No. 1.6 The Commission
has received one comment on the
proposed rule change.7 This order
approves the proposed rule change, as
modified by Amendment No. 1.
II. Description of the Proposed Rule
Change
The Exchange proposes to eliminate
NYSE member 8 and non-member
employee Floor Officials 9 and transition
the related duties to the newly created
position of Trading Official, which
would be filled by Exchange employees
appointed by the NYSE CEO or his or
her designee. In order to effectuate this
proposed rule change, the Exchange
would: (1) Delete current NYSE Rules
46 and 46A, (2) replace those rules with
new NYSE Rule 46, which would define
Trading Officials and provide for their
appointment, and (3) make conforming
changes to other Exchange rules related
to the duties and responsibilities of
Trading Officials. As a result of this
proposal, the various seniority-based
gradations of Floor Official would be
eliminated,10 and the Floor-related
4 See Securities Exchange Act Release No. 91084
(Feb. 9, 2020), 86 FR 9545 (Feb. 16, 2021).
5 Amendment No. 1 is available on the
Commission’s website at https://www.sec.gov/
comments/sr-nyse-2020-105/srnyse20201058545367-230641.pdf.
6 See Securities Exchange Act Release No. 91442
(Mar. 30, 2021), 86 FR 17658 (Apr. 5, 2021) (Notice
of Filing of Amendment No. 1 and Order Instituting
Proceedings (‘‘OIP’’)).
7 See Letter from David De Gregorio, Associate
General Counsel, New York Stock Exchange to
Vanessa Countryman, Secretary, Office of the
Secretary, Commission (May 10, 2021) (‘‘OIP
Response Letter’’).
8 NYSE Rule 2(a) states that the term ‘‘member,’’
when referring to a natural person, means a natural
person associated with a member organization who
has been approved by the Exchange and designated
by such member organization to effect transactions
on the Exchange Trading Floor or any facility
thereof.
9 NYSE Rule 46 (Floor Officials—Appointment)
and NYSE Rule 46A (Executive Floor Governors)
currently set forth the process for the Exchange to
appoint active NYSE members as Floor Officials. In
addition, Rule 46 permits the Exchange to appoint
qualified employees to as act as Floor Governors.
10 The title ‘‘Floor Official’’ includes a broad
category of titles that include, in order of increasing
seniority, Floor Officials, Senior Floor Officials,
Executive Floor Officials, Floor Governors, and
Executive Floor Governors. See NYSE Rules 46 and
46A (defining Floor Official, Floor Governor,
Executive Floor Official, Senior Floor Official, and
Executive Floor Governor).
PO 00000
Frm 00120
Fmt 4703
Sfmt 4703
33001
functions that are currently delegated by
Exchange Rules to member Floor
Officials and Staff Governors would be
performed only by Trading Officials.
Only Exchange employees, not active
Exchange members, would be eligible to
serve as Trading Officials.
The Exchange anticipates that the
current Staff Governors, who are
Exchange employees, would be
appointed as Trading Officials.
According to the Exchange, Trading
Officials, like current Staff Governors,
would be appointed based on
experience and necessary business and
rule knowledge that would enable them
to participate in and supervise various
trading situations on the Trading
Floor,11 and the Exchange would train
and supervise them.12 In addition,
Trading Officials, like the current Staff
Governors, would report to the Head of
Equities. The Exchange states that this
reporting structure is appropriate
because Trading Officials, like Staff
Governors, will supervise trading on the
Exchange and will not have any
regulatory role or responsibility.13
The Exchange is also proposing
certain technical and conforming
changes to NYSE Rules 7.35A, 7.35B,
18(d), 37, 47, 75, 91.50, 93(b), 103.10,
103A, 103B(G), 104, 112(a)(i), 124(e),
128B.10, 308(g), and 903(d)(ii), which
relate to the duties of Trading Officials
and Floor supervision. Additionally, the
Exchange proposes to amend NYSE
Listed Company Manual Section 202.04.
• NYSE Rule 7.35A (DMM-Facilitated
Core Open and Trading Halt Auctions)
sets forth the responsibility of
designated market makers (‘‘DMMs’’) to
ensure that registered securities open as
close to the beginning of Core Trading
Hours as possible or reopen at the end
of the halt or pause.
Æ Subsection (a)(4) provides for Floor
Official participation in the opening and
reopening process to provide an
impartial professional assessment of
unusual situations, as well as to provide
guidance with respect to pricing when
a significant disparity in supply and
demand exists. The rule also
contemplates DMM consultations with
Floor Officials under certain specific
circumstances. References to Floor
Official in NYSE Rule 7.35A(a)(4) and
11 The term ‘‘Trading Floor’’ is defined in Rule 6A
to mean the restricted-access physical areas
designated by the Exchange for the trading of
securities, commonly known as the ‘‘Main Room’’
and the ‘‘Buttonwood Room.’’
12 Currently, Floor Officials are appointed by the
Board annually and must complete a mandatory
education program and pass a qualifications exam.
See NYSE Rules 46 and 46A.
13 Regulatory employees are not permitted to be
Staff Governors. See NYSE Rule 46.10.
E:\FR\FM\23JNN1.SGM
23JNN1
]]>Agencies
[Federal Register Volume 86, Number 118 (Wednesday, June 23, 2021)]
[Notices]
[Pages 32997-33001]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-13098]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92190; File No. SR-ISE-2021-13]
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 3, ``Regular Order Fees and
Rebates'' and Section 4, ``Complex Order Fees and Rebates''
June 16, 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 June 8, 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
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 3, ``Regular Order Fees and Rebates'' and Section 4, ``Complex
Order Fees and Rebates.''
The Exchange originally filed the proposed pricing change on June
1, 2021 (SR-ISE-2021-12). On June 8, 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 ISE's Pricing Schedule at Options 7,
Section 3, ``Regular Order Fees and Rebates'' and Section 4, ``Complex
Order Fees and Rebates.'' Each change is described below.
Options 7, Section 3 Regular Order Fees and Rebates
Today, the Exchange assesses a Maker Fee of $0.18 per contract in
Select Symbols \3\ for Market Maker,\4\ Non-Nasdaq ISE Market Maker
(FarMM),\5\ Firm Proprietary \6\/Broker-Dealer,\7\ and Professional
Customer \8\ orders. Priority Customer \9\ orders are not assessed a
Select Symbol Maker Fee.
---------------------------------------------------------------------------
\3\ ``Select Symbols'' are options overlying all symbols listed
on the Nasdaq ISE that are in the Penny Interval Program. See
Options 7, Section 1.
\4\ This fee applies to Market Maker orders sent to the Exchange
by Electronic Access Members. Market Makers that qualify for Market
Maker Plus will not pay this fee if they meet the applicable tier
thresholds set forth in Options 7, Section 3. Market Makers will
instead be assessed fees or rebates based on the applicable tier for
which they qualify. See notes 5 and 8 within Options 7, Section 3.
Market Maker Plus for Select Symbols is not being amended. The term
``Market Makers'' refers to ``Competitive Market Makers'' and
``Primary Market Makers'' collectively. See Options 1, Section
1(a)(21).
\5\ A ``Non-Nasdaq ISE Market Maker'' is a market maker as
defined in Section 3(a)(38) of the Securities Exchange Act of 1934,
as amended, registered in the same options class on another options
exchange. See Options 7, Section 1.
\6\ A ``Firm Proprietary'' order is an order submitted by a
member for its own proprietary account. See Options 7, Section 1.
\7\ A ``Broker-Dealer'' order is an order submitted by a member
for a broker-dealer account that is not its own proprietary account.
See Options 7, Section 1.
\8\ A ``Professional Customer'' is a person or entity that is
not a broker/dealer and is not a Priority Customer. See Options 7,
Section 1.
\9\ A ``Priority Customer'' is a person or entity that is not a
broker/dealer in securities, and does not place more than 390 orders
in listed options per day on average during a calendar month for its
own beneficial account(s), as defined in ISE Options 1, Section
1(a)(37). Unless otherwise noted, when used in the Pricing Schedule
the term ``Priority Customer'' includes ``Retail.'' A ``Retail''
order is a Priority Customer order that originates from a natural
person, provided that no change is made to the terms of the order
with respect to price or side of market and the order does not
originate from a trading algorithm or any other computerized
methodology. See Options 7, Section 1.
---------------------------------------------------------------------------
Further, today, pursuant to Options 7, Section 3, note 10, a Market
Maker is not charged a fee or paid a rebate when trading against non-
Priority Customer Complex Orders \10\ that leg into the regular \11\
order book. Also, today, pursuant to Options 7, Section 3, note 11, a
Market Maker, FarMM, Firm Proprietary/Broker Dealer, and Professional
Customer are assessed a $0.25 per contract fee, instead of the
applicable fee or rebate, when trading against Priority Customer
Complex Orders that leg into the regular order book. Today, Market
Makers that qualify for Market Maker Plus in Select Symbols pay a $0.15
per contract fee in the symbols for which they qualify for Market Maker
Plus when trading against Priority Customer Complex Orders of less than
50 contracts in Select Symbols that leg into the regular order book.
Further, Market Makers that qualify for Market Maker Plus in Select
Symbols do not pay any fee nor receive any rebate in the symbols for
which they qualify for Market Maker Plus when trading against Priority
Customer Complex Orders of 50 contracts or more in Select Symbols that
leg into the regular order book.
---------------------------------------------------------------------------
\10\ A ``Complex Order'' is any order involving the simultaneous
purchase and/or sale of two or more different options series in the
same underlying security, as provided in Nasdaq ISE Options 3,
Section 14, as well as Stock-Option Orders. See Options 7, Section
1.
\11\ A ``Regular Order'' is an order that consists of only a
single option series and is not submitted with a stock leg. See
Options 7, Section 1.
---------------------------------------------------------------------------
The Exchange proposes to remove rule text from Options 7, Section
3, note 11, which provides that Market Makers that qualify for Market
Maker Plus in Select Symbols will pay a $0.15 per contract fee in
symbols for which they
[[Page 32998]]
qualify for Market Maker Plus when trading against Priority Customer
Complex Orders of less than 50 contracts in Select Symbols that leg
into the regular order book. Additionally, the Exchange proposes to
modify the remainder of note 11 to provide, ``Market Makers that
qualify for Market Maker Plus in Select Symbols will not pay this fee
nor receive any rebate in symbols for which they qualify for Market
Maker Plus when trading against Priority Customer Complex Orders leg
into the regular order book.''
With the proposed amendments to note 11 of Options 7, Section 3, a
Market Maker that qualifies for Market Maker Plus when trading against
Priority Customer Complex Orders leg into the regular order book would
no longer pay a $0.15 per contract fee, rather, the Market Maker would
pay no fee, nor receive any rebate similar to the manner in which
Market Makers are priced today for orders of 50 contracts or more in
Select Symbols, when those Market Makers qualify for Market Maker Plus
and trade against Priority Customer Complex Orders leg into the regular
order book. This proposal would align pricing for Market Makers that
qualify for Market Maker Plus when trading against Priority Customer
Complex Orders leg into the regular order book, irrespective of the
size of the order. Market Makers that do not qualify for Market Maker
Plus would continue to pay a $0.25 per contract fee when trading
against Priority Customer Complex Orders that leg into the regular
order book similar to other market participants.
The Exchange believes this pricing will continue to incentivize
Market Makers to qualify for Market Maker Plus in order to earn the
associated rebates for Market Maker Plus and also pay no fees when
trading against Priority Customer Complex Orders leg into the regular
order book in Select Symbols.
The Exchange also proposes to make a non-substantive amendment to
capitalize the term ``Complex Order'' in current note 10 of Options 7,
Section 3.
Options 7, Section 4, Complex Order Fees and Rebates
Currently, Options 7, Section 4 provides a fee structure for
Complex Orders that provides rebates to Priority Customer Complex
Orders in order to encourage Members to bring that order flow to the
Exchange. Specifically, Priority Customer Complex Orders are provided
rebates in Select Symbols and Non-Select Symbols \12\ (other than NDX,
NQX, and MNX as noted within note 4 of Options 7, Section 4) based on
Priority Customer average daily volume (``ADV'').\13\
---------------------------------------------------------------------------
\12\ ``Non-Select Symbols'' are options overlying all symbols
excluding Select Symbols. See Options 7, Section 1.
\13\ See tiered rebates within Options 7, Section 4.
---------------------------------------------------------------------------
Today, Options 7, Section 4, note 1 provides, ``Rebate provided per
contract per leg if the order trades with non-Priority Customer orders
in the Complex Order Book. Rebate provided per contract leg in Select
Symbols where the largest leg of the Complex Order is under fifty (50)
contracts and trades with quotes and orders on the regular order book.
No Priority Customer Complex Order rebates will be provided in Select
Symbols if any leg of the order that trades with interest on the
regular order book is fifty (50) contracts or more. No Priority
Customer Complex Order rebates will be provided in Non-Select Symbols
if any leg of the order trades with interest on the regular order book,
irrespective of order size.''
The Exchange proposes to amend the second sentence in note 1 of
Options 7, Section 4 to state, ``This rebate will be reduced by $0.15
per contract in Select Symbols where the largest leg of the complex
order is under fifty (50) contracts and trades with quotes and orders
on the regular order book.'' The proposed amendment to the second
sentence of note 1 of Options 7, Section 4, would reduce the current
rebate paid in Select Symbols, per contract, when the largest leg of
the Complex Order is under fifty contracts and trades with quotes and
orders on the regular order book. Today, the Exchange pays no Priority
Customer Complex Order rebates in Select Symbols if any leg of the
order that trades with interest on the regular order book is fifty
contracts or more, nor does the Exchange pay a Priority Customer
Complex Order rebate in Non-Select Symbols if any leg of the order
trades with interest on the regular order book, irrespective of order
size. The Exchange has observed in the past that several market
participants have entered larger sized Priority Customer Complex Orders
with a leg of fifty or more contracts to earn a rebate. When these
Complex Orders do not find a counterparty in the Complex Order Book,
the orders may leg into the regular order book where they are typically
executed by Market Makers on the individual legs who pay a fee to trade
with this order flow.\14\ As a result, the Market Maker's ability to
provide liquidity on the Exchange is adversely affected as they are
charged to trade against these larger complex orders when they leg into
the regular market and execute against their quotes. For this reason,
the Exchange continues to not pay Priority Customer Complex Order
rebates in Select Symbols if any leg of the order that trades with
interest on the regular order book is fifty contracts or more,
including for Select Symbols which do not pay a Priority Customer
Complex Order rebate if any leg of the order trades with interest on
the regular order book, irrespective of order size.
---------------------------------------------------------------------------
\14\ For example, a Market Maker providing liquidity on the
individual leg would typically pay a maker fee of only $0.18 per
contract for trading with orders originating from the regular order
book, or in the case of Market Makers that achieve Market Maker Plus
status, would earn certain maker rebates instead of paying the $0.18
per contract maker fee. See Options 7, Section 3, note 5.
---------------------------------------------------------------------------
The Exchange's proposal to reduce the Select Symbol rebate when the
largest leg of the Complex Order is under fifty contracts and trades
with quotes and orders on the regular order book, by $0.15 per
contract, is intended to continue to incentivize Members to send order
flow to the Exchange despite the reduction. Also, the Exchange will
continue to pay Priority Customer rebates for Priority Customer Complex
Orders of any size which trades with non-Priority Customer orders in
the Complex Order Book, based on the Priority Customer Complex Tier
achieved, thereby continuing to incentivize Members to bring Complex
Order flow to the Exchange to earn the rebate on their Priority
Customer Complex Order volume.
Further, the proposal would close the pricing gap as between
Members who receive a Priority Customer rebate, which is being reduced
by this proposal, in Select Symbols where the largest leg of the
Complex Order is under fifty (50) contracts and trades with quotes and
orders on the regular order book as compared to both Members that do
not receive a Priority Customer rebate in non-Select Symbols if any leg
of the order trades with interest on the regular order book,
irrespective of order size, and Members that do not receive a Priority
Customer rebate in Select Symbols where the largest leg of the Complex
Order is fifty contracts or more and trades with quotes and orders on
the regular order book.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\15\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\16\ in particular, in that it
[[Page 32999]]
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.
---------------------------------------------------------------------------
\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
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'. . . .'' \17\
---------------------------------------------------------------------------
\17\ 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)).
---------------------------------------------------------------------------
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.'' \18\
---------------------------------------------------------------------------
\18\ Securities Exchange Act Release No. 51808 (June 9, 2005),
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
---------------------------------------------------------------------------
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.
Options 7, Section 3 Regular Order Fees and Rebates
The Exchange's proposal to remove certain rule text from Options 7,
Section 3, note 11, and amend the remaining rule text is reasonable as
a Market Maker that qualifies for Market Maker Plus when trading
against Priority Customer Complex Orders that leg into the regular
order book would no longer pay a $0.15 per contract fee, rather, the
Market Maker would pay no fee, nor receive any rebate. This proposal
would align the pricing to the manner in which Market Makers are priced
today for orders of 50 contracts or more in Select Symbols, when those
Market Makers qualify for Market Maker Plus and trade against Priority
Customer Complex Orders leg into the regular order book. Specifically,
Market Makers that qualify for Market Maker Plus when trading against
Priority Customer Complex Orders that leg into the regular order book,
would pay no fee, nor receive any rebate, irrespective of the size of
the order. The Exchange believes this pricing will continue to
incentivize Market Makers to qualify for Market Maker Plus in order to
earn the associated rebates for Market Maker Plus and also pay no fees
when trading against Priority Customer Complex Orders leg into the
regular order book in Select Symbols. Market Makers that do not qualify
for Market Maker Plus would continue to pay a $0.25 per contract fee
when trading against Priority Customer Complex Orders that leg into the
regular order book similar to other market participants.
The Exchange's proposal to remove certain rule text from Options 7,
Section 3, note 11, and amend the remaining rule text is equitable and
not unfairly discriminatory. Market Makers that qualifies for Market
Maker Plus when trading against Priority Customer Complex Orders leg
into the regular order book would uniformly pay no fee, nor receive any
rebate, irrespective of the size of the order. The Exchange will
continue to assess a $0.25 per contract fee to all other non-Priority
Customer market participants, including Market Makers that do not
qualify for Market Maker Plus, when trading against Priority Customer
Complex Orders that leg into the regular order book. The Exchange
believes that it is not unfairly discriminatory to not assess Market
Makers a fee if they qualify for Market Maker Plus because those Market
Makers are paid rebates within the Market Maker Plus Program for adding
value for quoting at the NBBO for a significant percentage of time.
Further, all Market Makers are subject to the same qualification
criteria for Market Maker Plus.
The Exchange's proposal to capitalize the term ``Complex Order'' in
current note 10 of Options 7, Section 3 is non-substantive.
Options 7, Section 4, Complex Order Fees and Rebates
The Exchange's proposal to amend the second sentence in note 1 of
Options 7, Section 4 to state, ``This rebate will be reduced by $0.15
per contract in Select Symbols where the largest leg of the complex
order is under fifty (50) contracts and trades with quotes and orders
on the regular order book,'' is reasonable. The proposed amendment to
note 1 of Options 7, Section 4, would reduce the current rebate paid in
Select Symbols, per contract, when the largest leg of the Complex Order
is under fifty contracts and trades with quotes and orders on the
regular order book. Overall, the Exchange believes that the Priority
Customer Complex Order rebate program, as modified, is reasonable
because the program is optional and all Members can choose to
participate or not. The Exchange's proposal to reduce the Select Symbol
rebate when the largest leg of the Complex Order is under fifty
contracts and trades with quotes and orders on the regular order book,
by $0.15 per contract, is intended to continue to incentivize Members
to send order flow to the Exchange despite the reduction. Also, the
Exchange will continue to pay Priority Customer rebates for Priority
Customer Complex Orders of any size which trades with non-Priority
Customer orders in the Complex Order Book, based on the Priority
Customer Complex Tier achieved, thereby continuing to incentivize
Members to bring Complex Order flow to the Exchange to earn the rebate
on their Priority Customer Complex Order volume. Further, the proposal
would close the pricing gap as between Members who receive a Priority
Customer rebate, which is being reduced by this proposal, in Select
Symbols where the largest leg of the Complex Order is under fifty (50)
contracts and trades with quotes and orders on the regular order book
as compared to both Members that do not receive a Priority Customer
rebate in non-Select Symbols if any leg of the order trades with
interest on the regular order book, irrespective of order size, and
Members that do not receive a Priority Customer rebate in Select
Symbols where the largest leg of the
[[Page 33000]]
Complex Order is fifty contracts or more and trades with quotes and
orders on the regular order book. This fee remains competitive with
other options markets.\19\
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\19\ MIAX Emerald, LLC's (``Emerald'') Pricing Schedule provides
that Priority Customer Complex Orders contra to Priority Customer
Complex Orders are neither charged nor rebated for Penny and Non-
Penny Classes. Priority Customer Complex Orders that leg into the
Simple book are neither charged nor rebated. See Emerald's Pricing
Schedule.
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The Exchange's proposal to amend the second sentence in note 1 of
Options 7, Section 4 to state, ``This rebate will be reduced by $0.15
per contract in Select Symbols where the largest leg of the complex
order is under fifty (50) contracts and trades with quotes and orders
on the regular order book,'' is equitable and not unfairly
discriminatory. The Exchange will continue to uniformly pay rebates to
Priority Customer Complex Orders trading with non-Priority Customer
orders in the Complex Order Book, regardless of size, based on the
Priority Customer Complex Tier achieved. Further, the Exchange would
uniformly pay a reduced rebate (reduced by $0.15 per contract) in
Select Symbols where the largest leg of the complex order is under
fifty contracts and trades with quotes and orders on the regular order
book.
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.
Options 7, Section 3 Regular Order Fees and Rebates
The Exchange's proposal to remove certain rule text from Options 7,
Section 3, note 11, and amend the remaining rule text does not impose
an undue burden on competition. Market Makers that qualifies for Market
Maker Plus when trading against Priority Customer Complex Orders leg
into the regular order book would uniformly pay no fee, nor receive any
rebate, irrespective of the size of the order. The Exchange will
continue to assess a $0.25 per contract fee to all other non-Priority
Customer market participants, including Market Makers that do not
qualify for Market Maker Plus, when trading against Priority Customer
Complex Orders that leg into the regular order book. Today, Market
Makers that qualify for Market Maker Plus are paid rebates based on
their tier qualification for adding value for quoting at the NBBO for a
significant percentage of time. All Market Makers are subject to the
same qualification criteria for Market Maker Plus.
The Exchange's proposal to capitalize the term ``Complex Order'' in
current note 10 of Options 7, Section 3 is non-substantive.
Options 7, Section 4, Complex Order Fees and Rebates
The Exchange's proposal to amend the second sentence in note 1 of
Options 7, Section 4 to state, ``This rebate will be reduced by $0.15
per contract in Select Symbols where the largest leg of the complex
order is under fifty (50) contracts and trades with quotes and orders
on the regular order book,'' does not impose an undue burden on
competition. The Exchange uniformly pay rebates to Priority Customer
Complex Orders trading with non-Priority Customer orders in the Complex
Order Book, regardless of size, based on the Priority Customer Complex
Tier achieved and will continue to pay rebates. Further, the Exchange
would uniformly pay a reduced rebate (reduced by $0.15 per contract) in
Select Symbols where the largest leg of the complex order is under
fifty contracts and trades with quotes and orders on the regular order
book.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act.\20\ At any time within 60 days of the
filing of the proposed rule change, the Commission summarily may
temporarily suspend such rule change if it appears to the Commission
that such action is: (i) Necessary or appropriate in the public
interest; (ii) for the protection of investors; or (iii) otherwise in
furtherance of the purposes of the Act. If the Commission takes such
action, the Commission shall institute proceedings to determine whether
the proposed rule should be approved or disapproved.
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\20\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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-2021-13 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-2021-13. 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,
[[Page 33001]]
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-2021-13 and should be
submitted on or before July 14, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
J. Matthew DeLesDernier,
Assistant Secretary.
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\21\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2021-13098 Filed 6-22-21; 8:45 am]
BILLING CODE 8011-01-P
