Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Pricing Schedule at Options 7, Section 6.A To Modify the QCC and Solicitation Rebate Program, 58121-58124 [2021-22807]
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Federal Register / Vol. 86, No. 200 / Wednesday, October 20, 2021 / Notices
information that more fully incorporates
then-current market conditions,
enabling DPMs and LMMs to more
accurately price such options and
provide for a tighter spread upon the
opening of the series. An Exchangedetermined period of time before a
DPM’s and LMM’s opening quote
obligations are triggered in an index
option class will apply uniformly to any
DPM and/or LMM that may be
appointed in that class.
The Exchange does not believe that
the proposed rule change will impose
any burden on intermarket competition
that is not necessary or appropriate in
furtherance of the purposes of the Act,
because it relates solely to a quoting
obligation applicable to DPMs and
LMMs on the Exchange. The Exchange
notes that other options exchanges that
may have similar opening quote
requirements for their market makers
may, in their discretion, adopt similar
flexibility regarding the timing of the
opening quote requirements in
connection with index options.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
lotter on DSK11XQN23PROD with NOTICES1
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The Exchange has designated this rule
filing as non-controversial under
Section 19(b)(3)(A) 18 of the Act and
Rule 19b–4(f)(6) 19 thereunder. Because
the proposed rule change does not: (i)
Significantly affect the protection of
investors or the public interest; (ii)
impose any significant burden on
competition; and (iii) become operative
for 30 days from the date on which it
was filed, or such shorter time as the
Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act and Rule 19b–
4(f)(6) thereunder.
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
U.S.C. 78s(b)(3)(A).
19 17 CFR 240.19b–4(f)(6).
under Section 19(b)(2)(B) 20 of the Act to
determine whether the proposed rule
change 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–
CBOE–2021–059 on the subject line.
Paper Comments
• Send paper comments in triplicate
to the Secretary, Securities and
Exchange Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–CBOE–2021–059. 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–CBOE–2021–059 and
18 15
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17:55 Oct 19, 2021
should be submitted on or before
November 10, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–22811 Filed 10–19–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–93314; File No. SR–ISE–
2021–21)
Self-Regulatory Organizations; Nasdaq
ISE, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend the
Exchange’s Pricing Schedule at
Options 7, Section 6.A To Modify the
QCC and Solicitation Rebate Program
October 14, 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
September 30, 2021, Nasdaq ISE, LLC
(‘‘ISE’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘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 the
Exchange’s Pricing Schedule at Options
7, Section 6.A to modify its Qualified
Contingent Cross (‘‘QCC’’) and
Solicitation rebate program, as
described further below.
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.]
[sic]
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
21 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
20 15
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U.S.C. 78s(b)(2)(B).
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Federal Register / Vol. 86, No. 200 / Wednesday, October 20, 2021 / Notices
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.
Orders except for Solicited Orders
between two Priority Customers.7
Solicited Orders between two Priority
Customers will not receive any rebate.
The volume threshold and
corresponding rebates are as follows:8
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
0 to 99,999 ...................................
100,000 to 199,999 ......................
200,000 to 499,999 ......................
500,000 to 749,999 ......................
750,000 to 999,999 ......................
1,000,000+ ....................................
1. Purpose
The purpose of the proposed rule
change is to modify the Exchange’s
QCC 3 and Solicitation Rebate program
in Options 7, Section 6.A by: (i)
Providing a new additional rebate of
$0.01 per originating contract side to
qualifying Members, and (ii) amending
the qualifications for the existing $0.01
additional rebate. The Exchange also
proposes a technical amendment in
Options 7, Section 4. Each change is
discussed in detail below.
While these amendments are effective
upon filing, the Exchange has
designated the proposed amendments to
be operative on October 1, 2021.
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Background
Today, Members using QCC and/or
other solicited orders executed in the
Solicitation 4 or Facilitation 5
Mechanisms (together with QCC,
collectively, ‘‘Solicited Orders’’) receive
rebates for each originating contract side
in all symbols traded on the Exchange.
Once a Member reaches a certain
volume threshold in Solicited Orders
during a month, the Exchange provides
rebates to that Member for all of its
eligible Solicited Order traded contracts
for that month.6 Rebates will be applied
to Solicited Order traded contracts once
the volume threshold is met. Members
will receive the rebate for all Solicited
3 A QCC Order is comprised of an originating
order to buy or sell at least 1000 contracts that is
identified as being part of a qualified contingent
trade, as that term is defined in Supplementary
Material .01 to Options 3, Section 7, coupled with
a contra-side order or orders totaling an equal
number of contracts. See Options 3, Section 7(j).
4 The Solicitation or Solicited Order Mechanism
is a process by which an Electronic Access Member
(‘‘EAM’’) can attempt to execute orders of 500 or
more contracts it represents as agent against contra
orders that it solicited. See Options 3, Section 11(d).
5 The Facilitation Mechanism is a process by
which an EAM can execute a transaction wherein
the EAM seeks to facilitate a block-size order it
represents as agent, and/or a transaction wherein
the EAM solicited interest to execute against a
block-size order it represents as agent. See Options
3, Section 11(b).
6 All eligible volume from affiliated Members will
be aggregated in determining QCC and Solicitation
volume totals, provided there is at least 75%
common ownership between the Members as
reflected on each Member’s Form BD, Schedule A.
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Originating contract sides
Rebate
$0.00
(0.05)
(0.07)
(0.09)
(0.10)
(0.11)
For Members that achieve the highest
volume threshold of 1,000,000 or more
originating contract sides, the Exchange
also currently provides an additional
rebate of $0.01 per originating contract
side on Solicited Orders that qualify for
the QCC and Solicitation Rebate
program if the Member achieves in a
given month: (i) Combined Solicited
Order volume of more than 1,750,000
originating contract sides and (ii)
Priority Customer Complex Tiers 6–9 in
Section 4 (the ‘‘note * incentive’’).9 The
purpose of this incentive is to encourage
Members to provide high volumes of
Solicited Order activity well above the
highest QCC and Solicitation Rebate
volume tier of 1,000,000 or more
originating contract sides, and also
provide significant complex order
volume.
New QCC and Solicitation Incentive
To further encourage Solicited Order
and complex order flow, the Exchange
now proposes to provide a new
additional incentive that will be
structured similarly to the existing note
* incentive, except the proposed
incentive will also be applied to the
lower QCC and Solicitation Rebate
volume tiers (in addition to the highest
volume tier). Furthermore, Members
will be able to qualify for the proposed
incentive by achieving less stringent
Priority Customer Complex Tiers in
Section 4. Specifically, the Exchange
proposes that Members will receive an
additional rebate of $0.01 per
originating contract side on Solicited
7 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).
8 Volume resulting from all Solicited Orders will
be aggregated in determining the applicable volume
tier.
9 As set forth in Options 7, Section 4, Priority
Customer Complex Tiers are based on Total
Affiliated Member or Affiliated Entity complex
order volume (excluding Crossing Orders and
Responses to Crossing Orders) calculated as a
percentage of Customer Total Consolidated Volume.
PO 00000
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Orders that qualify for the QCC and
Solicitation Rebate program if they
achieve Priority Customer Complex Tier
2 or higher in a given month (the ‘‘note
& incentive’’).
The note & incentive will be applied
to all of the QCC and Solicitation Rebate
volume tiers except for the lowest tier
(for which the Exchange does not
currently provide a QCC and
Solicitation Rebate). This additional
rebate opportunity will be cumulative of
the base rebates so that qualifying
Members could receive up to $0.06 in
the second QCC and Solicitation Rebate
volume tier, $0.08 in the third tier,
$0.10 in the fourth tier, $0.11 in the fifth
tier, and $0.13 in the sixth and highest
tier (i.e., the $0.11 base rebate, the $0.01
note * incentive, and the $0.01 note &
incentive).
While structured similarly to the
existing note * incentive, the proposed
incentive will be less stringent in that it
will require Members to send a lower
amount of Solicited Order and complex
order volume in order to qualify for the
incentive. As such, the proposed note &
incentive may be more readily
accessible to Members. If more Members
find this rebate is accessible to them,
then more will seek to qualify for it by
sending Solicited Order and complex
order flow to the Exchange.
Existing QCC and Solicitation Incentive
As described above, the Exchange
currently offers the $0.01 note *
incentive to qualifying Members if they
achieve in a given month: (i) Combined
Solicited Order volume of more than
1,750,000 originating contract sides and
(ii) Priority Customer Complex Tiers 6–
9 in Section 4. When the Exchange
adopted the note * incentive in 2019,
there were only nine Priority Customer
Complex Tiers in Section 4.10 The
Exchange has since amended its Pricing
Schedule to adopt Priority Customer
Complex Tier 10, and now proposes to
update the existing Priority Customer
Complex Tier qualification in the note
* incentive accordingly.11 As amended,
the qualification will require Members
to achieve Priority Customer Complex
Tier 6 or higher. The amended
qualification will therefore include
Priority Customer Complex Tier 10
while also giving the Exchange
flexibility to accommodate any similar
changes to its Priority Customer
Complex Tiers going forward. The
Exchange notes that no Member is
10 See Securities Exchange Act Release No. 85647
(April 15, 2019), 84 FR 16300 (April 18, 2019) (SR–
ISE–2019–09) (the ‘‘2019 Filing’’).
11 See Securities Exchange Act Release No. 90501
(November 24, 2020), 85 FR 77328 (December 1,
2020) (SR–ISE–2020–39) (the ‘‘2020 Filing’’).
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currently achieving both Priority
Customer Complex Tier 10 and
combined Solicited Order volume of
more than 1,750,000 originating contract
sides to receive the $0.01 additional
incentive, so expects that the proposed
changes will have minimal impact.
Technical Amendment
The Exchange proposes a minor,
technical amendment in note 16 of
Options 7, Section 4, which currently
describes the Priority Customer
Complex Tiers, to add a reference to
Affiliated Entity 12 within the note’s first
sentence. The proposed change will
simply align the note’s language with
corresponding language presently in the
header of the Priority Customer complex
rebates table.
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2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,13 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,14 in particular, in that it
provides for the equitable allocation of
reasonable dues, fees, and other charges
among members and issuers and other
persons using any facility, and is not
designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers.
The Exchange’s proposed changes to
its Pricing Schedule are reasonable in
several respects. As a threshold matter,
the Exchange is subject to significant
competitive forces in the market for
options 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
12 An ‘‘Affiliated Entity’’ is a relationship between
an Appointed Market Maker and an Appointed OFP
for purposes of qualifying for certain pricing
specified in the Schedule of Fees. Market Makers
and OFPs are required to send an email to the
Exchange to appoint their counterpart, at least 3
business days prior to the last day of the month to
qualify for the next month. The Exchange will
acknowledge receipt of the emails and specify the
date the Affiliated Entity is eligible for applicable
pricing, as specified in the Schedule of Fees. Each
Affiliated Entity relationship will commence on the
1st of a month and may not be terminated prior to
the end of any month. An Affiliated Entity
relationship will terminate after a one (1) year
period, unless either party terminates earlier in
writing by sending an email to the Exchange at least
3 business days prior to the last day of the month
to terminate for the next month. Affiliated Entity
relationships must be renewed annually by each
party sending an email to the Exchange. Affiliated
Members may not qualify as a counterparty
comprising an Affiliated Entity. Each Member may
qualify for only one (1) Affiliated Entity
relationship at any given time.
13 15 U.S.C. 78f(b).
14 15 U.S.C. 78f(b)(4) and (5).
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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’. . . .’’ 15
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.’’ 16
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.
New QCC and Solicitation Incentive
The Exchange believes that its
proposal to provide Members with an
additional incentive of $0.01 per
originating contract side on Solicited
Orders that qualify for the QCC and
Solicitation Rebate program if they
achieve Priority Customer Complex Tier
2 or higher in a given month is
reasonable because this incentive is
intended to encourage Members to send
more Solicited Order and complex order
flow to the Exchange. As discussed
above, the proposed note & incentive is
15 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)).
16 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
PO 00000
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58123
similar to the existing note * incentive,
except the proposed incentive will be
less stringent in that it will require
Members to send a lower amount of
Solicited Order and complex order
volume in order to qualify for the
incentive. As such, the proposed note &
incentive may be more readily
accessible to Members. If more Members
find this rebate is accessible to them,
then more will seek to qualify for it by
sending Solicited Order and complex
order flow to the Exchange. All market
participants benefit from increased
order interaction when more order flow
is available on ISE.
The Exchange further believes that the
proposed note & incentive is equitable
and not unfairly discriminatory because
any Member may qualify for the
proposed incentive by submitting the
requisite volume of Solicited Orders and
complex orders. Furthermore, the
Exchange will uniformly apply the
proposed incentive to all qualifying
Members.
Existing QCC and Solicitation Incentive
The Exchange believes that the
proposed changes to amend the existing
qualification in the note * incentive is
reasonable for the following reasons.
First, the proposed changes would more
closely align to the Exchange’s original
intent in the 2019 Filing to provide the
note * incentive to qualifying Members
that achieved anything above 1.000% of
Total Affiliated Member or Affiliated
Entity Complex Order Volume
(Excluding Crossing Orders and
Responses to Crossing Orders)
calculated as a percentage of Customer
Total Consolidated Volume (i.e., Priority
Customer Complex Tiers 6–9 at the time
of the 2019 Filing).17 The 2020 Filing
amended, among other changes, the
Priority Customer Complex Tiers by
adding a new Tier 10 as the highest tier
and adjusting the volume percentages in
Tiers 8 and 9 accordingly.18 The volume
percentages in Tier 6, however,
remained the same with the 2020 Filing,
so even with the addition of Tier 10,
corresponding changes should have
been made to the note * incentive
qualifications to include Tier 10 to align
with the original intent of this incentive.
Second, as noted above, the proposed
changes to include Tier 10 in the
incentive qualifications are expected to
have minimal impact as no Member is
currently achieving both Priority
Customer Complex Tier 10 and
combined Solicited Order volume of
more than 1,750,000 originating contract
17 See
18 See
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2019 Filing.
2020 Filing.
20OCN1
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sides to receive the $0.01 additional
rebate.
Lastly, the Exchange believes that the
proposed changes to the existing
qualification are equitable and not
unfairly discriminatory because any
Member may qualify for the note *
incentive by submitting the requisite
volume of Solicited Orders and complex
orders. The Exchange will apply the
amended qualification to all qualifying
Members uniformly.
changes in this market may impose any
burden on competition is extremely
limited. In sum, if the changes proposed
herein are unattractive to market
participants, it is likely that the
Exchange will lose market share as a
result. Accordingly, the Exchange does
not believe that the proposed changes
will impair the ability of Members or
competing exchanges to maintain their
competitive standing in the financial
markets.
Technical Amendment
The Exchange’s proposal to amend
note 16 in Options 7, Section 4 is
reasonable, equitable, and not unfairly
discriminatory. As discussed above, the
Exchange is simply aligning the note’s
language corresponding language
currently in the header of the Priority
Customer complex rebates table. The
Exchange believes that the proposed
changes will bring clarity and
transparency to the Exchange’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.
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 its
proposal will place any category of
market participant at a competitive
disadvantage. As discussed above, any
Member may qualify for the QCC and
Solicitation Rebates, including the note
* incentive and the proposed note &
incentive. The proposed changes are
primarily aimed at attracting greater
Solicited Order and complex order flow
to the Exchange. To the extent the
Exchange’s proposal incentivizes
Members to bring more order flow to
ISE, the Exchange believes that the
resulting additional volume and
liquidity will benefit all market
participants.
In terms of inter-market competition,
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
options 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
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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.19 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–2021–21 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–2021–21. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
19 15
PO 00000
U.S.C. 78s(b)(3)(A)(ii).
Frm 00071
Fmt 4703
Sfmt 4703
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–2021–21 and should be
submitted on or before November 10,
2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–22807 Filed 10–19–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–93329; File Nos. SR–MIAX–
2021–29, SR–EMERALD–2021–22, SR–
PEARL–2021–30]
Self-Regulatory Organizations; Miami
International Securities Exchange,
LLC, MIAX Emerald, LLC, and MIAX
PEARL, LLC; Notice of Withdrawal of
Proposed Rule Changes To Amend
Fees for Purge Ports
October 14, 2021.
On July 1, 2021, Miami International
Securities Exchange, LLC, MIAX
Emerald, LLC, and MIAX PEARL, LLC
(each an ‘‘Exchange’’) each filed with
the Securities and Exchange
Commission (‘‘Commission’’) pursuant
to Section 19(b)(1) of the Securities
20 17
E:\FR\FM\20OCN1.SGM
CFR 200.30–3(a)(12).
20OCN1
]]>Agencies
[Federal Register Volume 86, Number 200 (Wednesday, October 20, 2021)]
[Notices]
[Pages 58121-58124]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-22807]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93314; File No. SR-ISE-2021-21)
Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the
Exchange's Pricing Schedule at Options 7, Section 6.A To Modify the QCC
and Solicitation Rebate Program
October 14, 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 September 30, 2021, Nasdaq ISE, LLC (``ISE'' or ``Exchange'')
filed with the Securities and Exchange Commission (``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 the Exchange's Pricing Schedule at
Options 7, Section 6.A to modify its Qualified Contingent Cross
(``QCC'') and Solicitation rebate program, as described further below.
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.] [sic]
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
[[Page 58122]]
any comments it received on the proposed rule change. The text of these
statements may be examined at the places specified in Item IV below.
The Exchange has prepared summaries, set forth in sections A, B, and C
below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to modify the Exchange's
QCC \3\ and Solicitation Rebate program in Options 7, Section 6.A by:
(i) Providing a new additional rebate of $0.01 per originating contract
side to qualifying Members, and (ii) amending the qualifications for
the existing $0.01 additional rebate. The Exchange also proposes a
technical amendment in Options 7, Section 4. Each change is discussed
in detail below.
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\3\ A QCC Order is comprised of an originating order to buy or
sell at least 1000 contracts that is identified as being part of a
qualified contingent trade, as that term is defined in Supplementary
Material .01 to Options 3, Section 7, coupled with a contra-side
order or orders totaling an equal number of contracts. See Options
3, Section 7(j).
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While these amendments are effective upon filing, the Exchange has
designated the proposed amendments to be operative on October 1, 2021.
Background
Today, Members using QCC and/or other solicited orders executed in
the Solicitation \4\ or Facilitation \5\ Mechanisms (together with QCC,
collectively, ``Solicited Orders'') receive rebates for each
originating contract side in all symbols traded on the Exchange. Once a
Member reaches a certain volume threshold in Solicited Orders during a
month, the Exchange provides rebates to that Member for all of its
eligible Solicited Order traded contracts for that month.\6\ Rebates
will be applied to Solicited Order traded contracts once the volume
threshold is met. Members will receive the rebate for all Solicited
Orders except for Solicited Orders between two Priority Customers.\7\
Solicited Orders between two Priority Customers will not receive any
rebate. The volume threshold and corresponding rebates are as
follows:\8\
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\4\ The Solicitation or Solicited Order Mechanism is a process
by which an Electronic Access Member (``EAM'') can attempt to
execute orders of 500 or more contracts it represents as agent
against contra orders that it solicited. See Options 3, Section
11(d).
\5\ The Facilitation Mechanism is a process by which an EAM can
execute a transaction wherein the EAM seeks to facilitate a block-
size order it represents as agent, and/or a transaction wherein the
EAM solicited interest to execute against a block-size order it
represents as agent. See Options 3, Section 11(b).
\6\ All eligible volume from affiliated Members will be
aggregated in determining QCC and Solicitation volume totals,
provided there is at least 75% common ownership between the Members
as reflected on each Member's Form BD, Schedule A.
\7\ 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).
\8\ Volume resulting from all Solicited Orders will be
aggregated in determining the applicable volume tier.
------------------------------------------------------------------------
Originating contract sides Rebate
------------------------------------------------------------------------
0 to 99,999.................................................. $0.00
100,000 to 199,999........................................... (0.05)
200,000 to 499,999........................................... (0.07)
500,000 to 749,999........................................... (0.09)
750,000 to 999,999........................................... (0.10)
1,000,000+................................................... (0.11)
------------------------------------------------------------------------
For Members that achieve the highest volume threshold of 1,000,000
or more originating contract sides, the Exchange also currently
provides an additional rebate of $0.01 per originating contract side on
Solicited Orders that qualify for the QCC and Solicitation Rebate
program if the Member achieves in a given month: (i) Combined Solicited
Order volume of more than 1,750,000 originating contract sides and (ii)
Priority Customer Complex Tiers 6-9 in Section 4 (the ``note *
incentive'').\9\ The purpose of this incentive is to encourage Members
to provide high volumes of Solicited Order activity well above the
highest QCC and Solicitation Rebate volume tier of 1,000,000 or more
originating contract sides, and also provide significant complex order
volume.
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\9\ As set forth in Options 7, Section 4, Priority Customer
Complex Tiers are based on Total Affiliated Member or Affiliated
Entity complex order volume (excluding Crossing Orders and Responses
to Crossing Orders) calculated as a percentage of Customer Total
Consolidated Volume.
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New QCC and Solicitation Incentive
To further encourage Solicited Order and complex order flow, the
Exchange now proposes to provide a new additional incentive that will
be structured similarly to the existing note * incentive, except the
proposed incentive will also be applied to the lower QCC and
Solicitation Rebate volume tiers (in addition to the highest volume
tier). Furthermore, Members will be able to qualify for the proposed
incentive by achieving less stringent Priority Customer Complex Tiers
in Section 4. Specifically, the Exchange proposes that Members will
receive an additional rebate of $0.01 per originating contract side on
Solicited Orders that qualify for the QCC and Solicitation Rebate
program if they achieve Priority Customer Complex Tier 2 or higher in a
given month (the ``note & incentive'').
The note & incentive will be applied to all of the QCC and
Solicitation Rebate volume tiers except for the lowest tier (for which
the Exchange does not currently provide a QCC and Solicitation Rebate).
This additional rebate opportunity will be cumulative of the base
rebates so that qualifying Members could receive up to $0.06 in the
second QCC and Solicitation Rebate volume tier, $0.08 in the third
tier, $0.10 in the fourth tier, $0.11 in the fifth tier, and $0.13 in
the sixth and highest tier (i.e., the $0.11 base rebate, the $0.01 note
* incentive, and the $0.01 note & incentive).
While structured similarly to the existing note * incentive, the
proposed incentive will be less stringent in that it will require
Members to send a lower amount of Solicited Order and complex order
volume in order to qualify for the incentive. As such, the proposed
note & incentive may be more readily accessible to Members. If more
Members find this rebate is accessible to them, then more will seek to
qualify for it by sending Solicited Order and complex order flow to the
Exchange.
Existing QCC and Solicitation Incentive
As described above, the Exchange currently offers the $0.01 note *
incentive to qualifying Members if they achieve in a given month: (i)
Combined Solicited Order volume of more than 1,750,000 originating
contract sides and (ii) Priority Customer Complex Tiers 6-9 in Section
4. When the Exchange adopted the note * incentive in 2019, there were
only nine Priority Customer Complex Tiers in Section 4.\10\ The
Exchange has since amended its Pricing Schedule to adopt Priority
Customer Complex Tier 10, and now proposes to update the existing
Priority Customer Complex Tier qualification in the note * incentive
accordingly.\11\ As amended, the qualification will require Members to
achieve Priority Customer Complex Tier 6 or higher. The amended
qualification will therefore include Priority Customer Complex Tier 10
while also giving the Exchange flexibility to accommodate any similar
changes to its Priority Customer Complex Tiers going forward. The
Exchange notes that no Member is
[[Page 58123]]
currently achieving both Priority Customer Complex Tier 10 and combined
Solicited Order volume of more than 1,750,000 originating contract
sides to receive the $0.01 additional incentive, so expects that the
proposed changes will have minimal impact.
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\10\ See Securities Exchange Act Release No. 85647 (April 15,
2019), 84 FR 16300 (April 18, 2019) (SR-ISE-2019-09) (the ``2019
Filing'').
\11\ See Securities Exchange Act Release No. 90501 (November 24,
2020), 85 FR 77328 (December 1, 2020) (SR-ISE-2020-39) (the ``2020
Filing'').
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Technical Amendment
The Exchange proposes a minor, technical amendment in note 16 of
Options 7, Section 4, which currently describes the Priority Customer
Complex Tiers, to add a reference to Affiliated Entity \12\ within the
note's first sentence. The proposed change will simply align the note's
language with corresponding language presently in the header of the
Priority Customer complex rebates table.
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\12\ An ``Affiliated Entity'' is a relationship between an
Appointed Market Maker and an Appointed OFP for purposes of
qualifying for certain pricing specified in the Schedule of Fees.
Market Makers and OFPs are required to send an email to the Exchange
to appoint their counterpart, at least 3 business days prior to the
last day of the month to qualify for the next month. The Exchange
will acknowledge receipt of the emails and specify the date the
Affiliated Entity is eligible for applicable pricing, as specified
in the Schedule of Fees. Each Affiliated Entity relationship will
commence on the 1st of a month and may not be terminated prior to
the end of any month. An Affiliated Entity relationship will
terminate after a one (1) year period, unless either party
terminates earlier in writing by sending an email to the Exchange at
least 3 business days prior to the last day of the month to
terminate for the next month. Affiliated Entity relationships must
be renewed annually by each party sending an email to the Exchange.
Affiliated Members may not qualify as a counterparty comprising an
Affiliated Entity. Each Member may qualify for only one (1)
Affiliated Entity relationship at any given time.
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\13\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\14\ 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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\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange's proposed changes to its Pricing Schedule are
reasonable in several respects. As a threshold matter, the Exchange is
subject to significant competitive forces in the market for options
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'. . . .'' \15\
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\15\ 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.'' \16\
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\16\ 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.
New QCC and Solicitation Incentive
The Exchange believes that its proposal to provide Members with an
additional incentive of $0.01 per originating contract side on
Solicited Orders that qualify for the QCC and Solicitation Rebate
program if they achieve Priority Customer Complex Tier 2 or higher in a
given month is reasonable because this incentive is intended to
encourage Members to send more Solicited Order and complex order flow
to the Exchange. As discussed above, the proposed note & incentive is
similar to the existing note * incentive, except the proposed incentive
will be less stringent in that it will require Members to send a lower
amount of Solicited Order and complex order volume in order to qualify
for the incentive. As such, the proposed note & incentive may be more
readily accessible to Members. If more Members find this rebate is
accessible to them, then more will seek to qualify for it by sending
Solicited Order and complex order flow to the Exchange. All market
participants benefit from increased order interaction when more order
flow is available on ISE.
The Exchange further believes that the proposed note & incentive is
equitable and not unfairly discriminatory because any Member may
qualify for the proposed incentive by submitting the requisite volume
of Solicited Orders and complex orders. Furthermore, the Exchange will
uniformly apply the proposed incentive to all qualifying Members.
Existing QCC and Solicitation Incentive
The Exchange believes that the proposed changes to amend the
existing qualification in the note * incentive is reasonable for the
following reasons. First, the proposed changes would more closely align
to the Exchange's original intent in the 2019 Filing to provide the
note * incentive to qualifying Members that achieved anything above
1.000% of Total Affiliated Member or Affiliated Entity Complex Order
Volume (Excluding Crossing Orders and Responses to Crossing Orders)
calculated as a percentage of Customer Total Consolidated Volume (i.e.,
Priority Customer Complex Tiers 6-9 at the time of the 2019
Filing).\17\ The 2020 Filing amended, among other changes, the Priority
Customer Complex Tiers by adding a new Tier 10 as the highest tier and
adjusting the volume percentages in Tiers 8 and 9 accordingly.\18\ The
volume percentages in Tier 6, however, remained the same with the 2020
Filing, so even with the addition of Tier 10, corresponding changes
should have been made to the note * incentive qualifications to include
Tier 10 to align with the original intent of this incentive. Second, as
noted above, the proposed changes to include Tier 10 in the incentive
qualifications are expected to have minimal impact as no Member is
currently achieving both Priority Customer Complex Tier 10 and combined
Solicited Order volume of more than 1,750,000 originating contract
[[Page 58124]]
sides to receive the $0.01 additional rebate.
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\17\ See 2019 Filing.
\18\ See 2020 Filing.
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Lastly, the Exchange believes that the proposed changes to the
existing qualification are equitable and not unfairly discriminatory
because any Member may qualify for the note * incentive by submitting
the requisite volume of Solicited Orders and complex orders. The
Exchange will apply the amended qualification to all qualifying Members
uniformly.
Technical Amendment
The Exchange's proposal to amend note 16 in Options 7, Section 4 is
reasonable, equitable, and not unfairly discriminatory. As discussed
above, the Exchange is simply aligning the note's language
corresponding language currently in the header of the Priority Customer
complex rebates table. The Exchange believes that the proposed changes
will bring clarity and transparency to the Exchange's Pricing Schedule.
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 its proposal will place any category of market participant at a
competitive disadvantage. As discussed above, any Member may qualify
for the QCC and Solicitation Rebates, including the note * incentive
and the proposed note & incentive. The proposed changes are primarily
aimed at attracting greater Solicited Order and complex order flow to
the Exchange. To the extent the Exchange's proposal incentivizes
Members to bring more order flow to ISE, the Exchange believes that the
resulting additional volume and liquidity will benefit all market
participants.
In terms of inter-market competition, 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
options 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. In sum, if the changes proposed herein are
unattractive to market participants, it is likely that the Exchange
will lose market share as a result. Accordingly, the Exchange does not
believe that the proposed changes will impair the ability of Members or
competing exchanges to maintain their competitive standing in the
financial markets.
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.\19\ 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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\19\ 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-2021-21 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-2021-21. 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-2021-21 and should be submitted on
or before November 10, 2021.
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\20\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-22807 Filed 10-19-21; 8:45 am]
BILLING CODE 8011-01-P
