Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Market Maker Plus Tier 1b Rebate for SPY, QQQ, and IWM, 16274-16277 [2022-05977]
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16274
Federal Register / Vol. 87, No. 55 / Tuesday, March 22, 2022 / Notices
waivers do not put any market
participants at a relative disadvantage
compared to other market participants.
As discussed, the proposed credits
would apply to all External Distributors
Cboe One Premium and EDGA Depth on
an equal and non-discriminatory basis.
Further, the Exchange believes that the
proposed fees do not impose a burden
on competition or on other SROs that is
not necessary or appropriate in
furtherance of the purposes of the Act.
Other exchanges are free to adopt a
similar waiver if they choose. As
discussed above, the proposed
amendments are designed to enhance
competition by providing an incentive
to new Distributors to enlist new
subscribers.
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.
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)
of the Act 13 and paragraph (f) of Rule
19b–4 14 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 will institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
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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:
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–CboeEDGA–2022–003. 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–CboeEDGA–2022–003 and
should be submitted on or before April
12, 2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022–05985 Filed 3–21–22; 8:45 am]
BILLING CODE 8011–01–P
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 SRCboeEDGA–2022–003 on the subject
line.
13 15
14 17
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f).
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–94427; File No. SR–ISE–
2022–06]
Self-Regulatory Organizations; Nasdaq
ISE, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Market Maker
Plus Tier 1b Rebate for SPY, QQQ, and
IWM
March 16, 2022.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on March 1,
2022, Nasdaq ISE, LLC (‘‘ISE’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend its
Pricing Schedule at Options 7, Section
3 to increase the Market Maker Plus Tier
1b rebate for SPY, QQQ, and IWM.
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 purpose of the proposed rule
change is to amend the Exchange’s
1 15
15 17
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CFR 200.30–3(a)(12).
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2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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Federal Register / Vol. 87, No. 55 / Tuesday, March 22, 2022 / Notices
Pricing Schedule at Options 7, Section
3 to increase the Market Maker Plus Tier
1b rebate for SPY, QQQ, and IWM.
Today, the Exchange operates a
Market Maker Plus program for regular
orders in Select Symbols 3 and NonSelect Symbols 4 that provides tiered
incentives to Market Makers 5 based on
time spent quoting at the National Best
Bid or National Best Offer (‘‘NBBO’’).6
This program is designed to reward
Market Makers that contribute to market
quality by maintaining tight markets in
symbols traded on the Exchange. In
particular, Market Makers that qualify
for this program will not pay the maker
fee of $0.18 per contract (in Select
Symbols) or $0.70 per contract (in NonSelect Symbols), and will instead
receive incentives based on the
applicable Market Maker Plus Tier for
which they qualify. Market Makers are
evaluated each trading day for the
percentage of time spent on the NBBO
for qualifying series that expire in two
successive thirty calendar day periods
beginning on that trading day. A Market
Maker Plus is a Market Maker who is on
the NBBO a specified percentage of the
time on average for the month based on
daily performance in the qualifying
series for each of the two successive
periods described above.7
For SPY, QQQ, and IWM, the
Exchange currently provides the below
marker rebates based on the applicable
Market Maker Plus tier for which the
Market Maker qualifies.
SPY, QQQ, AND IWM
Regular
maker
rebate
Market maker plus tier
(specified percentage)
Tier 1a (50% to less than 65%) ..............................................................................................................................................
Tier 1b (65% to less than 80%) or (over 50% and adds liquidity in the qualifying symbol that is executed at a volume of
greater than 0.10% of Customer Total Consolidated Volume) ...........................................................................................
Tier 2 (80% to less than 85%) or (over 50% and adds liquidity in the qualifying symbol that is executed at a volume of
greater than 0.20% of Customer Total Consolidated Volume) ...........................................................................................
Tier 3 (85% to less than 90%) or (over 50% and adds liquidity in the qualifying symbol that is executed at a volume of
greater than 0.25% of Customer Total Consolidated Volume) ...........................................................................................
Tier 4 (90% or greater) or (over 50% and adds liquidity in the qualifying symbol that is executed at a volume of greater
than 0.50% of Customer Total Consolidated Volume) ........................................................................................................
The Exchange now proposes to
increase the Market Maker Plus Tier 1b
rebate from $0.05 to $0.10 per contract.
No other changes are being made to the
Market Maker Plus program under this
proposal.
By increasing the Tier 1b rebate, the
Exchange seeks to further incentivize
Market Makers to participate in the
Market Maker Plus program for SPY,
QQQ, and IWM. By fortifying
participation in this program, the
Exchange believes that the proposed
changes will continue to encourage
Market Makers to post quality markets
in SPY, QQQ, and IWM, thereby
improving trading conditions for all
market participants through narrower
bid-ask spreads and increased depth of
liquidity available at the inside market.
2. Statutory Basis
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The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,8 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,9 in particular, in that it
provides for the equitable allocation of
reasonable dues, fees, and other charges
among members and issuers and other
3 ‘‘Select Symbols’’ are options overlying all
symbols listed on the Exchange that are in the
Penny Interval Program.
4 ‘‘Non-Select Symbols’’ are options overlying all
symbols excluding Select Symbols.
5 The term ‘‘Market Makers’’ refers to Competitive
Market Makers and Primary Market Makers,
collectively.
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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
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’. . . .’’ 10
6 See
Options 7, Section 3, note 5.
series are series trading between
$0.03 and $3.00 (for options whose underlying
stock’s previous trading day’s last sale price was
less than or equal to $100) and between $0.10 and
$3.00 (for options whose underlying stock’s
previous trading day’s last sale price was greater
than $100) in premium.
8 15 U.S.C. 78f(b).
7 Qualifying
PO 00000
Frm 00114
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Linked
maker
rebate
($0.00)
N/A
($0.05)
N/A
($0.18)
($0.15)
($0.22)
($0.19)
($0.26)
($0.23)
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.’’ 11
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
9 15
U.S.C. 78f(b)(4) and (5).
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)).
11 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
10 NetCoalition
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Federal Register / Vol. 87, No. 55 / Tuesday, March 22, 2022 / Notices
lotter on DSK11XQN23PROD with NOTICES1
attempt by the Exchange to increase its
liquidity and market share relative to its
competitors.
In particular, the Exchange’s proposal
to increase the SPY, QQQ, and IWM
Tier 1b rebate from $0.05 to $0.10 per
contract is a reasonable attempt to
fortify participation in the Market Maker
Plus program and improve market
quality on ISE. The Exchange will apply
the proposed changes to SPY, QQQ, and
IWM as they are three of the most
actively traded symbols on ISE, so the
Exchange believes that further
incentivizing liquidity in these three
names will have a significant and
beneficial impact on market quality on
ISE.
The Exchange also believes that the
proposed changes are equitable and not
unfairly discriminatory as all Market
Makers would be eligible to receive the
increased Tier 1b rebate in SPY, QQQ,
and IWM by meeting the quoting
requirements described above.
Furthermore, the Exchange continues to
believe that it is not unfairly
discriminatory to offer this program’s
incentives to Market Makers only.
Market Makers, and in particular, those
Market Makers that participate in and
qualify for the Market Maker Plus
program, add value through continuous
quoting, and are subject to additional
requirements and obligations (such as
quoting obligations) that other market
participants are not. Lastly, the
proposed changes will further
encourage Market Makers to maintain
tight markets in SPY, QQQ, and IWM,
thereby increasing liquidity and
attracting additional order flow to the
Exchange, which will benefit all market
participants in the quality of order
interaction.
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,
while the proposed increase to the SPY,
QQQ, and IWM Tier 1b rebate would
apply directly to Market Makers that
participate in the Market Maker Plus
program, the Exchange believes that the
proposed changes will further
strengthen participation in the program,
ultimately to the benefit of all market
participants. As discussed above,
continuing to encourage participation in
the Market Maker Plus program will
improve market quality by incentivizing
Market Makers to provide significant
quoting at the NBBO. This, in turn,
improves trading conditions for all
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market participants through narrower
bid-ask spreads and increased depth of
liquidity available at the inside market,
thereby attracting additional order flow
to the Exchange.
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 and rebates to remain competitive
with other 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 order execution venues 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 12 and Rule
19b–4(f)(2) 13 thereunder. At any time
within 60 days of the filing of the
proposed rule change, the Commission
summarily may temporarily suspend
such rule change if it appears to the
Commission that such action is: (i)
Necessary or appropriate in the public
interest; (ii) for the protection of
investors; or (iii) otherwise in
furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
12 15
13 17
PO 00000
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–2022–06 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–2022–06. 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–2022–06 and should be
submitted on or before April 12, 2022.
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
Frm 00115
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Federal Register / Vol. 87, No. 55 / Tuesday, March 22, 2022 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
J. Matthew DeLesDernier,
Assistant Secretary.
Dated: March 17, 2022.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2022–06095 Filed 3–18–22; 11:15 am]
BILLING CODE 8011–01–P
[FR Doc. 2022–05977 Filed 3–21–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–94432; File No. SR–
CboeBZX–2022–015]
Sunshine Act Meetings
2:00 p.m. on Thursday,
March 24, 2022.
PLACE: The meeting will be held via
remote means and/or at the
Commission’s headquarters, 100 F
Street NE, Washington, DC 20549.
STATUS: This meeting will be closed to
the public.
MATTERS TO BE CONSIDERED:
Commissioners, Counsel to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the closed meeting. Certain
staff members who have an interest in
the matters also may be present.
In the event that the time, date, or
location of this meeting changes, an
announcement of the change, along with
the new time, date, and/or place of the
meeting will be posted on the
Commission’s website at https://
www.sec.gov.
The General Counsel of the
Commission, or his designee, has
certified that, in his opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c)(3), (5), (6), (7), (8), 9(B)
and (10) and 17 CFR 200.402(a)(3),
(a)(5), (a)(6), (a)(7), (a)(8), (a)(9)(ii) and
(a)(10), permit consideration of the
scheduled matters at the closed meeting.
The subject matter of the closed
meeting will consist of the following
topics:
Institution and settlement of
injunctive actions;
Institution and settlement of
administrative proceedings;
Resolution of litigation claims; and
Other matters relating to examinations
and enforcement proceedings.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting agenda items that
may consist of adjudicatory,
examination, litigation, or regulatory
matters.
CONTACT PERSON FOR MORE INFORMATION:
For further information; please contact
Vanessa A. Countryman from the Office
of the Secretary at (202) 551–5400.
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TIME AND DATE:
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend the
Fees Applicable to Various Market
Data Products
March 16, 2022.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on March 3,
2022, Cboe BZX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BZX’’) filed with the
Securities and Exchange Commission
(the ‘‘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
Cboe BZX Exchange, Inc. (‘‘BZX’’ or
the ‘‘Exchange’’) is filing with the
Securities and Exchange Commission
(the ‘‘Commission’’) a proposed rule
change to amend the fees applicable to
various market data products. The text
of the proposed rule change is provided
in Exhibit 5.
The text of the proposed rule change
is also available on the Exchange’s
website (https://markets.cboe.com/us/
equities/regulation/rule_filings/bzx/), at
the Exchange’s Office of the Secretary,
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
(Authority: 5 U.S.C. 552b.)
1 15
14 17
CFR 200.30–3(a)(12).
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2 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend the
Market Data section applicable to its
equities trading platform (‘‘BZX
Equities’’). Particularly, the Exchange
proposes to (i) adopt a New External
Distributor Credit applicable to Cboe
One Premium, and (ii) extend the New
External Distributor Credit applicable to
BZX Summary Depth Feed from one (1)
month to three (3) months.3
By way of background, Cboe One
Premium is a data feed that
disseminates, on a real-time basis, the
aggregate best bid and offer (‘‘BBO’’) of
all displayed orders for securities traded
on BZX and its affiliated exchanges (i.e.,
Cboe BYX Exchange, Inc. (‘‘BYX’’), Cboe
EDGX Exchange, Inc. (‘‘EDGX’’), and
Cboe EDGA Exchange, Inc. (‘‘EDGA’’))
and contains optional functionality
which enables recipients to receive
aggregated two-sided quotations from
BZX and its affiliated equities
exchanges for up to five (5) price levels.4
Currently, the Exchange charges an
external distribution fee of $12,500 per
month to External Distributors 5 of Cboe
One Premium. The Exchange now
proposes to adopt a New External
Distributor Credit which provide that
new External Distributors of the Cboe
One Premium Feed will not be charged
an External Distributor Fee for their first
three (3) months in order to allow them
to enlist new Users to receive the Cboe
One Premium Feed. The Exchange
believes the proposal will incentivize
External Distributors to enlist new users
to receive Cboe One Premium. To
3 The Exchange initially filed the proposed fee
changes on January 3, 2022 (SR-CboeBZX–2022–
001). On March 3, 2022 the Exchange withdrew that
filing and submitted this proposal.
4 The Cboe Aggregated Market (‘‘Cboe One’’) Feed
is a data feed that contains the aggregate best bid
and offer of all displayed orders for securities
traded on the Exchange and its affiliated exchanges
(i.e., BYX, EDGX, and EDGA). See Exchange Rule
11.22(j). The Cboe One Feed contains optional
functionality which enables recipients to receive
aggregated two-sided quotations from the Cboe
Equities Exchanges for up to five (5) price levels
(‘‘Cboe One Premium Feed’’). The Cboe One
Premium external distribution fee is equal to the
aggregate BZX Summary Depth, BYX Summary
Depth, EDGX Summary Depth, and EDGA Summary
Depth external distribution fees.
5 An External Distributor of an Exchange Market
Data product is a Distributor that receives the
Exchange Market Data product and then distributes
that data to a third party or one or more Users
outside the Distributor’s own entity.
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]]>Agencies
[Federal Register Volume 87, Number 55 (Tuesday, March 22, 2022)]
[Notices]
[Pages 16274-16277]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-05977]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94427; File No. SR-ISE-2022-06]
Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Market
Maker Plus Tier 1b Rebate for SPY, QQQ, and IWM
March 16, 2022.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on March 1, 2022, Nasdaq ISE, LLC (``ISE'' or ``Exchange'') filed with
the Securities and Exchange Commission (``SEC'' or ``Commission'') the
proposed rule change as described in Items I and II below, which Items
have been prepared by the Exchange. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend its Pricing Schedule at Options 7,
Section 3 to increase the Market Maker Plus Tier 1b rebate for SPY,
QQQ, and IWM.
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 purpose of the proposed rule change is to amend the Exchange's
[[Page 16275]]
Pricing Schedule at Options 7, Section 3 to increase the Market Maker
Plus Tier 1b rebate for SPY, QQQ, and IWM.
Today, the Exchange operates a Market Maker Plus program for
regular orders in Select Symbols \3\ and Non-Select Symbols \4\ that
provides tiered incentives to Market Makers \5\ based on time spent
quoting at the National Best Bid or National Best Offer (``NBBO'').\6\
This program is designed to reward Market Makers that contribute to
market quality by maintaining tight markets in symbols traded on the
Exchange. In particular, Market Makers that qualify for this program
will not pay the maker fee of $0.18 per contract (in Select Symbols) or
$0.70 per contract (in Non-Select Symbols), and will instead receive
incentives based on the applicable Market Maker Plus Tier for which
they qualify. Market Makers are evaluated each trading day for the
percentage of time spent on the NBBO for qualifying series that expire
in two successive thirty calendar day periods beginning on that trading
day. A Market Maker Plus is a Market Maker who is on the NBBO a
specified percentage of the time on average for the month based on
daily performance in the qualifying series for each of the two
successive periods described above.\7\
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\3\ ``Select Symbols'' are options overlying all symbols listed
on the Exchange that are in the Penny Interval Program.
\4\ ``Non-Select Symbols'' are options overlying all symbols
excluding Select Symbols.
\5\ The term ``Market Makers'' refers to Competitive Market
Makers and Primary Market Makers, collectively.
\6\ See Options 7, Section 3, note 5.
\7\ Qualifying series are series trading between $0.03 and $3.00
(for options whose underlying stock's previous trading day's last
sale price was less than or equal to $100) and between $0.10 and
$3.00 (for options whose underlying stock's previous trading day's
last sale price was greater than $100) in premium.
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For SPY, QQQ, and IWM, the Exchange currently provides the below
marker rebates based on the applicable Market Maker Plus tier for which
the Market Maker qualifies.
SPY, QQQ, and IWM
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Regular Linked
Market maker plus tier (specified percentage) maker maker
rebate rebate
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Tier 1a (50% to less than 65%).................... ($0.00) N/A
Tier 1b (65% to less than 80%) or (over 50% and ($0.05) N/A
adds liquidity in the qualifying symbol that is
executed at a volume of greater than 0.10% of
Customer Total Consolidated Volume)..............
Tier 2 (80% to less than 85%) or (over 50% and ($0.18) ($0.15)
adds liquidity in the qualifying symbol that is
executed at a volume of greater than 0.20% of
Customer Total Consolidated Volume)..............
Tier 3 (85% to less than 90%) or (over 50% and ($0.22) ($0.19)
adds liquidity in the qualifying symbol that is
executed at a volume of greater than 0.25% of
Customer Total Consolidated Volume)..............
Tier 4 (90% or greater) or (over 50% and adds ($0.26) ($0.23)
liquidity in the qualifying symbol that is
executed at a volume of greater than 0.50% of
Customer Total Consolidated Volume)..............
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The Exchange now proposes to increase the Market Maker Plus Tier 1b
rebate from $0.05 to $0.10 per contract. No other changes are being
made to the Market Maker Plus program under this proposal.
By increasing the Tier 1b rebate, the Exchange seeks to further
incentivize Market Makers to participate in the Market Maker Plus
program for SPY, QQQ, and IWM. By fortifying participation in this
program, the Exchange believes that the proposed changes will continue
to encourage Market Makers to post quality markets in SPY, QQQ, and
IWM, thereby improving trading conditions for all market participants
through narrower bid-ask spreads and increased depth of liquidity
available at the inside market.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\8\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,\9\ 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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\8\ 15 U.S.C. 78f(b).
\9\ 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'. . . .'' \10\
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\10\ 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.'' \11\
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\11\ 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
[[Page 16276]]
attempt by the Exchange to increase its liquidity and market share
relative to its competitors.
In particular, the Exchange's proposal to increase the SPY, QQQ,
and IWM Tier 1b rebate from $0.05 to $0.10 per contract is a reasonable
attempt to fortify participation in the Market Maker Plus program and
improve market quality on ISE. The Exchange will apply the proposed
changes to SPY, QQQ, and IWM as they are three of the most actively
traded symbols on ISE, so the Exchange believes that further
incentivizing liquidity in these three names will have a significant
and beneficial impact on market quality on ISE.
The Exchange also believes that the proposed changes are equitable
and not unfairly discriminatory as all Market Makers would be eligible
to receive the increased Tier 1b rebate in SPY, QQQ, and IWM by meeting
the quoting requirements described above. Furthermore, the Exchange
continues to believe that it is not unfairly discriminatory to offer
this program's incentives to Market Makers only. Market Makers, and in
particular, those Market Makers that participate in and qualify for the
Market Maker Plus program, add value through continuous quoting, and
are subject to additional requirements and obligations (such as quoting
obligations) that other market participants are not. Lastly, the
proposed changes will further encourage Market Makers to maintain tight
markets in SPY, QQQ, and IWM, thereby increasing liquidity and
attracting additional order flow to the Exchange, which will benefit
all market participants in the quality of order interaction.
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, while the proposed increase
to the SPY, QQQ, and IWM Tier 1b rebate would apply directly to Market
Makers that participate in the Market Maker Plus program, the Exchange
believes that the proposed changes will further strengthen
participation in the program, ultimately to the benefit of all market
participants. As discussed above, continuing to encourage participation
in the Market Maker Plus program will improve market quality by
incentivizing Market Makers to provide significant quoting at the NBBO.
This, in turn, improves trading conditions for all market participants
through narrower bid-ask spreads and increased depth of liquidity
available at the inside market, thereby attracting additional order
flow to the Exchange.
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 and rebates to remain competitive with
other 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 order execution
venues 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 \12\ and Rule 19b-4(f)(2) \13\ thereunder.
At any time within 60 days of the filing of the proposed rule change,
the Commission summarily may temporarily suspend such rule change if it
appears to the Commission that such action is: (i) Necessary or
appropriate in the public interest; (ii) for the protection of
investors; or (iii) otherwise in furtherance of the purposes of the
Act. If the Commission takes such action, the Commission shall
institute proceedings to determine whether the proposed rule should be
approved or disapproved.
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\12\ 15 U.S.C. 78s(b)(3)(A)(ii).
\13\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-ISE-2022-06 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-2022-06. 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-2022-06 and should be submitted on
or before April 12, 2022.
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For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-05977 Filed 3-21-22; 8:45 am]
BILLING CODE 8011-01-P
