Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Pricing Schedule at Options 7, Section 3 To Modify the PIM Break-Up Rebate, 10609-10611 [2023-03486]
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Federal Register / Vol. 88, No. 34 / Tuesday, February 21, 2023 / Notices
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 that is not
necessary or appropriate in furtherance
of the purposes of the Act. Rather, the
Exchange believes the proposal will
enhance competition by because
including all of the exchanges enhances
transparency and enables investors to
better assess the quality of the
Exchange’s execution and routing
services. The Exchange also believes the
proposal will enhance competition
because it will potentially enhance the
performance of its order handling and
execution of orders in equity securities
by receiving market data directly from
MEMX. Finally, the proposed rule
change will not impact competition
between market participants because it
will affect all market participants
equally.
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 Exchange has filed the proposed
rule change pursuant to section
19(b)(3)(A)(iii) of the Act 8 and Rule
19b–4(f)(6) thereunder.9 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
prior to 30 days from the date on which
it was filed, or such shorter time as the
Commission may designate, if
consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to section 19(b)(3)(A)
of the Act 10 and Rule 19b–4(f)(6)(iii)
thereunder.11
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
8 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
10 15 U.S.C. 78s(b)(3)(A).
11 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
lotter on DSK11XQN23PROD with NOTICES1
9 17
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17:54 Feb 17, 2023
Jkt 259001
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
under section 19(b)(2)(B) 12 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–
CboeEDGA–2023–002 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–CboeEDGA–2023–002. 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–2023–002 and
should be submitted on or before March
14, 2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–03475 Filed 2–17–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–96927; File No. SR–ISE–
2023–04]
Self-Regulatory Organizations; Nasdaq
ISE, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Pricing
Schedule at Options 7, Section 3 To
Modify the PIM Break-Up Rebate
February 14, 2023.
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 February
1, 2023, Nasdaq ISE, LLC (‘‘ISE’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III, below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
Exchange’s Pricing Schedule at Options
7, Section 3 (Regular Order Fees and
Rebates).
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.
13 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
12 15
PO 00000
U.S.C. 78s(b)(2)(B).
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Federal Register / Vol. 88, No. 34 / Tuesday, February 21, 2023 / Notices
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
lotter on DSK11XQN23PROD with NOTICES1
1. Purpose
The purpose of the proposed rule
change is to amend the Exchange’s
Pricing Schedule at Options 7, Section
3 (Regular Order Fees and Rebates) to
increase the Select Symbol 3 break-up
rebate currently provided to Electronic
Access Members 4 (‘‘EAMs’’) that utilize
the Price Improvement Mechanism
(‘‘PIM’’).5
The Exchange currently provides
EAMs that use PIM to execute more
than 0.75% of Priority Customer 6
volume of regular orders, calculated as
a percentage of Customer Total
Consolidated Volume 7 (‘‘TCV’’) per day
in a given month, a PIM break-up rebate
of $0.25 per contract in Select Symbols
and $0.60 per contract in Non-Select
Symbols.8 These rebates are applied to
Priority Customer regular orders under
3 ‘‘Select Symbols’’ are options overlying all
symbols listed on ISE that are in the Penny Interval
Program. See Options 7, Section 1(c).
4 The term ‘‘Electronic Access Member’’ means a
Member that is approved to exercise trading
privileges associated with EAM Rights. See General
1, Section 1(a)(6).
5 As described in Options 3, Section 13, PIM is
a process by which an EAM can provide price
improvement opportunities for a ‘‘Crossing
Transaction,’’ which is comprised of the order the
EAM represents as agent (the ‘‘Agency Order’’) and
a counter-side order for the full size of the Agency
Order (the ‘‘Counter-Side Order’’). Upon the entry
of a Crossing Transaction into the PIM, PIM
responses (i.e., ‘‘Improvement Orders’’) may be
entered during the auction exposure period.
6 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).
7 ‘‘Customer Total Consolidated Volume’’ means
the total national volume cleared at The Options
Clearing Corporation in the Customer range in
equity and ETF options in that month.
8 ‘‘Non-Select Symbols’’ are options overlying all
symbols excluding Select Symbols. See Options 7,
Section 1(c).
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17:54 Feb 17, 2023
Jkt 259001
100 contracts that are submitted to PIM
and do not trade with their contra
orders except when those contracts
trade against unrelated quotes or
orders.9
The Exchange now proposes to
increase the $0.25 per contract PIM
break-up rebate described above for
Select Symbols to $0.26 per contract.
With the proposed change, the
Exchange is seeking to incentivize
EAMs to submit a greater amount of
Priority Customer orders in Select
Symbols into PIM for price
improvement.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,10 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,11 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
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’. . ..’’ 12
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
9 See
note 19 of Options 7, Section 3.
U.S.C. 78f(b).
11 15 U.S.C. 78f(b)(4) and (5).
12 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)).
10 15
PO 00000
Frm 00116
Fmt 4703
Sfmt 4703
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.’’ 13
Numerous indicia demonstrate the
competitive nature of this market. For
example, clear substitutes to the
Exchange exist in the market for options
security transaction services. The
Exchange is only one of sixteen options
exchanges to which market participants
may direct their order flow. Within this
environment, market participants can
freely and often do shift their order flow
among the Exchange and competing
venues in response to changes in their
respective pricing schedules. As such,
the proposal represents a reasonable
attempt by the Exchange to increase its
liquidity and market share relative to its
competitors.
The Exchange believes that its
proposal to increase the $0.25 per
contract PIM break-up rebate for Select
Symbols to $0.26 per contract is
reasonable because the increased
incentive will further encourage
participation in PIM. Specifically, the
Exchange believes that the proposed
rebate will encourage increased
originating Priority Customer order flow
in Select Symbols into PIM for price
improvement, thus potentially
increasing the initiation of PIM and
volume executed therein. Additional
PIM order flow provides all market
participants with trading opportunities
at improved prices.
While the proposed increase to the
PIM break-up rebate for Select Symbols
will continue to be specifically targeted
towards Priority Customer orders
entered into PIM, the Exchange
continues to believe that this is
equitable and not unfairly
discriminatory. Of note, today, Priority
Customers generally receive more
favorable pricing on ISE, including by
not paying any fees for PIM Orders.14
Furthermore, Priority Customer
liquidity benefits all market participants
by providing more trading
opportunities, which in turn attracts
market makers. An increase in the
activity of these market participants in
turn facilitates tighter spreads, which
may cause an additional corresponding
increase in order flow other market
participants. The Exchange therefore
13 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
14 See Options 7, Section 3.
E:\FR\FM\21FEN1.SGM
21FEN1
Federal Register / Vol. 88, No. 34 / Tuesday, February 21, 2023 / Notices
believes that attracting more liquidity
from Priority Customer orders will
benefit all market participants that trade
on ISE.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
lotter on DSK11XQN23PROD with NOTICES1
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
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 exchanges and
with alternative trading systems that
have been exempted from compliance
with the statutory standards applicable
to exchanges. Because competitors are
free to modify their own fees in
response, and because market
participants may readily adjust their
order routing practices, the Exchange
believes that the degree to which fee
changes in this market may impose any
burden on competition is extremely
limited.
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.
In terms of intra-market competition,
the Exchange’s proposal to increase the
PIM break-up rebate for Priority
Customer orders in Select Symbols does
not impose an undue burden on
competition because Priority Customer
liquidity benefits all market participants
on ISE by providing more trading
opportunities, which in turn attracts
market makers. As discussed above, an
increase in the activity of these market
participants in turn facilitates tighter
spread, which may cause an additional
corresponding increase in order flow
from other market participants.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
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17:54 Feb 17, 2023
Jkt 259001
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.15 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–2023–04 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–2023–04. 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 such
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–2023–04 and should be
submitted on or before March 14, 2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–03486 Filed 2–17–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–96925; File No. SR–MRX–
2023–03]
Self-Regulatory Organizations; Nasdaq
MRX, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend the Pricing
Schedule at Options 7, Section 4
(Complex Order Fees)
February 14, 2023.
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 January
30, 2023, Nasdaq MRX, LLC (‘‘MRX’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III, below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to a proposal
to amend the Exchange’s Pricing
Schedule at Options 7, Section 4
(Complex Order Fees).
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/mrx/rules, at the principal
16 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
15 15
PO 00000
U.S.C. 78s(b)(3)(A)(ii).
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10611
E:\FR\FM\21FEN1.SGM
21FEN1
]]>Agencies
[Federal Register Volume 88, Number 34 (Tuesday, February 21, 2023)]
[Notices]
[Pages 10609-10611]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-03486]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96927; File No. SR-ISE-2023-04]
Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Pricing
Schedule at Options 7, Section 3 To Modify the PIM Break-Up Rebate
February 14, 2023.
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 February 1, 2023, Nasdaq ISE, LLC (``ISE'' or ``Exchange'') filed
with the Securities and Exchange Commission (``SEC'' or ``Commission'')
the proposed rule change as described in Items I, II, and III, below,
which Items have been prepared by the Exchange. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the Exchange's Pricing Schedule at
Options 7, Section 3 (Regular Order Fees and Rebates).
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.
[[Page 10610]]
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
Pricing Schedule at Options 7, Section 3 (Regular Order Fees and
Rebates) to increase the Select Symbol \3\ break-up rebate currently
provided to Electronic Access Members \4\ (``EAMs'') that utilize the
Price Improvement Mechanism (``PIM'').\5\
---------------------------------------------------------------------------
\3\ ``Select Symbols'' are options overlying all symbols listed
on ISE that are in the Penny Interval Program. See Options 7,
Section 1(c).
\4\ The term ``Electronic Access Member'' means a Member that is
approved to exercise trading privileges associated with EAM Rights.
See General 1, Section 1(a)(6).
\5\ As described in Options 3, Section 13, PIM is a process by
which an EAM can provide price improvement opportunities for a
``Crossing Transaction,'' which is comprised of the order the EAM
represents as agent (the ``Agency Order'') and a counter-side order
for the full size of the Agency Order (the ``Counter-Side Order'').
Upon the entry of a Crossing Transaction into the PIM, PIM responses
(i.e., ``Improvement Orders'') may be entered during the auction
exposure period.
---------------------------------------------------------------------------
The Exchange currently provides EAMs that use PIM to execute more
than 0.75% of Priority Customer \6\ volume of regular orders,
calculated as a percentage of Customer Total Consolidated Volume \7\
(``TCV'') per day in a given month, a PIM break-up rebate of $0.25 per
contract in Select Symbols and $0.60 per contract in Non-Select
Symbols.\8\ These rebates are applied to Priority Customer regular
orders under 100 contracts that are submitted to PIM and do not trade
with their contra orders except when those contracts trade against
unrelated quotes or orders.\9\
---------------------------------------------------------------------------
\6\ 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).
\7\ ``Customer Total Consolidated Volume'' means the total
national volume cleared at The Options Clearing Corporation in the
Customer range in equity and ETF options in that month.
\8\ ``Non-Select Symbols'' are options overlying all symbols
excluding Select Symbols. See Options 7, Section 1(c).
\9\ See note 19 of Options 7, Section 3.
---------------------------------------------------------------------------
The Exchange now proposes to increase the $0.25 per contract PIM
break-up rebate described above for Select Symbols to $0.26 per
contract. With the proposed change, the Exchange is seeking to
incentivize EAMs to submit a greater amount of Priority Customer orders
in Select Symbols into PIM for price improvement.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\10\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\11\ 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.
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
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'. . ..'' \12\
---------------------------------------------------------------------------
\12\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
---------------------------------------------------------------------------
The Commission and the courts have repeatedly expressed their
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. In Regulation
NMS, while adopting a series of steps to improve the current market
model, the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \13\
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\13\ Securities Exchange Act Release No. 51808 (June 9, 2005),
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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Numerous indicia demonstrate the competitive nature of this market.
For example, clear substitutes to the Exchange exist in the market for
options security transaction services. The Exchange is only one of
sixteen options exchanges to which market participants may direct their
order flow. Within this environment, market participants can freely and
often do shift their order flow among the Exchange and competing venues
in response to changes in their respective pricing schedules. As such,
the proposal represents a reasonable attempt by the Exchange to
increase its liquidity and market share relative to its competitors.
The Exchange believes that its proposal to increase the $0.25 per
contract PIM break-up rebate for Select Symbols to $0.26 per contract
is reasonable because the increased incentive will further encourage
participation in PIM. Specifically, the Exchange believes that the
proposed rebate will encourage increased originating Priority Customer
order flow in Select Symbols into PIM for price improvement, thus
potentially increasing the initiation of PIM and volume executed
therein. Additional PIM order flow provides all market participants
with trading opportunities at improved prices.
While the proposed increase to the PIM break-up rebate for Select
Symbols will continue to be specifically targeted towards Priority
Customer orders entered into PIM, the Exchange continues to believe
that this is equitable and not unfairly discriminatory. Of note, today,
Priority Customers generally receive more favorable pricing on ISE,
including by not paying any fees for PIM Orders.\14\ Furthermore,
Priority Customer liquidity benefits all market participants by
providing more trading opportunities, which in turn attracts market
makers. An increase in the activity of these market participants in
turn facilitates tighter spreads, which may cause an additional
corresponding increase in order flow other market participants. The
Exchange therefore
[[Page 10611]]
believes that attracting more liquidity from Priority Customer orders
will benefit all market participants that trade on ISE.
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\14\ See Options 7, Section 3.
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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 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 exchanges and with
alternative trading systems that have been exempted from compliance
with the statutory standards applicable to exchanges. Because
competitors are free to modify their own fees in response, and because
market participants may readily adjust their order routing practices,
the Exchange believes that the degree to which fee changes in this
market may impose any burden on competition is extremely limited.
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.
In terms of intra-market competition, the Exchange's proposal to
increase the PIM break-up rebate for Priority Customer orders in Select
Symbols does not impose an undue burden on competition because Priority
Customer liquidity benefits all market participants on ISE by providing
more trading opportunities, which in turn attracts market makers. As
discussed above, an increase in the activity of these market
participants in turn facilitates tighter spread, which may cause an
additional corresponding increase in order flow from other market
participants.
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.\15\ 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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\15\ 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-2023-04 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-2023-04. 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 such 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-2023-04 and should be submitted on
or before March 14, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-03486 Filed 2-17-23; 8:45 am]
BILLING CODE 8011-01-P
