Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Pricing Schedule at Options 7 To Specify Pricing Related to Unrelated Market or Marketable Interest, 77642-77646 [2023-24866]

Download as PDF khammond on DSKJM1Z7X2PROD with NOTICES 77642 Federal Register / Vol. 88, No. 217 / Monday, November 13, 2023 / Notices thereby stimulate greater competition among existing DMM units and potential new entrants, to the benefit the investing public, issuers, and the marketplace. In addition, to the extent that the proposal would lead to additional member organizations becoming fully-operational DMM units, the Exchange believes the proposal would expand and diversify the pool of Exchange DMMs. The Exchange also believes that the proposed changes would continue to foster competition and optimal performance among DMM units, thereby enhancing the quality of the services DMMs provide to issuers and promoting intermarket competition, particularly for issuers in connection with their determination of which exchange to select as a primary listing exchange. The Exchange does not believe that the proposed rule change would impose any burden on intramarket competition that is not necessary or appropriate in furtherance of the purposes of the Act. The proposal is designed to address the DMM unit’s operations on the Trading Floor, access to non-public information, and unique role in facilitating trading on the Exchange without diminishing the balance of benefits and obligations, or altering or diminishing the numerous obligations currently imposed by Exchange rules, on DMM units. Finally, the Exchange believes that member organizations eligible for the Program may be able to deploy their existing market-making strategies on the Exchange and qualify for credits offered by the Exchange based on increased quoting and liquidity-providing activity. The Exchange therefore believes that the proposed rule change would promote competition by encouraging additional displayed liquidity, facilitating price discovery, and increasing the range and diversity of market making activity on the Exchange. Further, the Exchange does not believe that the proposed rule would impose any burden on intramarket competition because adding a new, temporary market participant would allow eligible member organizations an opportunity to access the benefits available to fullyoperational DMM units when trading ETPs electronically for a brief ramp up period, subject to the same registration and regulatory obligations as those DMM units. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. VerDate Sep<11>2014 17:12 Nov 09, 2023 Jkt 262001 III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) by order approve or disapprove the proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be 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: copying at the principal office of the Exchange. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to file number SR–NYSE–2023–36 and should be submitted on or before December 4, 2023. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.68 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2023–24868 Filed 11–9–23; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–98865; File No. SR–ISE– 2023–23] 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– NYSE–2023–36 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–NYSE–2023–36. 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 a.m. and 3 p.m. Copies of the filing also will be available for inspection and PO 00000 Frm 00094 Fmt 4703 Sfmt 4703 Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Pricing Schedule at Options 7 To Specify Pricing Related to Unrelated Market or Marketable Interest November 6, 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 October 23, 2023, Nasdaq ISE, LLC (‘‘ISE’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘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 to specify pricing related to unrelated market or marketable interest. 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. 68 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 E:\FR\FM\13NON1.SGM 13NON1 Federal Register / Vol. 88, No. 217 / Monday, November 13, 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 khammond on DSKJM1Z7X2PROD with NOTICES 1. Purpose The Exchange proposes to amend the Exchange’s Pricing Schedule at Options 7 to specify pricing related to unrelated market or marketable interest. Specifically, the Exchange proposes to specify the current manner in which the Exchange assesses fees and rebates with respect to unrelated market or marketable interest received prior to the commencement of an auction in the Facilitation Mechanism (‘‘FAC’’),3 Solicited Order Mechanism (‘‘SOL’’),4 and Price Improvement Mechanism (‘‘PIM’’),5 and during such auctions. In 3 The Facilitation Mechanism is a process by which an Electronic Access Member can execute a transaction wherein the Electronic Access Member seeks to facilitate a block-size order it represents as agent, and/or a transaction wherein the Electronic Access Member solicited interest to execute against a block-size order it represents as agent. Electronic Access Members must be willing to execute the entire size of orders entered into the Facilitation Mechanism. See Options 3, Section 11(b). Additionally, Electronic Access Members may use the Facilitation Mechanism to execute block-size Complex Orders at a net price. See Options 3, Section 11(c) for the rules governing complex Facilitation Mechanism. 4 The Solicited Order Mechanism is a process by which an Electronic Access Member can attempt to execute orders of 500 or more contracts it represents as agent (the ‘‘Agency Order’’) against contra orders that it solicited. Each order entered into the Solicited Order Mechanism shall be designated as all-or-none. See Options 3, Section 11(d). Additionally, Electronic Access Members may use the Solicited Order Mechanism to execute Complex Orders at a net price. See Options 3, Section 11(e) for the rules governing complex Solicited Order Mechanism. 5 The Price Improvement Mechanism is a process by which an Electronic Access Member can provide price improvement opportunities for a transaction wherein the Electronic Access Member seeks to facilitate an order it represents as agent, and/or a transaction wherein the Electronic Access Member solicited interest to execute against an order it represents as agent. See Options 3, Section 13. Additionally, Electronic Access Members may use the Price Improvement Mechanism to execute Complex Orders at a net price. See Options 3, VerDate Sep<11>2014 17:12 Nov 09, 2023 Jkt 262001 addition, the Exchange also proposes a few non-substantive amendments to Options 7 that will bring more clarity to the Exchange’s Pricing Schedule. Each change is discussed below. Unrelated Interest As a general rule, today, if an order executed in FAC (‘‘FAC Order’’), SOL (‘‘SOL Order’’), or PIM (‘‘PIM Order’’) executes against unrelated market or marketable interest received during an auction, the Exchange would assess the applicable Crossing Order 6 pricing in its Pricing Schedule. If the FAC, SOL, or PIM Order executes against unrelated market or marketable interest received prior to an auction, the Exchange would assess applicable order book pricing in its Pricing Schedule. As discussed below, the Exchange applies these concepts to unrelated market or marketable interest in line with Member expectations and to treat similarly situated Members in a uniform manner. The Exchange notes that it currently denotes in the Pricing Schedule that it would apply separate Crossing Order pricing for any contra-side interest submitted after the commencement of an auction in FAC, SOL, or PIM (which includes unrelated market and marketable interest received during the auction) by grouping such interest as Responses to Crossing Orders.7 The Exchange further notes that today, it specifies throughout Options 7 how it will price Responses to Crossing Orders.8 While the Exchange has delineated the treatment of unrelated market and marketable interest received by the Exchange during a FAC, SOL, and PIM auction in its Pricing Schedule, the Exchange believes that further clarity would be beneficial to Members as to how the Exchange currently assesses pricing for such interest received prior to the commencement of the auction. As such, the Exchange Section 13(e) for the rules governing complex Price Improvement Mechanism. 6 A ‘‘Crossing Order’’ is an order executed in the Exchange’s Facilitation Mechanism, Solicited Order Mechanism, Price Improvement Mechanism (‘‘PIM’’) or submitted as a Qualified Contingent Cross order. For purposes of this Pricing Schedule, orders executed in the Block Order Mechanism are also considered Crossing Orders. 7 ‘‘Responses to Crossing Order’’ is any contraside interest (i.e., orders & quotes) submitted after the commencement of an auction in the Exchange’s Facilitation Mechanism, Solicited Order Mechanism, Block Order Mechanism or Price Improvement Mechanism. Contra-side interest in this context therefore includes both contra-side interest submitted specifically in response to an auction notification, and unrelated market and marketable contra-side interest submitted to the order book during the auction. 8 See Section 3 (regular order fees for Responses to Crossing Orders); and Section 4 (complex order fees for Responses to Crossing Orders). PO 00000 Frm 00095 Fmt 4703 Sfmt 4703 77643 proposes to memorialize these concepts in its Pricing Schedule by adding new paragraph (d) to Options 7, Section 1, titled ‘‘Unrelated Market or Marketable Interest Pricing.’’ Proposed paragraph (d) would state that the following concepts would apply to FAC, SOL, and PIM Orders in Select Symbols and NonSelect Symbols (excluding Index Options).9 The Exchange also proposes to note that all transactions in Index Options are subject to separate pricing in Options 7, Section 5. Today, the Exchange charges separate transaction fees for all executions (including executions in FAC, SOL, and PIM) in Index Options.10 As such, the Exchange believes it is appropriate to clarify that these Index Options fees are excluded from the unrelated interest concepts in new paragraph (d). Specifically, under new paragraph (d)(1), when the FAC Order or SOL Order executes against unrelated market or marketable interest received during an auction, the FAC Order or SOL Order will be assessed the applicable Fees for Crossing Orders (except PIM Orders) 11 or Facilitation and Solicitation Break-up Rebates 12 in Options 7, Section 3 (for regular FAC Orders and SOL Orders) and Section 4 (for complex FAC Orders and SOL Orders). Qualifying FAC Orders and SOL Orders may also be assessed the applicable Solicitation Rebate in Options 7, Section 6.A 13 or PIM and Facilitation Rebate in Section 9 ‘‘Select Symbols’’ are options overlying all symbols listed on the Nasdaq ISE that are in the Penny Interval Program. ‘‘Non-Select Symbols’’ are options overlying all symbols excluding Select Symbols. 10 Currently, the transaction fees are $0.75 per contract for all non-Priority Customer NDX orders and $0.00 for all Priority Customer NDX orders. In addition, the transaction fees are $0.25 per contract for all non-Priority Customer NQX orders and $0.00 for all Priority Customer NQX orders. 11 Today, for both regular and complex orders, this fee is $0.20 per contract for all non-Priority Customer orders executed in FAC and SOL, except Professional Customer orders executed in SOL are assessed a $0.10 per contract fee instead. See Options 7, Section 3, note 16 and Section 4, note 14. Regular and complex Priority Customer orders executed in FAC and SOL currently receive free executions. 12 Today, for both regular and complex orders, this rebate is $0.15 per contract for all market participants except Market Makers who are not eligible for the rebate. The rebate is provided to the originating FAC or SOL Order that executes with any response other than the contra-side of the FAC or SOL Order. 13 Today, solicited FAC and SOL Orders are eligible to receive rebates ranging from $0.00 to $0.11 per contract according to the volume threshold table in Section 6.A. Rebates are applied to the originating side. All solicited market participant orders executed in FAC and SOL are eligible for the rebate, except solicited SOL or FAC Orders between two Priority Customers will not receive the rebate. E:\FR\FM\13NON1.SGM 13NON1 77644 Federal Register / Vol. 88, No. 217 / Monday, November 13, 2023 / Notices khammond on DSKJM1Z7X2PROD with NOTICES 6.C.14 Lastly, the unrelated market or marketable interest received during an auction will be assessed the applicable fees for Responses to Crossing Orders (except PIM Orders) in Options 7, Section 3 (for regular interest) and Section 4 (for complex interest).15 Under new paragraph (d)(2), when the order executed in PIM (‘‘PIM Order’’) executes against unrelated market or marketable interest received during an auction, the PIM Order will be assessed the applicable (1) Fees for PIM Orders 16 or PIM Break-up Rebates 17 in Section 3 below (for regular PIM Orders) and (2) Fees for PIM Orders in Section 4 below (for complex PIM Orders).18 Qualifying PIM Orders may also be assessed the applicable PIM and Facilitation Rebate in Options 7, Section 6.C.19 Lastly, the unrelated market or marketable interest received during an auction will be assessed the applicable Fees for Responses to PIM Orders in Section 3 (for regular interest) and Section 4 (for complex interest).20 Under new paragraph (d)(3), when the FAC Order, SOL Order, or PIM Order executes against unrelated market or marketable interest received prior to the commencement of an auction, the FAC Order, SOL Order, or PIM Order would be subject to the applicable taker pricing in Section 3 (for regular FAC Orders, 14 Today, unsolicited FAC Orders are eligible to receive rebates ranging from $0.02 to $0.03 per contract based on the volume threshold table in Section 6.C. Rebates are applied to the originating side. Only Firm Proprietary or Broker-Dealer orders executed in FAC and PIM are eligible for this rebate. 15 Today, for both regular and complex orders, this fee is $0.50 per contract for all market participants in Select Symbols and $1.10 per contract for all market participant in Non-Select Symbols. 16 Today, this fee is $0.10 per contract for all nonPriority Customer PIM Orders. Priority Customer PIM Orders currently receive free executions. 17 Today, this rebate is $0.00 for regular Priority Customer PIM Orders that execute with any response other than the contra-side of the PIM Order. In addition, this rebate can increase to $0.26 per contract (Select Symbols) and $0.60 per contract (Non-Select Symbols) if the volume and size requirements in note 19 of Options 7, Section 3 are met. 18 Today, this fee is $0.10 per contract for all nonPriority Customer PIM Orders. Priority Customer PIM Orders currently receive free executions. 19 Once the requisite volume and size qualifications in Section 6.C are met, an $0.11 per contract rebate is currently provided to eligible regular Priority Customer PIM Orders. Rebates are applied to originating (i.e., ‘‘Agency’’) side. This rebate is not provided to regular PIM Orders between two Priority Customers. In addition, today, unsolicited PIM Orders are eligible to receive the same rebates as described above for unsolicited FAC Orders. See supra note 14. 20 Today, for both regular and complex orders, this fee is $0.50 per contract for all market participants in Select Symbols and $1.10 per contract for all market participant in Non-Select Symbols. VerDate Sep<11>2014 17:12 Nov 09, 2023 Jkt 262001 SOL Orders, and PIM Orders) 21 and Section 4 (for complex FAC Orders, SOL Orders, and PIM Orders).22 The unrelated market or marketable interest received prior to the commencement of an auction will be assessed the applicable maker pricing in Section 3 (for regular interest),23 and Section 4 below (for complex interest).24 Unrelated market or marketable interest resting on the Exchange’s order book, whether received prior to the commencement of a FAC, SOL, or PIM auction or during such auction, would be allocated in accordance with Options 3, Section 11(b)(4) and (c)(7) (for regular and complex FAC), Section 11(d)(3) and (e)(4) (for regular and complex SOL), and Section 13(d) and (e)(5) (for regular and complex PIM). The Exchange applies order book pricing in accordance with Options 7, Sections 3 and 4 to interest received prior to a FAC, SOL, and PIM auction that subsequently trades with a FAC, SOL, or PIM Order (which is considered unrelated market or marketable interest for purposes of the auction) because the Exchange seeks to treat the Member who submitted such interest in a similar manner as any other Member who submits interest to the order book. The Member that submitted such interest would not have been aware at the time that a FAC, SOL, or PIM auction was in progress, and therefore would not have expected to be assessed separate Crossing Order pricing.25 In such 21 Today, the regular Select Symbol taker fees range from $0.37 to $0.46 per contract based on market participant category. In addition, the regular Non-Select Symbol taker fees range from $0.00 to $0.90 based on market participant category. 22 Today, the complex taker fees are $0.50 per contract (Select Symbols) and $0.98 per contract (Non-Select Symbols) for all non-Priority Customers. Priority Customers receive free complex executions in all symbols. 23 Today, the regular Select Symbol maker fees are $0.18 per contract (Select Symbols) and $0.70 per contract (Non-Select) for all non-Priority Customers. Market Makers are also eligible to receive maker rebates instead paying the maker fee if they qualify for Market Maker Plus. Lastly, Priority Customers currently receive free regular executions in Select Symbols and a maker rebate of $0.86 per contract in Non-Select Symbols. 24 Today, the complex maker fees in Select Symbols range from $0.00 to $0.20 per contract based on market participant category, except when trading against Priority Customers, these fees range from $0.00 to $0.50 per contract based on market participant category. In addition, the complex maker fees in Non-Select Symbols range from $0.00 to $0.20 based on market participant category, except when trading against a Priority Customer, these fees range from $0.00 to $0.88 per contract based on market participant category. 25 Members become aware of ongoing FAC, SOL, and PIM auctions as the Exchange disseminates an auction notification in the form of a ‘‘broadcast message’’ when the Exchange receives a FAC, SOL, and PIM Order for auction processing. The broadcast message is sent by the Exchange to all PO 00000 Frm 00096 Fmt 4703 Sfmt 4703 instances, the unrelated market or marketable interest that posted to the order book prior to the commencement of the auction would be treated as posting liquidity to the order book (makers of liquidity) and assessed maker pricing in accordance with Options 7, Section 3 and Section 4. The FAC, SOL, and PIM Order that trades against the unrelated interest would be considered as removing liquidity from the order book (takers of liquidity) and assessed taker pricing in accordance with Options 7, Section 3 and Section 4. This is consistent with taker pricing assessed to any Member that removes liquidity from the order book. In contrast, the Exchange applies Crossing Order pricing in Options 7, Sections 3 and 4 to the unrelated market or marketable interest when the interest arrived during a FAC, SOL, and PIM auction. Members submitting interest to the order book during one of these auctions are aware that they may be allocated in the auction.26 The Exchange assesses the applicable response fee in Options 7, Section 3 and Section 4 to Members submitting such interest in the same manner that responders to the FAC, SOL, and PIM auction are assessed fees for their auction responses. In other words, the unrelated market or marketable interest that received an allocation within the FAC, SOL, or PIM auction would be uniformly subject to the same fees as those Members that submitted auction responses and were allocated. The Exchange’s pricing models for the regular/complex order book and FAC/ SOL/PIM auctions each seek to attract liquidity to the Exchange and reward Members differently for the different types of order flow. To this end, the Exchange’s pricing considers the manner in which orders interact with the FAC/SOL/PIM auction based on the timing of when the order entered which order book. The Exchange’s pricing is consistent with its current practice of assigning the applicable pricing for auctions versus order book pricing depending on how and when the order was submitted to the Exchange. Technical Amendments The Exchange proposes a few technical, non-substantive amendments throughout Options 7. Specifically, the Exchange proposes to title paragraph (b) in Options 7, Section 1 as ‘‘Fee Disputes’’ and paragraph (c) as ‘‘Definitions’’ to more clearly identify Members and includes the series, price, side, and size of the Agency Order. See Options 3, Sections 11(b)(2), 11(d)(2), and 13(c). 26 See supra note 25. E:\FR\FM\13NON1.SGM 13NON1 Federal Register / Vol. 88, No. 217 / Monday, November 13, 2023 / Notices the applicable rules within the Pricing Schedule. khammond on DSKJM1Z7X2PROD with NOTICES 2. Statutory Basis The Exchange believes that its proposal is consistent with section 6(b) of the Act,27 in general, and furthers the objectives of sections 6(b)(4) and 6(b)(5) of the Act,28 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. Further the proposal is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general to protect investors and the public interest. Unrelated Interest The Exchange believes that its proposal to specify how the Exchange currently prices unrelated market or marketable interest received is consistent with the Act because memorializing these concepts in new paragraph (d) of Options 7, Section 1 will promote greater clarity and transparency in the rules and make the Pricing Schedule easier to navigate for market participants. As discussed above, the Exchange already denotes how unrelated market or marketable interest received during a FAC, SOL, and PIM auction is priced by grouping such interest as Responses to Crossing Orders and Responses to PIM Orders today. How the Exchange prices unrelated market or marketable interest received prior to a FAC, SOL, and PIM auction, however, is not currently detailed in the Exchange’s Pricing Schedule. As such, the Exchange believes that by consolidating and describing these concepts in one place in the Pricing Schedule, Members can more easily locate the related rules and avoid any potential investor confusion. As discussed above, the Exchange will memorialize that it will assess book pricing for unrelated market or marketable interest received prior to the commencement of a FAC, SOL, or PIM auction by stating that such interest would be assessed the applicable maker pricing. The FAC, SOL and PIM Order that such interest executes against would be assessed applicable taker pricing. The Exchange applies order book pricing in this scenario because at the time the unrelated market or 27 15 28 15 U.S.C. 78f(b). U.S.C. 78f(b)(4) and (5). VerDate Sep<11>2014 17:12 Nov 09, 2023 marketable interest was submitted and posted to the order book, Members would not have been aware of an ongoing FAC/SOL/PIM auction and therefore would not expect to be subject to the applicable Fees for Responses to Crossing Orders (including PIM Orders) set forth in Sections 3 and 4.29 In contrast, the Exchange applies the applicable Fees for Responses to Crossing Orders (including PIM Orders) in Sections 3 and 4 to the unrelated market or marketable interest when it arrives during the FAC/SOL/PIM auction because Members submitting interest to the order book at that time would be aware that they may be allocated in the FAC/SOL/PIM auction.30 Additionally, the Exchange’s pricing models for the regular/complex order book and FAC/SOL/PIM auctions each seek to attract liquidity to the Exchange and reward Members differently for different types of order flow. To this end, the Exchange’s pricing considers the manner in which interest interacts with the FAC/SOL/ PIM auction based on the timing of when such interest entered which order book. The Exchange’s pricing is consistent with its current practice of assigning the applicable pricing for auctions versus order book pricing depending on how and when the order was submitted to the Exchange. Further, the Exchange’s proposal to memorialize current practice that unrelated market or marketable interest received prior to the commencement of a FAC/SOL/PIM auction would be assessed the applicable maker pricing is reasonable, equitable, and not unfairly discriminatory because all Members who submitted such interest that posted to the order book prior to the commencement of the auction (and executes against the FAC/SOL/PIM Order) would be uniformly assessed the same pricing as any other Member who posted liquidity on the order book. Further, all Members who submitted a FAC/SOL/PIM Order that executed against such interest would be uniformly assessed the same pricing as any other Member who removed liquidity from the order book. Similarly, the Exchange believes that its proposal to specify current practice that unrelated market or marketable interest received during a FAC/SOL/ PIM auction would be assessed the applicable Responses to Crossing Order (including PIM Order) pricing as described above is reasonable, equitable, and not unfairly discriminatory because all Members who submitted such 29 See 30 See Jkt 262001 PO 00000 supra note 25. supra note 25. Frm 00097 Fmt 4703 interest would be uniformly assessed the same pricing as any other Member who submitted responses into the FAC/ SOL/PIM auction. Lastly, the Exchange believes that its proposal to specify that Index Options fees are excluded from the unrelated interest concepts in new paragraph (d) is reasonable, equitable, and not unfairly discriminatory because all transactions in Index Options (including transactions in FAC, SOL, and PIM) are presently subject to separate pricing in Options 7, Section 3.31 By clarifying this exclusion, the Exchange believes it will avoid potential confusion as to the applicability of its Pricing Schedule to the benefit of all market participants. Technical Amendments The Exchange believes that adding titles to paragraphs (b) and (c) of Options 7, Section 1 is consistent with the Act because they will promote clarity so that market participants can more easily locate the relevant rules in the 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. The Exchange does not believe that its proposal would impose an undue burden on intra-market competition. The pricing of unrelated interest in the manner described above uniformly treats similarly situated market participants. Specifically, all Members who submitted unrelated market or marketable interest that posted to the order book prior to the commencement of the auction (and executes against the FAC/SOL/PIM Order) would be uniformly assessed the same pricing as any other Member who posted liquidity on the order book. All Members who submitted a FAC/SOL/PIM Order that executed against such interest would be uniformly assessed the same pricing as any other Member who removed liquidity from the order book. Additionally, all Members who submitted unrelated market or marketable interest to the order book during the FAC/SOL/PIM auction (which ends up participating and executing against the auction order) would be uniformly assessed the same pricing as any other Member who submitted responses into the FAC/SOL/ PIM auction. In terms of inter-market competition, the Exchange continues to believe that 31 See Sfmt 4703 77645 E:\FR\FM\13NON1.SGM supra note 10. 13NON1 77646 Federal Register / Vol. 88, No. 217 / Monday, November 13, 2023 / Notices the way that it prices unrelated market or marketable interest remains competitive with other options markets given that the Exchange’s current pricing models for the regular and complex order books and for FAC/SOL/ PIM auctions are all designed to attract order flow to the Exchange. 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. 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. 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 32 and Rule 19b–4(f)(2) 33 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. khammond on DSKJM1Z7X2PROD with NOTICES 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: 32 15 33 17 U.S.C. 78s(b)(3)(A)(ii). CFR 240.19b–4(f)(2). VerDate Sep<11>2014 17:12 Nov 09, 2023 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–2023–23 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–2023–23. 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 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to file number SR–ISE–2023–23 and should be submitted on or before December 4, 2023. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.34 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2023–24866 Filed 11–9–23; 8:45 am] BILLING CODE 8011–01–P 34 17 Jkt 262001 PO 00000 CFR 200.30–3(a)(12). Frm 00098 Fmt 4703 Sfmt 4703 SECURITIES AND EXCHANGE COMMISSION [SEC File No. 270–173, OMB Control No. 3235–0178] Submission for OMB Review; Comment Request; Extension: Rule 31a–1 Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE, Washington, DC 20549–2736 Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501–3520), the Securities and Exchange Commission (‘‘Commission’’) has submitted to the Office of Management and Budget a request for extension of the previously approved collection of information discussed below. Rule 31a–1 (17 CFR 270.31a–1) under the Investment Company Act of 1940 (the ‘‘Act’’) (15 U.S.C. 80a) is entitled ‘‘Records to be maintained by registered investment companies, certain majorityowned subsidiaries thereof, and other persons having transactions with registered investment companies.’’ Rule 31a–1 requires registered investment companies (‘‘funds’’), and every underwriter, broker, dealer, or investment adviser that is a majorityowned subsidiary of a fund, to maintain and keep current accounts, books, and other documents which constitute the record forming the basis for financial statements required to be filed pursuant to section 31 of the Act (15 U.S.C. 80a– 30) and of the auditor’s certificates relating thereto. The rule lists specific records to be maintained by funds. The rule also requires certain underwriters, brokers, dealers, depositors, and investment advisers to maintain the records that they are required to maintain under federal securities laws. The Commission periodically inspects the operations of funds to insure their compliance with the provisions of the Act and the rules thereunder. The books and records required to be maintained by rule 31a–1 constitute a major focus of the Commission’s inspection program. There are approximately 2,766 investment companies registered with the Commission, all of which are required to comply with rule 31a–1. For purposes of determining the burden imposed by rule 31a–1, the Commission staff estimates that each fund is divided into approximately four series, on average, and that each series is required to comply with the recordkeeping requirements of rule 31a–1. Based on E:\FR\FM\13NON1.SGM 13NON1

Agencies

[Federal Register Volume 88, Number 217 (Monday, November 13, 2023)]
[Notices]
[Pages 77642-77646]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-24866]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98865; File No. SR-ISE-2023-23]


Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the 
Pricing Schedule at Options 7 To Specify Pricing Related to Unrelated 
Market or Marketable Interest

November 6, 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 October 23, 2023, Nasdaq ISE, LLC (``ISE'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``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.
---------------------------------------------------------------------------

    \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 to 
specify pricing related to unrelated market or marketable interest.
    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 77643]]

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend the Exchange's Pricing Schedule at 
Options 7 to specify pricing related to unrelated market or marketable 
interest. Specifically, the Exchange proposes to specify the current 
manner in which the Exchange assesses fees and rebates with respect to 
unrelated market or marketable interest received prior to the 
commencement of an auction in the Facilitation Mechanism (``FAC''),\3\ 
Solicited Order Mechanism (``SOL''),\4\ and Price Improvement Mechanism 
(``PIM''),\5\ and during such auctions. In addition, the Exchange also 
proposes a few non-substantive amendments to Options 7 that will bring 
more clarity to the Exchange's Pricing Schedule. Each change is 
discussed below.
---------------------------------------------------------------------------

    \3\ The Facilitation Mechanism is a process by which an 
Electronic Access Member can execute a transaction wherein the 
Electronic Access Member seeks to facilitate a block-size order it 
represents as agent, and/or a transaction wherein the Electronic 
Access Member solicited interest to execute against a block-size 
order it represents as agent. Electronic Access Members must be 
willing to execute the entire size of orders entered into the 
Facilitation Mechanism. See Options 3, Section 11(b). Additionally, 
Electronic Access Members may use the Facilitation Mechanism to 
execute block-size Complex Orders at a net price. See Options 3, 
Section 11(c) for the rules governing complex Facilitation 
Mechanism.
    \4\ The Solicited Order Mechanism is a process by which an 
Electronic Access Member can attempt to execute orders of 500 or 
more contracts it represents as agent (the ``Agency Order'') against 
contra orders that it solicited. Each order entered into the 
Solicited Order Mechanism shall be designated as all-or-none. See 
Options 3, Section 11(d). Additionally, Electronic Access Members 
may use the Solicited Order Mechanism to execute Complex Orders at a 
net price. See Options 3, Section 11(e) for the rules governing 
complex Solicited Order Mechanism.
    \5\ The Price Improvement Mechanism is a process by which an 
Electronic Access Member can provide price improvement opportunities 
for a transaction wherein the Electronic Access Member seeks to 
facilitate an order it represents as agent, and/or a transaction 
wherein the Electronic Access Member solicited interest to execute 
against an order it represents as agent. See Options 3, Section 13. 
Additionally, Electronic Access Members may use the Price 
Improvement Mechanism to execute Complex Orders at a net price. See 
Options 3, Section 13(e) for the rules governing complex Price 
Improvement Mechanism.
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Unrelated Interest
    As a general rule, today, if an order executed in FAC (``FAC 
Order''), SOL (``SOL Order''), or PIM (``PIM Order'') executes against 
unrelated market or marketable interest received during an auction, the 
Exchange would assess the applicable Crossing Order \6\ pricing in its 
Pricing Schedule. If the FAC, SOL, or PIM Order executes against 
unrelated market or marketable interest received prior to an auction, 
the Exchange would assess applicable order book pricing in its Pricing 
Schedule. As discussed below, the Exchange applies these concepts to 
unrelated market or marketable interest in line with Member 
expectations and to treat similarly situated Members in a uniform 
manner. The Exchange notes that it currently denotes in the Pricing 
Schedule that it would apply separate Crossing Order pricing for any 
contra-side interest submitted after the commencement of an auction in 
FAC, SOL, or PIM (which includes unrelated market and marketable 
interest received during the auction) by grouping such interest as 
Responses to Crossing Orders.\7\ The Exchange further notes that today, 
it specifies throughout Options 7 how it will price Responses to 
Crossing Orders.\8\ While the Exchange has delineated the treatment of 
unrelated market and marketable interest received by the Exchange 
during a FAC, SOL, and PIM auction in its Pricing Schedule, the 
Exchange believes that further clarity would be beneficial to Members 
as to how the Exchange currently assesses pricing for such interest 
received prior to the commencement of the auction. As such, the 
Exchange proposes to memorialize these concepts in its Pricing Schedule 
by adding new paragraph (d) to Options 7, Section 1, titled ``Unrelated 
Market or Marketable Interest Pricing.'' Proposed paragraph (d) would 
state that the following concepts would apply to FAC, SOL, and PIM 
Orders in Select Symbols and Non-Select Symbols (excluding Index 
Options).\9\ The Exchange also proposes to note that all transactions 
in Index Options are subject to separate pricing in Options 7, Section 
5. Today, the Exchange charges separate transaction fees for all 
executions (including executions in FAC, SOL, and PIM) in Index 
Options.\10\ As such, the Exchange believes it is appropriate to 
clarify that these Index Options fees are excluded from the unrelated 
interest concepts in new paragraph (d).
---------------------------------------------------------------------------

    \6\ A ``Crossing Order'' is an order executed in the Exchange's 
Facilitation Mechanism, Solicited Order Mechanism, Price Improvement 
Mechanism (``PIM'') or submitted as a Qualified Contingent Cross 
order. For purposes of this Pricing Schedule, orders executed in the 
Block Order Mechanism are also considered Crossing Orders.
    \7\ ``Responses to Crossing Order'' is any contra-side interest 
(i.e., orders & quotes) submitted after the commencement of an 
auction in the Exchange's Facilitation Mechanism, Solicited Order 
Mechanism, Block Order Mechanism or Price Improvement Mechanism. 
Contra-side interest in this context therefore includes both contra-
side interest submitted specifically in response to an auction 
notification, and unrelated market and marketable contra-side 
interest submitted to the order book during the auction.
    \8\ See Section 3 (regular order fees for Responses to Crossing 
Orders); and Section 4 (complex order fees for Responses to Crossing 
Orders).
    \9\ ``Select Symbols'' are options overlying all symbols listed 
on the Nasdaq ISE that are in the Penny Interval Program. ``Non-
Select Symbols'' are options overlying all symbols excluding Select 
Symbols.
    \10\ Currently, the transaction fees are $0.75 per contract for 
all non-Priority Customer NDX orders and $0.00 for all Priority 
Customer NDX orders. In addition, the transaction fees are $0.25 per 
contract for all non-Priority Customer NQX orders and $0.00 for all 
Priority Customer NQX orders.
---------------------------------------------------------------------------

    Specifically, under new paragraph (d)(1), when the FAC Order or SOL 
Order executes against unrelated market or marketable interest received 
during an auction, the FAC Order or SOL Order will be assessed the 
applicable Fees for Crossing Orders (except PIM Orders) \11\ or 
Facilitation and Solicitation Break-up Rebates \12\ in Options 7, 
Section 3 (for regular FAC Orders and SOL Orders) and Section 4 (for 
complex FAC Orders and SOL Orders). Qualifying FAC Orders and SOL 
Orders may also be assessed the applicable Solicitation Rebate in 
Options 7, Section 6.A \13\ or PIM and Facilitation Rebate in Section

[[Page 77644]]

6.C.\14\ Lastly, the unrelated market or marketable interest received 
during an auction will be assessed the applicable fees for Responses to 
Crossing Orders (except PIM Orders) in Options 7, Section 3 (for 
regular interest) and Section 4 (for complex interest).\15\
---------------------------------------------------------------------------

    \11\ Today, for both regular and complex orders, this fee is 
$0.20 per contract for all non-Priority Customer orders executed in 
FAC and SOL, except Professional Customer orders executed in SOL are 
assessed a $0.10 per contract fee instead. See Options 7, Section 3, 
note 16 and Section 4, note 14. Regular and complex Priority 
Customer orders executed in FAC and SOL currently receive free 
executions.
    \12\ Today, for both regular and complex orders, this rebate is 
$0.15 per contract for all market participants except Market Makers 
who are not eligible for the rebate. The rebate is provided to the 
originating FAC or SOL Order that executes with any response other 
than the contra-side of the FAC or SOL Order.
    \13\ Today, solicited FAC and SOL Orders are eligible to receive 
rebates ranging from $0.00 to $0.11 per contract according to the 
volume threshold table in Section 6.A. Rebates are applied to the 
originating side. All solicited market participant orders executed 
in FAC and SOL are eligible for the rebate, except solicited SOL or 
FAC Orders between two Priority Customers will not receive the 
rebate.
    \14\ Today, unsolicited FAC Orders are eligible to receive 
rebates ranging from $0.02 to $0.03 per contract based on the volume 
threshold table in Section 6.C. Rebates are applied to the 
originating side. Only Firm Proprietary or Broker-Dealer orders 
executed in FAC and PIM are eligible for this rebate.
    \15\ Today, for both regular and complex orders, this fee is 
$0.50 per contract for all market participants in Select Symbols and 
$1.10 per contract for all market participant in Non-Select Symbols.
---------------------------------------------------------------------------

    Under new paragraph (d)(2), when the order executed in PIM (``PIM 
Order'') executes against unrelated market or marketable interest 
received during an auction, the PIM Order will be assessed the 
applicable (1) Fees for PIM Orders \16\ or PIM Break-up Rebates \17\ in 
Section 3 below (for regular PIM Orders) and (2) Fees for PIM Orders in 
Section 4 below (for complex PIM Orders).\18\ Qualifying PIM Orders may 
also be assessed the applicable PIM and Facilitation Rebate in Options 
7, Section 6.C.\19\ Lastly, the unrelated market or marketable interest 
received during an auction will be assessed the applicable Fees for 
Responses to PIM Orders in Section 3 (for regular interest) and Section 
4 (for complex interest).\20\
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    \16\ Today, this fee is $0.10 per contract for all non-Priority 
Customer PIM Orders. Priority Customer PIM Orders currently receive 
free executions.
    \17\ Today, this rebate is $0.00 for regular Priority Customer 
PIM Orders that execute with any response other than the contra-side 
of the PIM Order. In addition, this rebate can increase to $0.26 per 
contract (Select Symbols) and $0.60 per contract (Non-Select 
Symbols) if the volume and size requirements in note 19 of Options 
7, Section 3 are met.
    \18\ Today, this fee is $0.10 per contract for all non-Priority 
Customer PIM Orders. Priority Customer PIM Orders currently receive 
free executions.
    \19\ Once the requisite volume and size qualifications in 
Section 6.C are met, an $0.11 per contract rebate is currently 
provided to eligible regular Priority Customer PIM Orders. Rebates 
are applied to originating (i.e., ``Agency'') side. This rebate is 
not provided to regular PIM Orders between two Priority Customers. 
In addition, today, unsolicited PIM Orders are eligible to receive 
the same rebates as described above for unsolicited FAC Orders. See 
supra note 14.
    \20\ Today, for both regular and complex orders, this fee is 
$0.50 per contract for all market participants in Select Symbols and 
$1.10 per contract for all market participant in Non-Select Symbols.
---------------------------------------------------------------------------

    Under new paragraph (d)(3), when the FAC Order, SOL Order, or PIM 
Order executes against unrelated market or marketable interest received 
prior to the commencement of an auction, the FAC Order, SOL Order, or 
PIM Order would be subject to the applicable taker pricing in Section 3 
(for regular FAC Orders, SOL Orders, and PIM Orders) \21\ and Section 4 
(for complex FAC Orders, SOL Orders, and PIM Orders).\22\ The unrelated 
market or marketable interest received prior to the commencement of an 
auction will be assessed the applicable maker pricing in Section 3 (for 
regular interest),\23\ and Section 4 below (for complex interest).\24\
---------------------------------------------------------------------------

    \21\ Today, the regular Select Symbol taker fees range from 
$0.37 to $0.46 per contract based on market participant category. In 
addition, the regular Non-Select Symbol taker fees range from $0.00 
to $0.90 based on market participant category.
    \22\ Today, the complex taker fees are $0.50 per contract 
(Select Symbols) and $0.98 per contract (Non-Select Symbols) for all 
non-Priority Customers. Priority Customers receive free complex 
executions in all symbols.
    \23\ Today, the regular Select Symbol maker fees are $0.18 per 
contract (Select Symbols) and $0.70 per contract (Non-Select) for 
all non-Priority Customers. Market Makers are also eligible to 
receive maker rebates instead paying the maker fee if they qualify 
for Market Maker Plus. Lastly, Priority Customers currently receive 
free regular executions in Select Symbols and a maker rebate of 
$0.86 per contract in Non-Select Symbols.
    \24\ Today, the complex maker fees in Select Symbols range from 
$0.00 to $0.20 per contract based on market participant category, 
except when trading against Priority Customers, these fees range 
from $0.00 to $0.50 per contract based on market participant 
category. In addition, the complex maker fees in Non-Select Symbols 
range from $0.00 to $0.20 based on market participant category, 
except when trading against a Priority Customer, these fees range 
from $0.00 to $0.88 per contract based on market participant 
category.
---------------------------------------------------------------------------

    Unrelated market or marketable interest resting on the Exchange's 
order book, whether received prior to the commencement of a FAC, SOL, 
or PIM auction or during such auction, would be allocated in accordance 
with Options 3, Section 11(b)(4) and (c)(7) (for regular and complex 
FAC), Section 11(d)(3) and (e)(4) (for regular and complex SOL), and 
Section 13(d) and (e)(5) (for regular and complex PIM).
    The Exchange applies order book pricing in accordance with Options 
7, Sections 3 and 4 to interest received prior to a FAC, SOL, and PIM 
auction that subsequently trades with a FAC, SOL, or PIM Order (which 
is considered unrelated market or marketable interest for purposes of 
the auction) because the Exchange seeks to treat the Member who 
submitted such interest in a similar manner as any other Member who 
submits interest to the order book. The Member that submitted such 
interest would not have been aware at the time that a FAC, SOL, or PIM 
auction was in progress, and therefore would not have expected to be 
assessed separate Crossing Order pricing.\25\ In such instances, the 
unrelated market or marketable interest that posted to the order book 
prior to the commencement of the auction would be treated as posting 
liquidity to the order book (makers of liquidity) and assessed maker 
pricing in accordance with Options 7, Section 3 and Section 4. The FAC, 
SOL, and PIM Order that trades against the unrelated interest would be 
considered as removing liquidity from the order book (takers of 
liquidity) and assessed taker pricing in accordance with Options 7, 
Section 3 and Section 4. This is consistent with taker pricing assessed 
to any Member that removes liquidity from the order book.
---------------------------------------------------------------------------

    \25\ Members become aware of ongoing FAC, SOL, and PIM auctions 
as the Exchange disseminates an auction notification in the form of 
a ``broadcast message'' when the Exchange receives a FAC, SOL, and 
PIM Order for auction processing. The broadcast message is sent by 
the Exchange to all Members and includes the series, price, side, 
and size of the Agency Order. See Options 3, Sections 11(b)(2), 
11(d)(2), and 13(c).
---------------------------------------------------------------------------

    In contrast, the Exchange applies Crossing Order pricing in Options 
7, Sections 3 and 4 to the unrelated market or marketable interest when 
the interest arrived during a FAC, SOL, and PIM auction. Members 
submitting interest to the order book during one of these auctions are 
aware that they may be allocated in the auction.\26\ The Exchange 
assesses the applicable response fee in Options 7, Section 3 and 
Section 4 to Members submitting such interest in the same manner that 
responders to the FAC, SOL, and PIM auction are assessed fees for their 
auction responses. In other words, the unrelated market or marketable 
interest that received an allocation within the FAC, SOL, or PIM 
auction would be uniformly subject to the same fees as those Members 
that submitted auction responses and were allocated.
---------------------------------------------------------------------------

    \26\ See supra note 25.
---------------------------------------------------------------------------

    The Exchange's pricing models for the regular/complex order book 
and FAC/SOL/PIM auctions each seek to attract liquidity to the Exchange 
and reward Members differently for the different types of order flow. 
To this end, the Exchange's pricing considers the manner in which 
orders interact with the FAC/SOL/PIM auction based on the timing of 
when the order entered which order book. The Exchange's pricing is 
consistent with its current practice of assigning the applicable 
pricing for auctions versus order book pricing depending on how and 
when the order was submitted to the Exchange.
Technical Amendments
    The Exchange proposes a few technical, non-substantive amendments 
throughout Options 7. Specifically, the Exchange proposes to title 
paragraph (b) in Options 7, Section 1 as ``Fee Disputes'' and paragraph 
(c) as ``Definitions'' to more clearly identify

[[Page 77645]]

the applicable rules within the Pricing Schedule.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with section 
6(b) of the Act,\27\ in general, and furthers the objectives of 
sections 6(b)(4) and 6(b)(5) of the Act,\28\ 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. Further the proposal is 
designed to promote just and equitable principles of trade, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general to protect investors and the 
public interest.
---------------------------------------------------------------------------

    \27\ 15 U.S.C. 78f(b).
    \28\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

Unrelated Interest
    The Exchange believes that its proposal to specify how the Exchange 
currently prices unrelated market or marketable interest received is 
consistent with the Act because memorializing these concepts in new 
paragraph (d) of Options 7, Section 1 will promote greater clarity and 
transparency in the rules and make the Pricing Schedule easier to 
navigate for market participants. As discussed above, the Exchange 
already denotes how unrelated market or marketable interest received 
during a FAC, SOL, and PIM auction is priced by grouping such interest 
as Responses to Crossing Orders and Responses to PIM Orders today. How 
the Exchange prices unrelated market or marketable interest received 
prior to a FAC, SOL, and PIM auction, however, is not currently 
detailed in the Exchange's Pricing Schedule. As such, the Exchange 
believes that by consolidating and describing these concepts in one 
place in the Pricing Schedule, Members can more easily locate the 
related rules and avoid any potential investor confusion.
    As discussed above, the Exchange will memorialize that it will 
assess book pricing for unrelated market or marketable interest 
received prior to the commencement of a FAC, SOL, or PIM auction by 
stating that such interest would be assessed the applicable maker 
pricing. The FAC, SOL and PIM Order that such interest executes against 
would be assessed applicable taker pricing. The Exchange applies order 
book pricing in this scenario because at the time the unrelated market 
or marketable interest was submitted and posted to the order book, 
Members would not have been aware of an ongoing FAC/SOL/PIM auction and 
therefore would not expect to be subject to the applicable Fees for 
Responses to Crossing Orders (including PIM Orders) set forth in 
Sections 3 and 4.\29\ In contrast, the Exchange applies the applicable 
Fees for Responses to Crossing Orders (including PIM Orders) in 
Sections 3 and 4 to the unrelated market or marketable interest when it 
arrives during the FAC/SOL/PIM auction because Members submitting 
interest to the order book at that time would be aware that they may be 
allocated in the FAC/SOL/PIM auction.\30\ Additionally, the Exchange's 
pricing models for the regular/complex order book and FAC/SOL/PIM 
auctions each seek to attract liquidity to the Exchange and reward 
Members differently for different types of order flow. To this end, the 
Exchange's pricing considers the manner in which interest interacts 
with the FAC/SOL/PIM auction based on the timing of when such interest 
entered which order book. The Exchange's pricing is consistent with its 
current practice of assigning the applicable pricing for auctions 
versus order book pricing depending on how and when the order was 
submitted to the Exchange.
---------------------------------------------------------------------------

    \29\ See supra note 25.
    \30\ See supra note 25.
---------------------------------------------------------------------------

    Further, the Exchange's proposal to memorialize current practice 
that unrelated market or marketable interest received prior to the 
commencement of a FAC/SOL/PIM auction would be assessed the applicable 
maker pricing is reasonable, equitable, and not unfairly discriminatory 
because all Members who submitted such interest that posted to the 
order book prior to the commencement of the auction (and executes 
against the FAC/SOL/PIM Order) would be uniformly assessed the same 
pricing as any other Member who posted liquidity on the order book. 
Further, all Members who submitted a FAC/SOL/PIM Order that executed 
against such interest would be uniformly assessed the same pricing as 
any other Member who removed liquidity from the order book.
    Similarly, the Exchange believes that its proposal to specify 
current practice that unrelated market or marketable interest received 
during a FAC/SOL/PIM auction would be assessed the applicable Responses 
to Crossing Order (including PIM Order) pricing as described above is 
reasonable, equitable, and not unfairly discriminatory because all 
Members who submitted such interest would be uniformly assessed the 
same pricing as any other Member who submitted responses into the FAC/
SOL/PIM auction.
    Lastly, the Exchange believes that its proposal to specify that 
Index Options fees are excluded from the unrelated interest concepts in 
new paragraph (d) is reasonable, equitable, and not unfairly 
discriminatory because all transactions in Index Options (including 
transactions in FAC, SOL, and PIM) are presently subject to separate 
pricing in Options 7, Section 3.\31\ By clarifying this exclusion, the 
Exchange believes it will avoid potential confusion as to the 
applicability of its Pricing Schedule to the benefit of all market 
participants.
---------------------------------------------------------------------------

    \31\ See supra note 10.
---------------------------------------------------------------------------

Technical Amendments
    The Exchange believes that adding titles to paragraphs (b) and (c) 
of Options 7, Section 1 is consistent with the Act because they will 
promote clarity so that market participants can more easily locate the 
relevant rules in the 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.
    The Exchange does not believe that its proposal would impose an 
undue burden on intra-market competition. The pricing of unrelated 
interest in the manner described above uniformly treats similarly 
situated market participants. Specifically, all Members who submitted 
unrelated market or marketable interest that posted to the order book 
prior to the commencement of the auction (and executes against the FAC/
SOL/PIM Order) would be uniformly assessed the same pricing as any 
other Member who posted liquidity on the order book. All Members who 
submitted a FAC/SOL/PIM Order that executed against such interest would 
be uniformly assessed the same pricing as any other Member who removed 
liquidity from the order book. Additionally, all Members who submitted 
unrelated market or marketable interest to the order book during the 
FAC/SOL/PIM auction (which ends up participating and executing against 
the auction order) would be uniformly assessed the same pricing as any 
other Member who submitted responses into the FAC/SOL/PIM auction.
    In terms of inter-market competition, the Exchange continues to 
believe that

[[Page 77646]]

the way that it prices unrelated market or marketable interest remains 
competitive with other options markets given that the Exchange's 
current pricing models for the regular and complex order books and for 
FAC/SOL/PIM auctions are all designed to attract order flow to the 
Exchange. 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. 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.

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 \32\ and Rule 19b-4(f)(2) \33\ 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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    \32\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \33\ 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-2023-23 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-2023-23. 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 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-ISE-2023-23 and should be 
submitted on or before December 4, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\34\
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    \34\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-24866 Filed 11-9-23; 8:45 am]
BILLING CODE 8011-01-P
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