Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Pricing Schedule at Options 7, 84014-84020 [2023-26499]
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Federal Register / Vol. 88, No. 230 / Friday, December 1, 2023 / Notices
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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
to determine whether the proposed rule
should be approved or disapproved.
submissions should refer to file number
SR–ISE–2023–30 and should be
submitted on or before December 22,
2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.39
Sherry R. Haywood,
Assistant Secretary.
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:
[FR Doc. 2023–26486 Filed 11–30–23; 8:45 am]
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–2023–30 on the subject line.
Self-Regulatory Organizations; Nasdaq
ISE, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend the
Exchange’s Pricing Schedule at
Options 7
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–2023–30. 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
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 November
13, 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 and II
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
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BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–99024; File No. SR–ISE–
2023–28]
November 28, 2023.
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.
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/ise/rules, at the principal
office of the Exchange, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
39 17
CFR 200.30–3(a)(12), (59).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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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. Each
change is described below.
The Exchange initially filed the
proposed pricing changes on November
1, 2023 (SR–ISE–2023–26). On
November 13, 2023, the Exchange
withdrew that filing and submitted this
filing.
Background
Regular Order Fees and Rebates
As set forth in Options 7, Section 3,
the Exchange currently has a maker/
taker pricing model where all market
participants (except Priority
Customers) 3 are assessed a uniform
Regular Order maker fee of $0.70 per
contract for Non-Select Symbol 4
executions that add liquidity on the
Exchange, and a uniform Regular Order
taker fee of $0.90 per contract for NonSelect Symbol executions that remove
liquidity. Priority Customers are
currently assessed a $0.86 per contract
Regular Order maker rebate in NonSelect Symbols and a $0.00 per contract
Regular Order taker fee in Non-Select
Symbols. Additionally, all market
participants are charged higher Regular
Order taker fees for trades in Non-Select
Symbols executed against Priority
Customers. Specifically, Non-Priority
Customers 5 are charged a taker fee of
$1.10 per contract for trades executed
against a Priority Customer, while
Priority Customers are charged a taker
fee of $0.86 per contract for trades
executed against another Priority
Customer.6
As it relates to the $0.86 per contract
Priority Customer Regular Order maker
3 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).
4 ‘‘Non-Select Symbols’’ are options overlying all
symbols excluding Select Symbols. ‘‘Select
Symbols’’ are options overlying all symbols listed
on the Exchange that are in the Penny Interval
Program.
5 ‘‘Non-Priority Customers’’ include Market
Makers, Non-Nasdaq ISE Market Makers (FarMMs),
Firm Proprietary/Broker-Dealers, and Professional
Customers.
6 See Options 7, Section 3, note 3.
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rebate described above, the Exchange
also currently offers Members an
additional rebate of $0.14 per contract if
they execute more than 0.06% of
Regular Order Non-Select Symbol
Priority Customer volume (excluding
Crossing Orders 7 and Responses to
Crossing Orders) 8 calculated as a
percentage of Customer Total
Consolidated Volume 9 per day in a
given month (‘‘Note 15 Incentive’’).10
The Note 15 Incentive is designed to
encourage Members to transact in
greater Regular Order Non-Select
Symbol Priority Customer volume on
the Exchange to receive rebates up to
$1.00 per contract (i.e., the current $0.86
base maker rebate plus the additional
$0.14 Note 15 Incentive).
Complex Order Fees and Rebates
As set forth in Options 7, Section 4,
the Exchange currently offers tiered
Complex Order Priority Customer
rebates for Select Symbols and NonSelect Symbols based on the Priority
Customer Complex Tier achieved.11 The
tiered Complex Order Priority Customer
rebates for Select Symbols and NonSelect Symbols are presently as follows:
TOTAL AFFILIATED MEMBER OR AFFILIATED ENTITY COMPLEX ORDER VOLUME
[Excluding Crossing Orders and Responses to Crossing Orders]
Priority customer complex tier
Tier
Tier
Tier
Tier
Tier
Tier
Tier
Tier
Tier
Tier
Calculated as a percentage of customer total consolidated volume
1 ................................................
2 ................................................
3 ................................................
4 ................................................
5 ................................................
6 ................................................
7 ................................................
8 ................................................
9 ................................................
10 ..............................................
0.000%–0.200% ........................................................................................
Above 0.200%–0.400% .............................................................................
Above 0.400%–0.450% .............................................................................
Above 0.450%–0.750% .............................................................................
Above 0.750%–1.000% .............................................................................
Above 1.000%–1.350% .............................................................................
Above 1.350%–1.750% .............................................................................
Above 1.750%–2.750% .............................................................................
Above 2.750%–4.500% .............................................................................
Above 4.500% ...........................................................................................
The above rebates are provided per
contract per leg if the order trades with
Non-Priority Customer orders in the
Complex Order Book. Today, this rebate
is reduced by $0.15 per contract in
Select Symbols where the largest leg of
the Complex Order is under fifty (50)
contracts and trades with quotes and
Rebate for
select symbols
Rebate for
non-select
symbols
($0.25)
(0.30)
(0.35)
(0.40)
(0.45)
(0.48)
(0.51)
(0.55)
(0.56)
(0.57)
($0.40)
(0.55)
(0.70)
(0.75)
(0.80)
(0.85)
(0.92)
(1.03)
(1.04)
(1.05)
Non-Select Symbols if any leg of the
order trades with interest on the regular
order book, irrespective of order size.12
Separately, the Exchange currently
assesses Complex Order maker and
taker fees for Select and Non-Select
Symbols based on the pricing schedule
below:
orders on the regular order book (the
‘‘Note 1 Rebate Discount’’). No Priority
Customer Complex Order rebates are
provided in Select Symbols if any leg of
the order that trades with interest on the
regular order book is fifty (50) contracts
or more. Lastly, no Priority Customer
Complex Order rebates are provided in
MAKER AND TAKER FEES
Maker fee for
select symbols
Market participant
Market Maker ...........................................
Non-Nasdaq ISE Market Maker (FarMM)
Firm Proprietary/Broker-Dealer ................
Professional Customer .............................
Priority Customer .....................................
0.10
0.20
0.10
0.10
0.00
Proposal 1—Regular Priority Customer
Maker Rebates in Non-Select Symbols
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The Exchange proposes to increase
the Regular Order Non-Select Symbol
7 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.
8 ‘‘Responses to Crossing Order’’ is any contraside interest submitted after the commencement of
an auction in the Exchange’s Facilitation
Mechanism, Solicited Order Mechanism, Block
Order Mechanism or PIM.
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Maker fee for
non-select
symbols
Maker fee for
select symbols
when trading
against priority
customer
Maker fee for
non-select
symbols when
trading against
priority
customer
Taker fee for
select symbols
0.50
0.50
0.50
0.50
0.00
0.86
0.88
0.88
0.88
0.00
0.50
0.50
0.50
0.50
0.00
0.20
0.20
0.20
0.20
0.00
Taker fee for
non- select
symbols
0.98
0.98
0.98
0.98
0.00
Priority Customer maker rebate in
Options 7, Section 3 from $0.86 to $1.00
per contract.
Proposal 2—Note 15 Incentive
9 ‘‘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.
10 See Options 7, Section 3, note 15.
11 Priority Customer Complex Tiers are based on
Total Affiliated Member or Affiliated Entity
Complex Order Volume (Excluding Crossing Orders
and Responses to Crossing Orders) Calculated as a
Percentage of Customer Total Consolidated Volume.
All Complex Order volume executed on the
Exchange, including volume executed by Affiliated
Members, is included in the volume calculation,
except for volume executed as Crossing Orders and
Responses to Crossing Orders. Affiliated Entities
may aggregate their Complex Order volume for
purposes of calculating Priority Customer Rebates.
The Appointed OFP would receive the rebate
associated with the qualifying volume tier based on
aggregated volume. See Options 7, Section 4, note
16.
12 See Options 7, Section 4, note 1.
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The Exchange also proposes to amend
the qualifications for the Note 15
Incentive by increasing the volume
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threshold from 0.06% to 0.10% of
Regular Order Non-Select Symbol
Priority Customer volume on ISE
(excluding Crossing Orders and
Responses to Crossing Orders)
calculated as a percentage of Customer
Total Consolidated Volume per day in a
given month. While the Exchange is
increasing the volume threshold in the
Note 15 Incentive, the Exchange is not
amending the $0.14 per contract
additional rebate under this proposal.
As such, Members that meet the
proposed volume threshold may be
eligible for rebates up to $1.14 per
contract (i.e., the proposed $1.00 base
maker rebate plus the additional $0.14
Note 15 Incentive) on their Priority
Customer Regular Orders in Non-Select
Symbols that add liquidity on ISE.
Further, the Exchange proposes to
link the amended Note 15 Incentive to
the Priority Customer Complex Order
rebates in Options 7, Section 4, as
further described above. Specifically,
Members that meet the amended Note
15 Incentive volume requirement (i.e.,
execute more than 0.10% of regular
order Non-Select Symbol Priority
Customer volume on ISE (excluding
Crossing Orders and Responses to
Crossing Orders) calculated as a
percentage of Customer Total
Consolidated Volume per day in a given
month) will also be eligible to receive
the Section 4 Priority Customer
Complex Order rebates in Select
Symbols and Non-Select Symbols that
apply to one tier higher than the tier for
which they currently qualify. For
example, if a Member currently qualifies
for Priority Customer Complex Tier 1
AND meets the proposed 0.10% volume
requirement in the Note 15 Incentive,
that Member will be eligible to receive
the Priority Customer Complex Tier 2
rebate for Select Symbols and NonSelect Symbols instead of the Priority
Customer Complex Tier 1 rebate for
Select Symbols and Non-Select
Symbols. The Exchange also proposes
that Members that already qualify for
the highest Priority Customer Complex
Tier (i.e., Tier 10) will instead receive an
additional rebate of $0.01 per contract
in Select Symbols and Non-Select
Symbols because they are already in the
highest tier (and therefore unable to
receive the benefit of a higher tier).13
In connection with linking the Note
15 Incentive with the Priority Customer
Complex Order rebates in Options 7,
Section 4, the Exchange also proposes to
add new note 17 in Options 7, Section
13 As discussed later in this filing, the Exchange
is also proposing a number of changes to the
Priority Customer Complex Order rebates for both
Select and Non-Select Symbols in Options 7,
Section 4.
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4 that would provide: ‘‘Members that
execute more than 0.10% of Regular
Order Non-Select Symbol Priority
Customer Volume (excluding Crossing
Orders and Responses to Crossing
Orders) calculated as a percentage of
Customer Total Consolidated Volume
per day in a given month will be eligible
to receive the Priority Customer
Complex Order rebates in Select
Symbols and Non-Select Symbols that
apply to one tier higher than the tier for
which they currently qualify, except
Members that already qualify for the
highest Priority Customer Complex Tier
will instead receive an additional rebate
of $0.01 per contract in Select Symbols
and Non-Select Symbols.’’ New note 17
would make clear that the Priority
Customer Complex Order rebates in
Section 4 are linked to the proposed
volume threshold in the note 15
incentive, as further described above.
amounts without changing the tier
qualifications so that Members can send
the same amount of order flow as they
do today to receive larger rebates
described above. Overall, the Exchange
believes that these increased Complex
Order Priority Customer rebates will
attract more Complex Order flow to ISE.
The Exchange also proposes to
increase the Note 1 Rebate Discount for
smaller-sized Complex Orders in Select
Symbols that leg into the regular order
book and trade with regular interest.
Today, the Note 1 Rebate Discount
reduces the Priority Customer Complex
Tiers 1–10 rebates for Select Symbols by
$0.15 per contract when the largest leg
of the Complex Order is under fifty (50)
contracts and trades with quotes and
orders on the regular order book. The
Exchange now proposes to increase this
reduction to $0.20 per contract.
Proposal 3—Regular Taker Fees in NonSelect Symbols
The Exchange proposes to increase
the Regular Order taker fees in note 3 of
Options 7, Section 3 for trades in NonSelect Symbols that are executed against
Priority Customers. As proposed, NonPriority Customer orders will be charged
a taker fee of $1.25 (increased from
$1.10) per contract for trades executed
against a Priority Customer. Priority
Customer orders will be charged a taker
fee of $1.00 (increased from $0.86) per
contract for trades executed against a
Priority Customer.
Proposal 5—Complex Maker and Taker
Fees in Non-Select Symbols
Proposal 4—Complex Priority Customer
Rebates
The Exchange proposes a number of
adjustments to the tiered Priority
Customer Complex Order rebates
described above. Specifically, the
Exchange proposes to increase the
Priority Customer Complex Tier 7 rebate
in Select Symbols from $0.51 to $0.54
per contract. The Exchange also
proposes to increase the Priority
Customer Complex Order rebates in
Non-Select Symbols as follows: Tier 1
would increase from $0.40 to $0.50 per
contract, Tier 2 would increase from
$0.55 to $0.60 per contract, Tier 3
would increase from $0.70 to $0.75 per
contract, Tier 4 would increase from
$0.75 to $0.80 per contract, Tier 5
would increase from $0.80 to $0.85 per
contract, Tier 6 would increase from
$0.85 to $0.95 per contract, Tier 7
would increase from $0.92 to $1.00 per
contract, Tier 8 would increase from
$1.03 to $1.10 per contract, Tier 9
would increase from $1.04 to $1.12 per
contract, and Tier 10 would increase
from $1.05 to $1.15 per contract. The
Exchange is amending the rebate
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The Exchange proposes to increase
the Complex Order maker and taker fees
in Non-Select Symbols described above.
Specifically, the Exchange proposes to
increase the maker fees in Non-Select
Symbols when trading against Priority
Customers as follows: $0.86 to $1.03 per
contract for Market Makers 14 and $0.88
to $1.05 per contract for all other NonPriority Customers. Further, the
Exchange proposes to increase the taker
fees in Non-Select Symbols from $0.98
to $1.15 per contract for all Non-Priority
Customers. Priority Customers will
continue to receive free executions for
their Complex Orders.
Proposal 6—Routing Fees
The Exchange proposes to amend the
Exchange’s Pricing Schedule at Options
7, Section 6.F (Route-Out Fees). The
routing fees in this section apply to
executions of orders in all symbols that
are routed to one or more exchanges in
connection with the Options Order
Protection and Locked/Crossed Market
Plan.
Today, the Exchange assesses Market
Makers, Non-Nasdaq ISE Market Makers
(FarMM),15 Firm Proprietary 16/Broker14 The term ‘‘Market Makers’’ refers to
‘‘Competitive Market Makers’’ and ‘‘Primary Market
Makers’’ collectively. See Options 1, Section
1(a)(21).
15 A ‘‘Non-Nasdaq ISE Market Maker’’ is a market
maker as defined in section 3(a)(38) of the
Securities Exchange Act of 1934, as amended,
registered in the same options class on another
options exchange.
16 A ‘‘Firm Proprietary’’ order is an order
submitted by a member for its own proprietary
account.
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Dealers 17 and Professional Customers 18
a $0.55 per contract Select Symbol
routing fee and a $1.09 Non-Select
Symbol routing fee to route to another
options exchange. Additionally, today,
the Exchange assess Priority Customers
a $0.48 per contract Select Symbol
routing fee and a $0.70 Non-Select
Symbol routing fee to route to another
options exchange.
The Exchange now proposes to assess
a $0.60 per contract Select Symbol
routing fee and a $1.20 Non-Select
Symbol routing fee to route to another
options exchange, regardless of the
capacity of the order. The purpose of the
proposed routing fees is to recoup costs
incurred by the Exchange when routing
orders to other options exchanges on
behalf of options Members. In
determining its proposed routing fees,
the Exchange took into account
transaction fees assessed by other
options exchanges, the Exchange’s
projected clearing costs, and the
projected administrative, regulatory,
and technical costs associated with
routing orders to other options
exchanges. The Exchange will continue
to use its affiliated broker-dealer,
Nasdaq Execution Services, to route
orders to other options exchanges.
Routing services offered by the
Exchange are completely optional and
market participants can readily select
between various providers of routing
services, including other exchanges and
broker-dealers. Also, the Exchange notes
that market participants may elect to
mark their orders as ‘‘Do-Not-Route’’ to
avoid any routing fees.19 The proposed
structure for routing fees is similar to
another options market.20 The Exchange
believes that the proposed routing fees
would enable the Exchange to recover
the costs it incurs to route orders to
away markets after taking into account
the other costs associated with routing
orders to other options exchanges.
2. Statutory Basis
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The Exchange believes that its
proposal is consistent with section 6(b)
of the Act,21 in general, and furthers the
objectives of sections 6(b)(4) and 6(b)(5)
17 A ‘‘Broker-Dealer’’ order is an order submitted
by a member for a broker-dealer account that is not
its own proprietary account.
18 A ‘‘Professional Customer’’ is a person or entity
that is not a broker/dealer and is not a Priority
Customer. See Options 7, Section 1(c).
19 See Supplementary Material .04 to Options 3,
Section 7.
20 See MEMX’s Options Fee Schedule at https://
info.memxtrading.com/us-options-tradingresources/us-options-fee-schedule/. MEMX assesses
a $0.60 per contract Penny Symbol routing fee and
a $1.20 Non-Penny Symbol routing fee.
21 15 U.S.C. 78f(b).
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of the Act,22 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’
. . . .’’ 23
The Commission and the courts have
repeatedly expressed their preference
for competition over regulatory
intervention in determining prices,
products, and services in the securities
markets. In Regulation NMS, while
adopting a series of steps to improve the
current market model, the Commission
highlighted the importance of market
forces in determining prices and SRO
revenues and, also, recognized that
current regulation of the market system
‘‘has been remarkably successful in
promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 24
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 seventeen
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
22 15
U.S.C. 78f(b)(4) and (5).
v. SEC, 615 F.3d 525, 539 (D.C.
Cir. 2010) (quoting Securities Exchange Act Release
No. 59039 (December 2, 2008), 73 FR 74770, 74782–
83 (December 9, 2008) (SR–NYSEArca–2006–21)).
24 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
23 NetCoalition
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84017
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.
Proposal 1—Regular Priority Customer
Maker Rebates in Non-Select Symbols
The Exchange believes that its
proposal to increase the Regular Order
Priority Customer maker rebate in NonSelect Symbols from $0.86 to $1.00 per
contract is reasonable because Members
will be further incentivized to add
liquidity in Priority Customer Regular
Orders in Non-Select Symbols in order
to receive the increased rebate. The
Exchange believes that this proposal is
equitable and not unfairly
discriminatory as all Priority Customers
will be uniformly assessed the $1.00
maker rebate. The Exchange further
believes that it is equitable and not
unfairly discriminatory to provide only
Priority Customers with this maker
rebate because the Exchange has
historically offered more favorable
pricing for those market participants. In
addition, increased Priority Customer
order flow enhances liquidity on the
Exchange for the benefit of all market
participants by providing more trading
opportunities, which in turn attracts
Market Makers and other market
participants that may trade with this
order flow.
Proposal 2—Note 15 Incentive
The Exchange believes that the
proposed changes to the Note 15
Incentive are reasonable for the reasons
that follow. As discussed above, the
Exchange is increasing the volume
threshold from 0.06% to 0.10% such
that Members would now need to
execute more than 0.10% of Regular
Order Non-Select Symbol Priority
Customer volume (excluding Crossing
Orders and Responses to Crossing
Orders) calculated as a percentage of
Customer Total Consolidated Volume
per day in a given month in order to
receive an additional rebate of $0.14 per
contract. While the volume threshold is
increasing under this proposal, the
Exchange believes that Members will
continue to be incentivized to increase
market participation in Non-Select
Symbol Priority Customer orders to
qualify for the $0.14 additional Note 15
Incentive, especially in light of the
significant increase in the base NonSelect Symbol Priority Customer maker
rebate to $1.00 per contract as discussed
above. Taken together, Members would
be able to receive up to $1.14 per
contract on their Priority Customer
Regular Orders in Non-Select Symbols
E:\FR\FM\01DEN1.SGM
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Federal Register / Vol. 88, No. 230 / Friday, December 1, 2023 / Notices
that add liquidity on ISE. The Exchange
believes that increased Priority
Customer order flow in Non-Select
Symbols would create additional
liquidity to the benefit of all market
participants and investors that trade on
the Exchange.
The Exchange also believes that
linking the proposed volume threshold
in the Note 15 Incentive to the Options
7, Section 4 Priority Customer Complex
Order rebates in the manner described
above is reasonable because the
proposal may further incentivize
Members to increase market
participation in Priority Customer
Regular Orders in Non-Select Symbols
to receive the next higher Priority
Customer Complex Tier rebate than the
tier for which they currently qualify (or
$0.01 additional rebate if they are
already in the highest Priority Customer
Complex Tier 10). The Exchange also
believes that the proposal would
incentivize Members to increase their
Priority Customer Complex Order flow
in both Select and Non-Select Symbols
to the Exchange in order to qualify for
a higher Priority Customer Complex
Tier (which in turn could set the
Member up to receive the next higher
Priority Customer Complex Tier
rebate—or an additional $0.01 rebate if
they are already in Priority Customer
Complex Tier 10—if they meet the
proposed volume threshold in the
amended Note 15 Incentive).
The Exchange believes that the
proposed changes to the Note 15
Incentive as discussed above are
equitable and not unfairly
discriminatory because they will apply
uniformly to all similarly situated
market participants. The Exchange
believes that it is equitable and not
unfairly discriminatory to offer the Note
15 Incentive to only Priority Customers
because Priority Customer liquidity
benefits all market participants by
providing more trading opportunities,
which 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
from other market participants.
lotter on DSK11XQN23PROD with NOTICES1
Proposal 3—Regular Taker Fees in NonSelect Symbols
The Exchange believes that its
proposal to increase the Regular Order
taker fees in note 3 of Options 7, Section
3 for trades in Non-Select Symbols that
are executed against Priority Customers
is reasonable because they are designed
to offset the significant incentives that
the Exchange is proposing for Priority
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Customer orders.25 As discussed above,
Non-Priority Customer orders will be
charged a taker fee of $1.25 (increased
from $1.10) per contract for trades
executed against a Priority Customer.
Priority Customer orders will be charged
a taker fee of $1.00 (increased from
$0.86) per contract for trades executed
against a Priority Customer. The
Exchange believes that Members will
benefit from the additional liquidity
created by the Priority Customer
incentives proposed in this filing, and it
is therefore appropriate to charge
increased taker fees for trades executed
against a Priority Customer.
The Exchange believes that its
proposal to increase the taker fees in
note 3 of Options 7, Section 3 for trades
that are executed against Priority
Customers is equitable and not unfairly
discriminatory because the changes will
apply uniformly to all similarly situated
market participants. Priority Customers
will continue to be charged a lower
taker fee pursuant to note 3 compared
to other market participants, which the
Exchange believes is equitable and not
unfairly discriminatory because the
Exchange has historically provided
Priority Customers with more favorable
pricing. Furthermore, Priority Customer
liquidity benefits all market participants
by providing more trading
opportunities, which 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 from other market
participants.
Proposal 4—Complex Priority Customer
Rebates
The Exchange believes that its
proposal to increase the tiered Priority
Customer Complex Order rebates in the
manner discussed above is reasonable
because these increased Complex Order
Priority Customer rebates will attract
more Complex Order flow to ISE to the
benefit of all market participants. The
Exchange believes that each rebate is set
at appropriate levels that will encourage
market participants to increase their
Priority Customer Complex Order
activity on the Exchange. As noted
25 As previously discussed, the Exchange is
proposing a significant increase in the base maker
rebate provided to Priority Customer Regular Orders
in Non-Select Symbols from $0.86 to $1.00 per
contract. In addition, the Exchange is linking the
Note 15 Incentive to the Section 4 Priority Customer
Complex Tier rebates to further incentivize Priority
Customer order flow to the Exchange. Finally, the
Exchange is increasing the Section 4 Priority
Customer Complex Tier rebates without changing
the tier qualifications so that Members can send the
same amount of order flow as they do today to
receive larger rebates.
PO 00000
Frm 00123
Fmt 4703
Sfmt 4703
above, the Exchange is amending the
rebate amounts without changing the
tier qualifications so that Members can
send the same amount of order flow as
they do today to receive larger rebates
described above.
The Exchange also believes that its
proposal to increase the Note 1 Rebate
Discount for smaller-sized Complex
Orders (i.e., largest leg of the order is
under fifty contracts) in Select Symbols
that leg into the regular order book and
trade with regular interest from $0.15 to
$0.20 per contract is reasonable because
Members will continue to be
incentivized to send Priority Customer
Complex Order flow to the Exchange
despite the increased reduction in order
to receive the tiered rebates. Also, the
Exchange will continue to pay rebates
for Priority Customer Complex Orders of
any size that trade with Non-Priority
Customer orders in the Complex Order
Book, based on the Priority Customer
Complex Tier achieved, thereby
continuing to incentivize Members to
bring Complex Order flow to the
Exchange to earn the rebate on their
Priority Customer Complex Order
volume. Overall, the Exchange believes
that the Priority Customer Complex
Order rebate program, as modified
under this proposal, is reasonable
because the program is optional and all
Members can choose to participate or
not.
The Exchange believes that offering
the Priority Customer Complex Order
rebate program, as modified, to only
Priority Customers is equitable and not
unfairly discriminatory as the proposed
changes are intended to increase
Priority Customer Complex Order flow
to ISE. An increase in Priority Customer
order flow enhances liquidity on the
Exchange to the benefit of all market
participants by providing more trading
opportunities, which in turn attracts
Market Makers and other market
participants that may interact with this
order flow.
Proposal 5—Complex Maker and Taker
Fees in Non-Select Symbols
The Exchange believes that its
proposal to increase the Complex Order
maker and taker fees in Non-Select
Symbols in the manner described above
is reasonable because it is designed to
offset the significant incentives that the
Exchange is proposing for Priority
Customer orders.26 The Exchange
believes that Members will benefit from
the additional liquidity created by the
Priority Customer incentives proposed
in this filing, and it is therefore
appropriate to charge all Non-Priority
26 See
E:\FR\FM\01DEN1.SGM
supra note 25.
01DEN1
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Federal Register / Vol. 88, No. 230 / Friday, December 1, 2023 / Notices
Customers increased maker fees for
trades executed against a Priority
Customer and increased taker fees.
The Exchange also believes that its
proposal is equitable and not unfairly
discriminatory. As discussed above, the
Exchange proposes to increase the
maker fees in Non-Select Symbols when
trading against Priority Customers as
follows: $0.86 to $1.03 per contract for
Market Makers and $0.88 to $1.05 per
contract for all other Non-Priority
Customers. Further, the Exchange
proposes to increase the taker fees in
Non-Select Symbols from $0.98 to $1.15
per contract for all Non-Priority
Customers. Priority Customers will
continue to receive free executions for
their Complex Orders. Market Makers
will continue to be assessed lower
maker fees in Non-Select Symbols than
other Non-Priority Customers when
trading against Priority Customers. The
Exchange believes this is equitable and
not unfairly discriminatory because
Market Makers are subject to additional
requirements and obligations (such as
quoting obligations) that other market
participants are not. In addition, the
Exchange believes that it is equitable
and not unfairly discriminatory to
continue to offer Priority Customers
Complex Orders free executions in order
to incentivize Priority Customer order
flow to ISE. Priority Customer order
flow enhances liquidity on the
Exchange for the benefit of all market
participants by providing more trading
opportunities, which in turn attracts
Market Makers and other market
participants that may interact with this
order flow.
routing fee is similar to another options
market.27
The Exchange’s proposal to amend its
routing fees such that all Members
would pay a $0.60 per contract Select
Symbol Routing Fee and a $1.20 NonSelect Symbol Routing Fee, regardless of
capacity, to route to another options
exchange is equitable and not unfairly
discriminatory because these uniform
Routing Fees will apply equally to all
options Members.
Proposal 6—Routing Fees
The Exchange does not believe that its
proposal to increase the Regular Order
Priority Customer maker rebate in NonSelect Symbols from $0.86 to $1.00 per
contract will impose an undue burden
on intra-market competition all Priority
Customers will be uniformly assessed
the $1.00 maker rebate. The Exchange
does not believe that its proposal to
provide only Priority Customers with
this maker rebate will impose an undue
burden on intra-market competition
because the Exchange has historically
offered more favorable pricing for those
market participants. In addition,
increased Priority Customer order flow
enhances liquidity on the Exchange for
the benefit of all market participants by
providing more trading opportunities,
which in turn attracts Market Makers
and other market participants that may
trade with this order flow.
The Exchange’s proposal to amend its
routing fees such that all Members
would pay a $0.60 per contract Select
Symbol routing fee and a $1.20 NonSelect Symbol routing fee to route to
another options exchange, regardless of
capacity, is reasonable because the
proposed routing fees would enable the
Exchange to recover the costs it incurs
to route orders to away markets after
taking into account the other costs
associated with routing orders to other
options exchanges. Routing services
offered by the Exchange are completely
optional and market participants can
readily select between various providers
of routing services, including other
exchanges and broker-dealers. Also, the
Exchange notes that market participants
may elect to mark their orders as ‘‘DoNot-Route’’ to avoid any routing fees. As
noted above, the proposed structure for
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18:47 Nov 30, 2023
Jkt 262001
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.
Intra-Market Competition
In terms of intra-market competition,
the Exchange does not believe that its
proposal will place any category of
market participant at a competitive
disadvantage. While some aspects of the
proposal apply directly to Priority
Customers (through rebates or more
favorable pricing) and Market Makers
(through lower Complex Order maker
fees when trading against Priority
Customers) as discussed above, the
Exchange believes that the changes,
taken together, will ultimately fortify
and encourage activity on the Exchange.
As discussed above, all market
participants will benefit from any
increase in market activity that the
proposal effectuates.
Proposal 1—Regular Priority Customer
Maker Rebates in Non-Select Symbols
27 See
PO 00000
supra note 20.
Frm 00124
Fmt 4703
Sfmt 4703
84019
Proposal 2—Note 15 Incentive
The Exchange does not believe that
the proposed changes to the Note 15
Incentive as discussed above will
impose an undue burden on intramarket competition as the proposal will
apply uniformly to all Priority
Customers. While the proposed Note 15
incentive will only apply to Priority
Customers, Priority Customer liquidity
benefits all market participants by
providing more trading opportunities,
which 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
from other market participants.
Proposal 3—Regular Taker Fees in NonSelect Symbols
The Exchange does not believe that its
proposal to increase the taker fees in
note 3 of Options 7, Section 3 for trades
that are executed against Priority
Customers will impose an undue
burden on intra-market competition
because the changes will apply
uniformly to all similarly situated
market participants. Priority Customers
will continue to be charged a lower
taker fee pursuant to note 3 compared
to other market participants, which the
Exchange believes is equitable and not
unfairly discriminatory because the
Exchange has historically provided
Priority Customers with more favorable
pricing. Furthermore, Priority Customer
liquidity benefits all market participants
by providing more trading
opportunities, which 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 from other market
participants.
Proposal 4—Complex Priority Customer
Rebates
The Exchange does not believe that
offering the Priority Customer Complex
Order rebate program, as modified
under this proposal, to only Priority
Customers will impose an undue
burden on intra-market competition
because the proposed changes are
intended to increase Priority Customer
Complex Order flow to ISE. An increase
in Priority Customer order flow
enhances liquidity on the Exchange to
the benefit of all market participants by
providing more trading opportunities,
which in turn attracts Market Makers
and other market participants that may
interact with this order flow.
E:\FR\FM\01DEN1.SGM
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Federal Register / Vol. 88, No. 230 / Friday, December 1, 2023 / Notices
Proposal 5—Complex Maker and Taker
Fees in Non-Select Symbols
The Exchange does not believe that its
proposal to increase the Complex Order
maker and taker fees in Non-Select
Symbols in the manner described above
will impose an undue burden on intramarket competition. As discussed
above, the Exchange proposes to
increase the maker fees in Non-Select
Symbols when trading against Priority
Customers as follows: $0.86 to $1.03 per
contract for Market Makers and $0.88 to
$1.05 per contract for all other NonPriority Customers. Further, the
Exchange proposes to increase the taker
fees in Non-Select Symbols from $0.98
to $1.15 per contract for all Non-Priority
Customers. Priority Customers will
continue to receive free executions for
their Complex Orders. Market Makers
will continue to be assessed lower
maker fees in Non-Select Symbols than
other Non-Priority Customers when
trading against Priority Customers. The
Exchange believes this is equitable and
not unfairly discriminatory because
Market Makers are subject to additional
requirements and obligations (such as
quoting obligations) that other market
participants are not. In addition, the
Exchange believes that it is equitable
and not unfairly discriminatory to
continue to offer Priority Customers
Complex Orders free executions in order
to incentivize Priority Customer order
flow to ISE. Priority Customer order
flow enhances liquidity on the
Exchange for the benefit of all market
participants by providing more trading
opportunities, which in turn attracts
Market Makers and other market
participants that may interact with this
order flow.
Proposal 6—Routing Fees
lotter on DSK11XQN23PROD with NOTICES1
The Exchange’s proposal to amend its
routing fees such that all Members
would pay a $0.60 per contract Select
Symbol routing fee and a $1.20 NonSelect Symbol routing fee to route to
another options exchange, regardless of
capacity, will not impose an undue
burden on intra-market competition
because these uniform routing fees will
apply equally to all options Members.
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. In
sum, if the changes proposed herein are
unattractive to market participants, it is
likely that the Exchange will lose
market share as a result. Accordingly,
the Exchange does not believe that the
proposed changes will impair the ability
of members or competing order
execution venues to maintain their
competitive standing in the financial
markets.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to section
19(b)(3)(A)(ii) of the Act 28 and Rule
19b–4(f)(2) 29 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.
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
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
• 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–2023–28 on the subject line.
VerDate Sep<11>2014
18:47 Nov 30, 2023
Jkt 262001
29 17
PO 00000
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
Frm 00125
Fmt 4703
• 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–2023–28. 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–2023–28 and should be
submitted on or before December 22,
2023.
For the Commission, by the Division
of Trading and Markets, pursuant to
delegated authority.30
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–26499 Filed 11–30–23; 8:45 am]
BILLING CODE 8011–01–P
Inter-Market Competition
28 15
Paper Comments
Sfmt 9990
30 17
E:\FR\FM\01DEN1.SGM
CFR 200.30–3(a)(12).
01DEN1
]]>Agencies
[Federal Register Volume 88, Number 230 (Friday, December 1, 2023)]
[Notices]
[Pages 84014-84020]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-26499]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99024; File No. SR-ISE-2023-28]
Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the
Exchange's Pricing Schedule at Options 7
November 28, 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 November 13, 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 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.
---------------------------------------------------------------------------
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.
The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/ise/rules, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to amend the Exchange's
Pricing Schedule at Options 7. Each change is described below.
The Exchange initially filed the proposed pricing changes on
November 1, 2023 (SR-ISE-2023-26). On November 13, 2023, the Exchange
withdrew that filing and submitted this filing.
Background
Regular Order Fees and Rebates
As set forth in Options 7, Section 3, the Exchange currently has a
maker/taker pricing model where all market participants (except
Priority Customers) \3\ are assessed a uniform Regular Order maker fee
of $0.70 per contract for Non-Select Symbol \4\ executions that add
liquidity on the Exchange, and a uniform Regular Order taker fee of
$0.90 per contract for Non-Select Symbol executions that remove
liquidity. Priority Customers are currently assessed a $0.86 per
contract Regular Order maker rebate in Non-Select Symbols and a $0.00
per contract Regular Order taker fee in Non-Select Symbols.
Additionally, all market participants are charged higher Regular Order
taker fees for trades in Non-Select Symbols executed against Priority
Customers. Specifically, Non-Priority Customers \5\ are charged a taker
fee of $1.10 per contract for trades executed against a Priority
Customer, while Priority Customers are charged a taker fee of $0.86 per
contract for trades executed against another Priority Customer.\6\
---------------------------------------------------------------------------
\3\ 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).
\4\ ``Non-Select Symbols'' are options overlying all symbols
excluding Select Symbols. ``Select Symbols'' are options overlying
all symbols listed on the Exchange that are in the Penny Interval
Program.
\5\ ``Non-Priority Customers'' include Market Makers, Non-Nasdaq
ISE Market Makers (FarMMs), Firm Proprietary/Broker-Dealers, and
Professional Customers.
\6\ See Options 7, Section 3, note 3.
---------------------------------------------------------------------------
As it relates to the $0.86 per contract Priority Customer Regular
Order maker
[[Page 84015]]
rebate described above, the Exchange also currently offers Members an
additional rebate of $0.14 per contract if they execute more than 0.06%
of Regular Order Non-Select Symbol Priority Customer volume (excluding
Crossing Orders \7\ and Responses to Crossing Orders) \8\ calculated as
a percentage of Customer Total Consolidated Volume \9\ per day in a
given month (``Note 15 Incentive'').\10\ The Note 15 Incentive is
designed to encourage Members to transact in greater Regular Order Non-
Select Symbol Priority Customer volume on the Exchange to receive
rebates up to $1.00 per contract (i.e., the current $0.86 base maker
rebate plus the additional $0.14 Note 15 Incentive).
---------------------------------------------------------------------------
\7\ 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.
\8\ ``Responses to Crossing Order'' is any contra-side interest
submitted after the commencement of an auction in the Exchange's
Facilitation Mechanism, Solicited Order Mechanism, Block Order
Mechanism or PIM.
\9\ ``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.
\10\ See Options 7, Section 3, note 15.
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Complex Order Fees and Rebates
As set forth in Options 7, Section 4, the Exchange currently offers
tiered Complex Order Priority Customer rebates for Select Symbols and
Non-Select Symbols based on the Priority Customer Complex Tier
achieved.\11\ The tiered Complex Order Priority Customer rebates for
Select Symbols and Non-Select Symbols are presently as follows:
---------------------------------------------------------------------------
\11\ Priority Customer Complex Tiers are based on Total
Affiliated Member or Affiliated Entity Complex Order Volume
(Excluding Crossing Orders and Responses to Crossing Orders)
Calculated as a Percentage of Customer Total Consolidated Volume.
All Complex Order volume executed on the Exchange, including volume
executed by Affiliated Members, is included in the volume
calculation, except for volume executed as Crossing Orders and
Responses to Crossing Orders. Affiliated Entities may aggregate
their Complex Order volume for purposes of calculating Priority
Customer Rebates. The Appointed OFP would receive the rebate
associated with the qualifying volume tier based on aggregated
volume. See Options 7, Section 4, note 16.
Total Affiliated Member or Affiliated Entity Complex Order Volume
[Excluding Crossing Orders and Responses to Crossing Orders]
----------------------------------------------------------------------------------------------------------------
Calculated as a percentage of Rebate for Rebate for non-
Priority customer complex tier customer total consolidated volume select symbols select symbols
----------------------------------------------------------------------------------------------------------------
Tier 1..................................... 0.000%-0.200%...................... ($0.25) ($0.40)
Tier 2..................................... Above 0.200%-0.400%................ (0.30) (0.55)
Tier 3..................................... Above 0.400%-0.450%................ (0.35) (0.70)
Tier 4..................................... Above 0.450%-0.750%................ (0.40) (0.75)
Tier 5..................................... Above 0.750%-1.000%................ (0.45) (0.80)
Tier 6..................................... Above 1.000%-1.350%................ (0.48) (0.85)
Tier 7..................................... Above 1.350%-1.750%................ (0.51) (0.92)
Tier 8..................................... Above 1.750%-2.750%................ (0.55) (1.03)
Tier 9..................................... Above 2.750%-4.500%................ (0.56) (1.04)
Tier 10.................................... Above 4.500%....................... (0.57) (1.05)
----------------------------------------------------------------------------------------------------------------
The above rebates are provided per contract per leg if the order
trades with Non-Priority Customer orders in the Complex Order Book.
Today, this rebate is reduced by $0.15 per contract in Select Symbols
where the largest leg of the Complex Order is under fifty (50)
contracts and trades with quotes and orders on the regular order book
(the ``Note 1 Rebate Discount''). No Priority Customer Complex Order
rebates are provided in Select Symbols if any leg of the order that
trades with interest on the regular order book is fifty (50) contracts
or more. Lastly, no Priority Customer Complex Order rebates are
provided in Non-Select Symbols if any leg of the order trades with
interest on the regular order book, irrespective of order size.\12\
---------------------------------------------------------------------------
\12\ See Options 7, Section 4, note 1.
---------------------------------------------------------------------------
Separately, the Exchange currently assesses Complex Order maker and
taker fees for Select and Non-Select Symbols based on the pricing
schedule below:
Maker and Taker Fees
--------------------------------------------------------------------------------------------------------------------------------------------------------
Maker fee for
Maker fee for non-select
Maker fee for select symbols symbols when Taker fee for
Market participant Maker fee for non-select when trading trading Taker fee for non- select
select symbols symbols against against select symbols symbols
priority priority
customer customer
--------------------------------------------------------------------------------------------------------------------------------------------------------
Market Maker............................................ 0.10 0.20 0.50 0.86 0.50 0.98
Non-Nasdaq ISE Market Maker (FarMM)..................... 0.20 0.20 0.50 0.88 0.50 0.98
Firm Proprietary/Broker-Dealer.......................... 0.10 0.20 0.50 0.88 0.50 0.98
Professional Customer................................... 0.10 0.20 0.50 0.88 0.50 0.98
Priority Customer....................................... 0.00 0.00 0.00 0.00 0.00 0.00
--------------------------------------------------------------------------------------------------------------------------------------------------------
Proposal 1--Regular Priority Customer Maker Rebates in Non-Select
Symbols
The Exchange proposes to increase the Regular Order Non-Select
Symbol Priority Customer maker rebate in Options 7, Section 3 from
$0.86 to $1.00 per contract.
Proposal 2--Note 15 Incentive
The Exchange also proposes to amend the qualifications for the Note
15 Incentive by increasing the volume
[[Page 84016]]
threshold from 0.06% to 0.10% of Regular Order Non-Select Symbol
Priority Customer volume on ISE (excluding Crossing Orders and
Responses to Crossing Orders) calculated as a percentage of Customer
Total Consolidated Volume per day in a given month. While the Exchange
is increasing the volume threshold in the Note 15 Incentive, the
Exchange is not amending the $0.14 per contract additional rebate under
this proposal. As such, Members that meet the proposed volume threshold
may be eligible for rebates up to $1.14 per contract (i.e., the
proposed $1.00 base maker rebate plus the additional $0.14 Note 15
Incentive) on their Priority Customer Regular Orders in Non-Select
Symbols that add liquidity on ISE.
Further, the Exchange proposes to link the amended Note 15
Incentive to the Priority Customer Complex Order rebates in Options 7,
Section 4, as further described above. Specifically, Members that meet
the amended Note 15 Incentive volume requirement (i.e., execute more
than 0.10% of regular order Non-Select Symbol Priority Customer volume
on ISE (excluding Crossing Orders and Responses to Crossing Orders)
calculated as a percentage of Customer Total Consolidated Volume per
day in a given month) will also be eligible to receive the Section 4
Priority Customer Complex Order rebates in Select Symbols and Non-
Select Symbols that apply to one tier higher than the tier for which
they currently qualify. For example, if a Member currently qualifies
for Priority Customer Complex Tier 1 AND meets the proposed 0.10%
volume requirement in the Note 15 Incentive, that Member will be
eligible to receive the Priority Customer Complex Tier 2 rebate for
Select Symbols and Non-Select Symbols instead of the Priority Customer
Complex Tier 1 rebate for Select Symbols and Non-Select Symbols. The
Exchange also proposes that Members that already qualify for the
highest Priority Customer Complex Tier (i.e., Tier 10) will instead
receive an additional rebate of $0.01 per contract in Select Symbols
and Non-Select Symbols because they are already in the highest tier
(and therefore unable to receive the benefit of a higher tier).\13\
---------------------------------------------------------------------------
\13\ As discussed later in this filing, the Exchange is also
proposing a number of changes to the Priority Customer Complex Order
rebates for both Select and Non-Select Symbols in Options 7, Section
4.
---------------------------------------------------------------------------
In connection with linking the Note 15 Incentive with the Priority
Customer Complex Order rebates in Options 7, Section 4, the Exchange
also proposes to add new note 17 in Options 7, Section 4 that would
provide: ``Members that execute more than 0.10% of Regular Order Non-
Select Symbol Priority Customer Volume (excluding Crossing Orders and
Responses to Crossing Orders) calculated as a percentage of Customer
Total Consolidated Volume per day in a given month will be eligible to
receive the Priority Customer Complex Order rebates in Select Symbols
and Non-Select Symbols that apply to one tier higher than the tier for
which they currently qualify, except Members that already qualify for
the highest Priority Customer Complex Tier will instead receive an
additional rebate of $0.01 per contract in Select Symbols and Non-
Select Symbols.'' New note 17 would make clear that the Priority
Customer Complex Order rebates in Section 4 are linked to the proposed
volume threshold in the note 15 incentive, as further described above.
Proposal 3--Regular Taker Fees in Non-Select Symbols
The Exchange proposes to increase the Regular Order taker fees in
note 3 of Options 7, Section 3 for trades in Non-Select Symbols that
are executed against Priority Customers. As proposed, Non-Priority
Customer orders will be charged a taker fee of $1.25 (increased from
$1.10) per contract for trades executed against a Priority Customer.
Priority Customer orders will be charged a taker fee of $1.00
(increased from $0.86) per contract for trades executed against a
Priority Customer.
Proposal 4--Complex Priority Customer Rebates
The Exchange proposes a number of adjustments to the tiered
Priority Customer Complex Order rebates described above. Specifically,
the Exchange proposes to increase the Priority Customer Complex Tier 7
rebate in Select Symbols from $0.51 to $0.54 per contract. The Exchange
also proposes to increase the Priority Customer Complex Order rebates
in Non-Select Symbols as follows: Tier 1 would increase from $0.40 to
$0.50 per contract, Tier 2 would increase from $0.55 to $0.60 per
contract, Tier 3 would increase from $0.70 to $0.75 per contract, Tier
4 would increase from $0.75 to $0.80 per contract, Tier 5 would
increase from $0.80 to $0.85 per contract, Tier 6 would increase from
$0.85 to $0.95 per contract, Tier 7 would increase from $0.92 to $1.00
per contract, Tier 8 would increase from $1.03 to $1.10 per contract,
Tier 9 would increase from $1.04 to $1.12 per contract, and Tier 10
would increase from $1.05 to $1.15 per contract. The Exchange is
amending the rebate amounts without changing the tier qualifications so
that Members can send the same amount of order flow as they do today to
receive larger rebates described above. Overall, the Exchange believes
that these increased Complex Order Priority Customer rebates will
attract more Complex Order flow to ISE.
The Exchange also proposes to increase the Note 1 Rebate Discount
for smaller-sized Complex Orders in Select Symbols that leg into the
regular order book and trade with regular interest. Today, the Note 1
Rebate Discount reduces the Priority Customer Complex Tiers 1-10
rebates for Select Symbols by $0.15 per contract when the largest leg
of the Complex Order is under fifty (50) contracts and trades with
quotes and orders on the regular order book. The Exchange now proposes
to increase this reduction to $0.20 per contract.
Proposal 5--Complex Maker and Taker Fees in Non-Select Symbols
The Exchange proposes to increase the Complex Order maker and taker
fees in Non-Select Symbols described above. Specifically, the Exchange
proposes to increase the maker fees in Non-Select Symbols when trading
against Priority Customers as follows: $0.86 to $1.03 per contract for
Market Makers \14\ and $0.88 to $1.05 per contract for all other Non-
Priority Customers. Further, the Exchange proposes to increase the
taker fees in Non-Select Symbols from $0.98 to $1.15 per contract for
all Non-Priority Customers. Priority Customers will continue to receive
free executions for their Complex Orders.
---------------------------------------------------------------------------
\14\ The term ``Market Makers'' refers to ``Competitive Market
Makers'' and ``Primary Market Makers'' collectively. See Options 1,
Section 1(a)(21).
---------------------------------------------------------------------------
Proposal 6--Routing Fees
The Exchange proposes to amend the Exchange's Pricing Schedule at
Options 7, Section 6.F (Route-Out Fees). The routing fees in this
section apply to executions of orders in all symbols that are routed to
one or more exchanges in connection with the Options Order Protection
and Locked/Crossed Market Plan.
Today, the Exchange assesses Market Makers, Non-Nasdaq ISE Market
Makers (FarMM),\15\ Firm Proprietary \16\/Broker-
[[Page 84017]]
Dealers \17\ and Professional Customers \18\ a $0.55 per contract
Select Symbol routing fee and a $1.09 Non-Select Symbol routing fee to
route to another options exchange. Additionally, today, the Exchange
assess Priority Customers a $0.48 per contract Select Symbol routing
fee and a $0.70 Non-Select Symbol routing fee to route to another
options exchange.
---------------------------------------------------------------------------
\15\ A ``Non-Nasdaq ISE Market Maker'' is a market maker as
defined in section 3(a)(38) of the Securities Exchange Act of 1934,
as amended, registered in the same options class on another options
exchange.
\16\ A ``Firm Proprietary'' order is an order submitted by a
member for its own proprietary account.
\17\ A ``Broker-Dealer'' order is an order submitted by a member
for a broker-dealer account that is not its own proprietary account.
\18\ A ``Professional Customer'' is a person or entity that is
not a broker/dealer and is not a Priority Customer. See Options 7,
Section 1(c).
---------------------------------------------------------------------------
The Exchange now proposes to assess a $0.60 per contract Select
Symbol routing fee and a $1.20 Non-Select Symbol routing fee to route
to another options exchange, regardless of the capacity of the order.
The purpose of the proposed routing fees is to recoup costs incurred by
the Exchange when routing orders to other options exchanges on behalf
of options Members. In determining its proposed routing fees, the
Exchange took into account transaction fees assessed by other options
exchanges, the Exchange's projected clearing costs, and the projected
administrative, regulatory, and technical costs associated with routing
orders to other options exchanges. The Exchange will continue to use
its affiliated broker-dealer, Nasdaq Execution Services, to route
orders to other options exchanges. Routing services offered by the
Exchange are completely optional and market participants can readily
select between various providers of routing services, including other
exchanges and broker-dealers. Also, the Exchange notes that market
participants may elect to mark their orders as ``Do-Not-Route'' to
avoid any routing fees.\19\ The proposed structure for routing fees is
similar to another options market.\20\ The Exchange believes that the
proposed routing fees would enable the Exchange to recover the costs it
incurs to route orders to away markets after taking into account the
other costs associated with routing orders to other options exchanges.
---------------------------------------------------------------------------
\19\ See Supplementary Material .04 to Options 3, Section 7.
\20\ See MEMX's Options Fee Schedule at https://info.memxtrading.com/us-options-trading-resources/us-options-fee-schedule/. MEMX assesses a $0.60 per contract Penny Symbol routing
fee and a $1.20 Non-Penny Symbol routing fee.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that its proposal is consistent with section
6(b) of the Act,\21\ in general, and furthers the objectives of
sections 6(b)(4) and 6(b)(5) of the Act,\22\ 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.
---------------------------------------------------------------------------
\21\ 15 U.S.C. 78f(b).
\22\ 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' . . . .'' \23\
---------------------------------------------------------------------------
\23\ 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.'' \24\
---------------------------------------------------------------------------
\24\ Securities Exchange Act Release No. 51808 (June 9, 2005),
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
---------------------------------------------------------------------------
Numerous indicia demonstrate the competitive nature of this market.
For example, clear substitutes to the Exchange exist in the market for
options security transaction services. The Exchange is only one of
seventeen 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.
Proposal 1--Regular Priority Customer Maker Rebates in Non-Select
Symbols
The Exchange believes that its proposal to increase the Regular
Order Priority Customer maker rebate in Non-Select Symbols from $0.86
to $1.00 per contract is reasonable because Members will be further
incentivized to add liquidity in Priority Customer Regular Orders in
Non-Select Symbols in order to receive the increased rebate. The
Exchange believes that this proposal is equitable and not unfairly
discriminatory as all Priority Customers will be uniformly assessed the
$1.00 maker rebate. The Exchange further believes that it is equitable
and not unfairly discriminatory to provide only Priority Customers with
this maker rebate because the Exchange has historically offered more
favorable pricing for those market participants. In addition, increased
Priority Customer order flow enhances liquidity on the Exchange for the
benefit of all market participants by providing more trading
opportunities, which in turn attracts Market Makers and other market
participants that may trade with this order flow.
Proposal 2--Note 15 Incentive
The Exchange believes that the proposed changes to the Note 15
Incentive are reasonable for the reasons that follow. As discussed
above, the Exchange is increasing the volume threshold from 0.06% to
0.10% such that Members would now need to execute more than 0.10% of
Regular Order Non-Select Symbol Priority Customer volume (excluding
Crossing Orders and Responses to Crossing Orders) calculated as a
percentage of Customer Total Consolidated Volume per day in a given
month in order to receive an additional rebate of $0.14 per contract.
While the volume threshold is increasing under this proposal, the
Exchange believes that Members will continue to be incentivized to
increase market participation in Non-Select Symbol Priority Customer
orders to qualify for the $0.14 additional Note 15 Incentive,
especially in light of the significant increase in the base Non-Select
Symbol Priority Customer maker rebate to $1.00 per contract as
discussed above. Taken together, Members would be able to receive up to
$1.14 per contract on their Priority Customer Regular Orders in Non-
Select Symbols
[[Page 84018]]
that add liquidity on ISE. The Exchange believes that increased
Priority Customer order flow in Non-Select Symbols would create
additional liquidity to the benefit of all market participants and
investors that trade on the Exchange.
The Exchange also believes that linking the proposed volume
threshold in the Note 15 Incentive to the Options 7, Section 4 Priority
Customer Complex Order rebates in the manner described above is
reasonable because the proposal may further incentivize Members to
increase market participation in Priority Customer Regular Orders in
Non-Select Symbols to receive the next higher Priority Customer Complex
Tier rebate than the tier for which they currently qualify (or $0.01
additional rebate if they are already in the highest Priority Customer
Complex Tier 10). The Exchange also believes that the proposal would
incentivize Members to increase their Priority Customer Complex Order
flow in both Select and Non-Select Symbols to the Exchange in order to
qualify for a higher Priority Customer Complex Tier (which in turn
could set the Member up to receive the next higher Priority Customer
Complex Tier rebate--or an additional $0.01 rebate if they are already
in Priority Customer Complex Tier 10--if they meet the proposed volume
threshold in the amended Note 15 Incentive).
The Exchange believes that the proposed changes to the Note 15
Incentive as discussed above are equitable and not unfairly
discriminatory because they will apply uniformly to all similarly
situated market participants. The Exchange believes that it is
equitable and not unfairly discriminatory to offer the Note 15
Incentive to only Priority Customers because Priority Customer
liquidity benefits all market participants by providing more trading
opportunities, which 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 from other market participants.
Proposal 3--Regular Taker Fees in Non-Select Symbols
The Exchange believes that its proposal to increase the Regular
Order taker fees in note 3 of Options 7, Section 3 for trades in Non-
Select Symbols that are executed against Priority Customers is
reasonable because they are designed to offset the significant
incentives that the Exchange is proposing for Priority Customer
orders.\25\ As discussed above, Non-Priority Customer orders will be
charged a taker fee of $1.25 (increased from $1.10) per contract for
trades executed against a Priority Customer. Priority Customer orders
will be charged a taker fee of $1.00 (increased from $0.86) per
contract for trades executed against a Priority Customer. The Exchange
believes that Members will benefit from the additional liquidity
created by the Priority Customer incentives proposed in this filing,
and it is therefore appropriate to charge increased taker fees for
trades executed against a Priority Customer.
---------------------------------------------------------------------------
\25\ As previously discussed, the Exchange is proposing a
significant increase in the base maker rebate provided to Priority
Customer Regular Orders in Non-Select Symbols from $0.86 to $1.00
per contract. In addition, the Exchange is linking the Note 15
Incentive to the Section 4 Priority Customer Complex Tier rebates to
further incentivize Priority Customer order flow to the Exchange.
Finally, the Exchange is increasing the Section 4 Priority Customer
Complex Tier rebates without changing the tier qualifications so
that Members can send the same amount of order flow as they do today
to receive larger rebates.
---------------------------------------------------------------------------
The Exchange believes that its proposal to increase the taker fees
in note 3 of Options 7, Section 3 for trades that are executed against
Priority Customers is equitable and not unfairly discriminatory because
the changes will apply uniformly to all similarly situated market
participants. Priority Customers will continue to be charged a lower
taker fee pursuant to note 3 compared to other market participants,
which the Exchange believes is equitable and not unfairly
discriminatory because the Exchange has historically provided Priority
Customers with more favorable pricing. Furthermore, Priority Customer
liquidity benefits all market participants by providing more trading
opportunities, which 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 from other market participants.
Proposal 4--Complex Priority Customer Rebates
The Exchange believes that its proposal to increase the tiered
Priority Customer Complex Order rebates in the manner discussed above
is reasonable because these increased Complex Order Priority Customer
rebates will attract more Complex Order flow to ISE to the benefit of
all market participants. The Exchange believes that each rebate is set
at appropriate levels that will encourage market participants to
increase their Priority Customer Complex Order activity on the
Exchange. As noted above, the Exchange is amending the rebate amounts
without changing the tier qualifications so that Members can send the
same amount of order flow as they do today to receive larger rebates
described above.
The Exchange also believes that its proposal to increase the Note 1
Rebate Discount for smaller-sized Complex Orders (i.e., largest leg of
the order is under fifty contracts) in Select Symbols that leg into the
regular order book and trade with regular interest from $0.15 to $0.20
per contract is reasonable because Members will continue to be
incentivized to send Priority Customer Complex Order flow to the
Exchange despite the increased reduction in order to receive the tiered
rebates. Also, the Exchange will continue to pay rebates for Priority
Customer Complex Orders of any size that trade with Non-Priority
Customer orders in the Complex Order Book, based on the Priority
Customer Complex Tier achieved, thereby continuing to incentivize
Members to bring Complex Order flow to the Exchange to earn the rebate
on their Priority Customer Complex Order volume. Overall, the Exchange
believes that the Priority Customer Complex Order rebate program, as
modified under this proposal, is reasonable because the program is
optional and all Members can choose to participate or not.
The Exchange believes that offering the Priority Customer Complex
Order rebate program, as modified, to only Priority Customers is
equitable and not unfairly discriminatory as the proposed changes are
intended to increase Priority Customer Complex Order flow to ISE. An
increase in Priority Customer order flow enhances liquidity on the
Exchange to the benefit of all market participants by providing more
trading opportunities, which in turn attracts Market Makers and other
market participants that may interact with this order flow.
Proposal 5--Complex Maker and Taker Fees in Non-Select Symbols
The Exchange believes that its proposal to increase the Complex
Order maker and taker fees in Non-Select Symbols in the manner
described above is reasonable because it is designed to offset the
significant incentives that the Exchange is proposing for Priority
Customer orders.\26\ The Exchange believes that Members will benefit
from the additional liquidity created by the Priority Customer
incentives proposed in this filing, and it is therefore appropriate to
charge all Non-Priority
[[Page 84019]]
Customers increased maker fees for trades executed against a Priority
Customer and increased taker fees.
---------------------------------------------------------------------------
\26\ See supra note 25.
---------------------------------------------------------------------------
The Exchange also believes that its proposal is equitable and not
unfairly discriminatory. As discussed above, the Exchange proposes to
increase the maker fees in Non-Select Symbols when trading against
Priority Customers as follows: $0.86 to $1.03 per contract for Market
Makers and $0.88 to $1.05 per contract for all other Non-Priority
Customers. Further, the Exchange proposes to increase the taker fees in
Non-Select Symbols from $0.98 to $1.15 per contract for all Non-
Priority Customers. Priority Customers will continue to receive free
executions for their Complex Orders. Market Makers will continue to be
assessed lower maker fees in Non-Select Symbols than other Non-Priority
Customers when trading against Priority Customers. The Exchange
believes this is equitable and not unfairly discriminatory because
Market Makers are subject to additional requirements and obligations
(such as quoting obligations) that other market participants are not.
In addition, the Exchange believes that it is equitable and not
unfairly discriminatory to continue to offer Priority Customers Complex
Orders free executions in order to incentivize Priority Customer order
flow to ISE. Priority Customer order flow enhances liquidity on the
Exchange for the benefit of all market participants by providing more
trading opportunities, which in turn attracts Market Makers and other
market participants that may interact with this order flow.
Proposal 6--Routing Fees
The Exchange's proposal to amend its routing fees such that all
Members would pay a $0.60 per contract Select Symbol routing fee and a
$1.20 Non-Select Symbol routing fee to route to another options
exchange, regardless of capacity, is reasonable because the proposed
routing fees would enable the Exchange to recover the costs it incurs
to route orders to away markets after taking into account the other
costs associated with routing orders to other options exchanges.
Routing services offered by the Exchange are completely optional and
market participants can readily select between various providers of
routing services, including other exchanges and broker-dealers. Also,
the Exchange notes that market participants may elect to mark their
orders as ``Do-Not-Route'' to avoid any routing fees. As noted above,
the proposed structure for routing fee is similar to another options
market.\27\
---------------------------------------------------------------------------
\27\ See supra note 20.
---------------------------------------------------------------------------
The Exchange's proposal to amend its routing fees such that all
Members would pay a $0.60 per contract Select Symbol Routing Fee and a
$1.20 Non-Select Symbol Routing Fee, regardless of capacity, to route
to another options exchange is equitable and not unfairly
discriminatory because these uniform Routing Fees will apply equally to
all options Members.
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.
Intra-Market Competition
In terms of intra-market competition, the Exchange does not believe
that its proposal will place any category of market participant at a
competitive disadvantage. While some aspects of the proposal apply
directly to Priority Customers (through rebates or more favorable
pricing) and Market Makers (through lower Complex Order maker fees when
trading against Priority Customers) as discussed above, the Exchange
believes that the changes, taken together, will ultimately fortify and
encourage activity on the Exchange. As discussed above, all market
participants will benefit from any increase in market activity that the
proposal effectuates.
Proposal 1--Regular Priority Customer Maker Rebates in Non-Select
Symbols
The Exchange does not believe that its proposal to increase the
Regular Order Priority Customer maker rebate in Non-Select Symbols from
$0.86 to $1.00 per contract will impose an undue burden on intra-market
competition all Priority Customers will be uniformly assessed the $1.00
maker rebate. The Exchange does not believe that its proposal to
provide only Priority Customers with this maker rebate will impose an
undue burden on intra-market competition because the Exchange has
historically offered more favorable pricing for those market
participants. In addition, increased Priority Customer order flow
enhances liquidity on the Exchange for the benefit of all market
participants by providing more trading opportunities, which in turn
attracts Market Makers and other market participants that may trade
with this order flow.
Proposal 2--Note 15 Incentive
The Exchange does not believe that the proposed changes to the Note
15 Incentive as discussed above will impose an undue burden on intra-
market competition as the proposal will apply uniformly to all Priority
Customers. While the proposed Note 15 incentive will only apply to
Priority Customers, Priority Customer liquidity benefits all market
participants by providing more trading opportunities, which 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 from other market participants.
Proposal 3--Regular Taker Fees in Non-Select Symbols
The Exchange does not believe that its proposal to increase the
taker fees in note 3 of Options 7, Section 3 for trades that are
executed against Priority Customers will impose an undue burden on
intra-market competition because the changes will apply uniformly to
all similarly situated market participants. Priority Customers will
continue to be charged a lower taker fee pursuant to note 3 compared to
other market participants, which the Exchange believes is equitable and
not unfairly discriminatory because the Exchange has historically
provided Priority Customers with more favorable pricing. Furthermore,
Priority Customer liquidity benefits all market participants by
providing more trading opportunities, which 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 from other market participants.
Proposal 4--Complex Priority Customer Rebates
The Exchange does not believe that offering the Priority Customer
Complex Order rebate program, as modified under this proposal, to only
Priority Customers will impose an undue burden on intra-market
competition because the proposed changes are intended to increase
Priority Customer Complex Order flow to ISE. An increase in Priority
Customer order flow enhances liquidity on the Exchange to the benefit
of all market participants by providing more trading opportunities,
which in turn attracts Market Makers and other market participants that
may interact with this order flow.
[[Page 84020]]
Proposal 5--Complex Maker and Taker Fees in Non-Select Symbols
The Exchange does not believe that its proposal to increase the
Complex Order maker and taker fees in Non-Select Symbols in the manner
described above will impose an undue burden on intra-market
competition. As discussed above, the Exchange proposes to increase the
maker fees in Non-Select Symbols when trading against Priority
Customers as follows: $0.86 to $1.03 per contract for Market Makers and
$0.88 to $1.05 per contract for all other Non-Priority Customers.
Further, the Exchange proposes to increase the taker fees in Non-Select
Symbols from $0.98 to $1.15 per contract for all Non-Priority
Customers. Priority Customers will continue to receive free executions
for their Complex Orders. Market Makers will continue to be assessed
lower maker fees in Non-Select Symbols than other Non-Priority
Customers when trading against Priority Customers. The Exchange
believes this is equitable and not unfairly discriminatory because
Market Makers are subject to additional requirements and obligations
(such as quoting obligations) that other market participants are not.
In addition, the Exchange believes that it is equitable and not
unfairly discriminatory to continue to offer Priority Customers Complex
Orders free executions in order to incentivize Priority Customer order
flow to ISE. Priority Customer order flow enhances liquidity on the
Exchange for the benefit of all market participants by providing more
trading opportunities, which in turn attracts Market Makers and other
market participants that may interact with this order flow.
Proposal 6--Routing Fees
The Exchange's proposal to amend its routing fees such that all
Members would pay a $0.60 per contract Select Symbol routing fee and a
$1.20 Non-Select Symbol routing fee to route to another options
exchange, regardless of capacity, will not impose an undue burden on
intra-market competition because these uniform routing fees will apply
equally to all options Members.
Inter-Market Competition
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. Because competitors are free to modify their own fees in
response, and because market participants may readily adjust their
order routing practices, the Exchange believes that the degree to which
fee changes in this market may impose any burden on competition is
extremely limited. In sum, if the changes proposed herein are
unattractive to market participants, it is likely that the Exchange
will lose market share as a result. Accordingly, the Exchange does not
believe that the proposed changes will impair the ability of members or
competing order execution venues to maintain their competitive standing
in the financial markets.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to section
19(b)(3)(A)(ii) of the Act \28\ and Rule 19b-4(f)(2) \29\ 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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\28\ 15 U.S.C. 78s(b)(3)(A)(ii).
\29\ 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-2023-28 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-2023-28. 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-2023-28 and should be
submitted on or before December 22, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\30\
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\30\ 17 CFR 200.30-3(a)(12).
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-26499 Filed 11-30-23; 8:45 am]
BILLING CODE 8011-01-P
