Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend ISE Options 7, 43455-43459 [2024-10818]
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Federal Register / Vol. 89, No. 97 / Friday, May 17, 2024 / Notices
Comments may be submitted by any of
the following methods:
SECURITIES AND EXCHANGE
COMMISSION
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–
CboeBYX–2024–014 on the subject line.
[Release No. 34–100123; File No. SR–ISE–
2024–18]
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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–CboeBYX–2024–014. 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–CboeBYX–2024–014 and should be
submitted on or before June 7, 2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–10817 Filed 5–16–24; 8:45 am]
BILLING CODE 8011–01–P
Self-Regulatory Organizations; Nasdaq
ISE, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend ISE Options 7
May 13, 2024.
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 May 7,
2024, Nasdaq ISE, LLC (‘‘ISE’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III, below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
ISE’s Pricing Schedule at Options 7.3
While the changes proposed herein
are effective upon filing, the Exchange
has designated the pricing changes
become operative on August 1, 2024,
with the exception of the Exposed Order
definition and Dedicated Gateway
amendments which would be effective
on September 1, 2024.
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.
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Exchange withdrew SR–ISE–2024–15 on
May 7, 2024 and submitted this filing.
2 17
3 The
18 17
CFR 200.30–3(a)(12).
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43455
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
ISE proposes to amend its Pricing
Schedule at Options 7. Specifically, ISE
proposes to: (1) add the defined term
‘‘Exposed Order’’ within Options 7,
Section 1(c); (2) amend Options 7,
Section 7.C to offer certain free ports in
connection with an upcoming
technology migration; 4 and (3) amend
Options 7, Section 8.C to discontinue
offering Dedicated Gateway access
services. Each change is described
below.
Options 7, Section 1
The Exchange proposes to define an
Exposed Order for purposes of pricing
within Options 7. The Exchange
introduced the concept of an
‘‘exposure’’ in a rule change amending
ISE’s routing rules.5 In that rule change,
the Exchange noted that for purposes of
ISE’s Options 5, Section 4 routing rule,
‘‘exposure’’ or ‘‘exposing’’ an order
means a notification sent to Members
with the price, size, and side of interest
that is available for execution.6 The
order exposure will apply to both routed
orders and non-routed or ‘‘DNR
Orders.’’ The order exposure process
permits the Exchange to apply a Route
Timer 7 prior to the initial and
subsequent routing of an order and
allows routing of the order after
exposure occurs (during open trading)
every time an order becomes marketable
against the ABBO.8
At this time, the Exchange proposes to
amend Options 7, Section 1(c) to
provide,
4 See Options Trader Alert #2024–5. The ISE
migration will commence on September 9, 2024.
5 See Securities Exchange Act Release No. 94897
(May 12, 2022), 87 FR 30294 (May 18, 2022) (SR–
ISE–2022–11) (Notice of Filing and Immediate
Effectiveness of Proposed Rule Change To Amend
Routing Functionality in Connection With a
Technology Migration). See also Securities
Exchange Act Release No. 97126 (March 13, 2023),
88 FR 16485 (March 17, 2023) (SR–ISE–2023–04)
(Notice of Filing and Immediate Effectiveness of
Proposed Rule Change To Delay the
Implementation of Certain Trading Functionality).
6 See ISE Options 5, Section 4(a) which is
effective but not yet operative. See supra note 4.
7 For purposes of Options 5, Section 4, a Route
Timer shall not exceed one second and shall begin
at the time orders are accepted into the System, and
the System will consider whether an order can be
routed at the conclusion of each Route Timer.
8 See supra note 4.
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Federal Register / Vol. 89, No. 97 / Friday, May 17, 2024 / Notices
An ‘‘Exposed Order’’ is an order that
is broadcast via an order exposure alert
as described within Options 5, Section
4 (Order Routing). Unless otherwise
noted in Options 7, Section 3 pricing,
Exposed Orders will be assessed the
applicable ‘‘Taker’’ Fee and any order or
quote that executes against an Exposed
Order during a Route Timer will be
paid/assessed the applicable ‘‘Maker’’
Rebate/Fee.
As proposed, the defined term would
apply a Taker Fee, where applicable, to
an executed Exposed Order. If an order
or quote allocates against the Exposed
Order during the Route Timer described
within Options 5, Section 4, the
Exchange would pay/assess the
applicable Maker Rebate or Maker Fee.
The Exchange believes that its proposal
should provide increased opportunities
for participation in executions on the
Exchange, facilitating the ability of the
Exchange to bring together participants
and encourage more robust competition
for orders.
Options 7, Section 6
In connection with a technology
migration,9 Members may request new
FIX Ports,10 SQF Ports,11 SQF Purge
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9 ISE
is migrating its technology to an enhanced
Nasdaq, Inc. functionality which results in higher
performance, scalability, and more robust
architecture.
10 ‘‘Financial Information eXchange’’ or ‘‘FIX’’ is
an interface that allows Members and their
Sponsored Customers to connect, send, and receive
messages related to orders and auction orders to the
Exchange. Features include the following: (1)
execution messages; (2) order messages; (3) risk
protection triggers and cancel notifications; and (4)
post trade allocation messages. See Supplementary
Material .03(a) to Options 3, Section 7.
11 ‘‘Specialized Quote Feed’’ or ‘‘SQF’’ is an
interface that allows Market Makers to connect,
send, and receive messages related to quotes,
Immediate-or-Cancel Orders, and auction responses
to the Exchange. Features include the following: (1)
options symbol directory messages (e.g., underlying
instruments); (2) System event messages (e.g., start
of trading hours messages and start of opening); (3)
trading action messages (e.g., halts and resumes); (4)
execution messages; (5) quote messages; (6)
Immediate-or-Cancel Order messages; (7) risk
protection triggers and purge notifications; (8)
opening imbalance messages; (9) auction
notifications; and (10) auction responses. The SQF
Purge Interface only receives and notifies of purge
requests from the Market Maker. Market Makers
may only enter interest into SQF in their assigned
options series. See Supplementary Material .03(c) to
Options 3, Section 7.
12 SQF Purge is a specific port for the SQF
interface that only receives and notifies of purge
requests from the Market Maker. Dedicated SQF
Purge Ports enable Market Makers to seamlessly
manage their ability to remove their quotes in a
swift manner.
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Ports,12 OTTO Ports,13 CTI Ports,14 and
FIX DROP Ports,15 at no additional cost,
from August 1, 2024 through October
31, 2024 (‘‘Transition Period’’) which
are duplicative of the type and quantity
of their legacy ports. These second set
of new ports would allow Members time
to test ports to the new environment as
well as provide continuous connection
to the Exchange’s match engine during
the Transition Period.16 During the
Transition Period, Members will be
required to utilize their new ports on
the new ISE platform for symbols that
have migrated to the new platform,
while continuing to leverage legacy
ports for symbols that have not yet
migrated to the new platform.17 For
example, an ISE Member with 3 legacy
SQF Ports, 1 legacy SQF Purge Port, 1
legacy FIX DROP Port, 1 legacy OTTO
Port, and 1 legacy CTI Port on August
1, 2024 could request the equivalent
quantity and type of new ports (3 SQF
Ports, 1 SQF Purge Port, 1 FIX DROP
Port, 1 OTTO Port, and 1 CTI Port) for
the new ISE environment during the
Transition Period at no additional cost.
During the Transition Period, the ISE
Member would be assessed only for
legacy ports and would not be assessed
13 ‘‘Ouch to Trade Options’’ or ‘‘OTTO’’ is an
interface that allows Members and their Sponsored
Customers to connect, send, and receive messages
related to orders, auction orders, and auction
responses to the Exchange. Features include the
following: (1) options symbol directory messages
(e.g., underlying instruments); (2) System event
messages (e.g., start of trading hours messages and
start of opening); (3) trading action messages (e.g.,
halts and resumes); (4) execution messages; (5)
order messages; (6) risk protection triggers and
cancel notifications; (7) auction notifications; (8)
auction responses; and (9) post trade allocation
messages. See Supplementary Material .03(b) to
Options 3, Section 7.
14 Clearing Trade Interface (‘‘CTI’’) is a real-time
cleared trade update message that is sent to a
Member after an execution has occurred and
contains trade details specific to that Member. The
information includes, among other things, the
following: (i) The Clearing Member Trade
Agreement (‘‘CMTA’’) or The Options Clearing
Corporation (‘‘OCC’’) number; (ii) badge or
mnemonic; (iii) account number; (iv) information
which identifies the transaction type (e.g. auction
type) for billing purposes; and (v) market
participant capacity. See Option 3, Section 23(b)(1).
15 FIX DROP is a real-time order and execution
update message that is sent to a Member after an
order been received/modified or an execution has
occurred and contains trade details specific to that
Member. The information includes, among other
things, the following: (i) executions; (ii)
cancellations; (iii) modifications to an existing
order; and (iv) busts or post-trade corrections. See
Options 3, Section 23(b)(3).
16 Members would contact Market Operations to
acquire new duplicative ports.
17 See Options Trader Alert #2024–5. The ISE
migration will commence on September 9, 2024 and
end on September 23, 2024.
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for the new ports, which are duplicative
of the legacy ports.
A Member may acquire additional
legacy ports during the Transition
Period and would be assessed the
charges indicated in the current Pricing
Schedule at Options 7, Section 7.C,
respectively, for those additional legacy
ports.
The technology migration does not
require a Member to acquire any
additional legacy ports or any specific
number of new ports, rather the
technology migration requires a new
port to connect to the new ISE
environment. As is the case today, a
Member may decide the number of ports
they desire to subscribe to on the new
technology platform.18
Of note, only ISE Members may
utilize ports on ISE and only one port
is necessary to submit orders to ISE.
Similarly, a Market Maker quoting on
ISE only requires 1 SQF Port.19 A
Member may also obtain any number of
order and execution ports, such as a
SQF Purge Ports, FIX DROP Ports and
CTI Ports and any number of market
data ports.20 Members are able to elect
the quantity and type of ports they
purchase based on that Member’s
business model.21
This proposal is not intended to
impose any additional fees on any ISE
Member. Rather, this proposal is
intended to permit an ISE Member to
utilize the new environment with the
same type and quantity of legacy ports,
at no additional cost, during the
Transition Period.
Starting November 1, 2024, the port
fees in Options 7, Section 7.C would
apply to any substituted ports that a
Member continues to subscribe to after
the Transition Period. ISE will sunset
legacy FIX Ports, SQF Ports, SQF Purge
Ports, OTTO Ports, CTI Ports and FIX
DROP Ports on December 20, 2024.
Options 7, Section 8
Today, ISE offers Market Makers the
ability to access the Exchange through a
18 The technology migration is 1:1 and therefore
would not require a Member to acquire an
additional quantity of new ports, nor would it
reduce the total number of ports needed to connect
to the match engine.
19 SQF Ports are utilized solely by Market Makers
who are the only Members permitted to quote on
ISE.
20 ISE does not assess fees for the market data
ports within Options 7, Section 7.C(iii). Members
may acquire any number of market data ports at no
cost.
21 For example, a Member may desire to utilize
multiple FIX or OTTO Ports for accounting
purposes, to measure performance, for regulatory
reasons or other determinations that are specific to
that Member.
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Dedicated Gateway. Only Market
Makers that utilize SQF ports have the
option of utilizing this dedicated
offering. Today, all other ports, namely
FIX, OTTO and Precise, are subject to
shared access through a Shared
Gateway, at no cost, while an SQF port
has the options of shared access, at no
cost, or dedicated access. Today, ISE
charges a fee of $2,250 per SQF gateway,
per month, for dedicated access.
At this time, ISE proposes to
discontinue Dedicated Gateway access
for SQF Ports as of September 1, 2024.
Similar to FIX, OTTO and Precise, SQF
Ports will have shared access through a
Shared Gateway at no cost.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,22 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,23 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’. . . .’’ 24
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
22 See
15 U.S.C. 78f(b).
15 U.S.C. 78f(b)(4) and (5).
24 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)).
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.’’ 25
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.
that executes against an Exposed Order
during a Route Timer because the
Exposed Order that would route to an
away market if not otherwise executed
on ISE would be taking liquidity from
the Exchange’s order book while a quote
or order that executes against the
Exposed Order during the Route Timer
would be considered making liquidity
in response to the notification sent to
Members indicating the order is
available for execution. Nasdaq MRX,
LLC (‘‘MRX’’) and Nasdaq GEMX, LLC
(‘‘GEMX’’) similarly assess a Taker Fee
to an exposed order and pay/assess a
Maker Rebate/Fee to any order or quote
that executes against the exposed order
during the Route Timer.27
The Exchange’s proposal to define an
Exposed Order for purposes of pricing
within Options 7, Section 1(c) is
equitable and not unfairly
discriminatory as the proposed pricing
for Exposed Orders would be uniformly
applied to all orders subject to the
Exchange’s Route Timer, as described in
Options 5, Section 4.
Options 7, Section 1
The Exchange’s proposal to define an
Exposed Order for purposes of pricing
within Options 7, Section 1(c) is
reasonable because it will provide
Members information as to the manner
in which pricing will be applied to both
the Exposed Order as well as an order
or quote that allocates against the
Exposed Order.26 As proposed, the
applicable Taker Fee would apply to an
executed Exposed Order and the
applicable Maker Rebate or Maker Fee
would apply to an order or quote that
allocated against the Exposed Order
during the Route Timer. The Exchange
believes the proposed pricing should
provide increased opportunities for
participation in executions on the
Exchange, facilitating the ability of the
Exchange to bring together participants
and encourage more robust competition
for orders. Order exposure has the
potential to result in more efficient
executions for participants as responses
to exposed orders could result in faster
executions. Order exposure assures that
such exposed orders will only receive
executions at a price at least as good as
the price disseminated by the best away
market at the time the order was
received. Further, the Exchange believes
that it is reasonable, equitable and not
unfairly discriminatory to apply the
Taker Fee to Exposed Orders and the
Maker Rebate/Fee to any order or quote
Options 7, Section 6
The proposed amendments to Options
7, Section 7.C to permit Members to
acquire a second set of FIX Ports, SQF
Ports, SQF Purge Ports, OTTO Ports, CTI
Ports and FIX DROP Ports, at no cost, as
part of the technology migration are
reasonable because they will permit ISE
Members to migrate to the new platform
without a pricing impact. Specifically,
the proposal is intended to permit ISE
Members to migrate their legacy FIX
Ports, SQF Ports, SQF Purge Ports,
OTTO Ports, CTI Ports and FIX DROP
Ports to new ports at no additional cost
during the Transition Period. This
proposal will allow Members to test
their ports and maintain continuous
connection to the Exchange’s match
engine during the Transition Period.
The proposed amendments to Options
7, Section 7.C to permit Members to
acquire a second set of FIX Ports, SQF
Ports, SQF Purge Ports, OTTO Ports, CTI
Ports and FIX DROP Ports, at no cost, as
part of the technology migration are
equitable and not unfairly
discriminatory because no Member
would have a pricing impact as a result
of this proposal, provided the Member
did not obtain additional new ports to
connect to the ISE environment beyond
the quantity and type the Member had
on August 1, 2024 or additional legacy
ports. No Member would be assessed a
fee for the new second set of ports,
provided they acquired a new second
set of ports commiserate with the type
and quantity of ports they subscribed to
23 See
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25 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
26 See Option 5, Section 4.
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27 See
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Federal Register / Vol. 89, No. 97 / Friday, May 17, 2024 / Notices
as of August 1, 2024. A Member
obtaining additional legacy ports,
beyond the current type and quantity of
ports they have as of August 1, 2024,
would be assessed the fees noted in
Options 7, Section 7.C as applicable. ISE
will sunset legacy FIX Ports, SQF Ports,
SQF Purge Ports, OTTO Ports, CTI Ports
and FIX DROP Ports on December 20,
2024 for all Members. Starting
November 1, 2024, the port fees in
Options 7, Section 7.C would apply to
any substituted ports that a Member
continues to subscribe to after the
Transition Period.
The technology migration does not
require a Member to acquire any
additional quantity of new ports, nor
would it reduce the total number of
ports needed to connect to the match
engine. Rather the technology migration
requires a new port to replace any
legacy port provided the Member
desired to maintain the same number of
ports on the new ISE technology
platform. Of note, only ISE Members
may utilize ports on ISE and only one
port is necessary to submit orders to
ISE. Similarly, a Market Maker quoting
on ISE only requires 1 SQF Port.28 A
Member may also obtain any number of
order and execution ports, such as a
SQF Purge Ports, FIX DROP Ports and
CTI Ports and any number of market
data ports.29 Members are able to elect
the quantity and type of ports they
purchase based on that Member’s
business model.30
Options 7, Section 8
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The Exchange’s proposal to
discontinue Dedicated Access for SQF
Ports as of September 1, 2024 is
reasonable as all ports (FIX, OTTO,
Precise, SQF Ports) would utilize a
shared gateway to access the Exchange.
There is no cost to utilize the Shared
Gateway on ISE. The Exchange notes
that GEMX and MRX do not offer
Shared Gateways, rather they utilize
shared access to all Members for all
ports.
The Exchange’s proposal to
discontinue Dedicated Access for SQF
Ports as of September 1, 2024 is
equitable and not unfairly
discriminatory as all access to the
28 SQF Ports are utilized solely by Market Makers
who are the only Members permitted to quote on
ISE.
29 ISE does not assess fees for the market data
ports within Options 7, Section 7.C(iii). Members
may acquire any number of market data ports at no
cost.
30 For example, a Member may desire to utilize
multiple FIX or OTTO Ports for accounting
purposes, to measure performance, for regulatory
reasons or other determinations that are specific to
that Member.
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Exchange for all Members, for all ports
will be at no cost through shared access.
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.
Intermarket Competition
The Exchange believes its proposal
remains competitive with other options
markets, and will offer market
participants with another choice of
venue to transact options. 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. 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.
Intramarket Competition
Options 7, Section 1
The Exchange’s proposal to define an
Exposed Order for purposes of pricing
within Options 7, Section 1(c) does not
impose an undue burden on
competition because the proposed
pricing for Exposed Orders would be
uniformly applied to all orders subject
to the Exchange’s Route Timer, as
described in Options 4, Section 5.
Options 7, Section 6
The proposed amendments to Options
7, Section 7.C to permit Members to
acquire a second set of FIX Ports, SQF
Ports, SQF Purge Ports, OTTO Ports, CTI
Ports and FIX DROP Ports, at no cost, as
part of the technology migration do not
impose an undue burden on
competition because no Member would
have a pricing impact as a result of this
proposal, provided the Member did not
obtain additional new ports to connect
to the ISE environment beyond the
quantity and type the Member had on
August 1, 2024 or additional legacy
ports. No Member would be assessed a
fee for the new second set of ports,
provided they acquired a new second
set of ports commiserate with the type
and quantity of ports they subscribed to
as of August 1, 2024. A Member
obtaining additional legacy ports,
beyond the current type and quantity of
ports they have as of August 1, 2024,
PO 00000
Frm 00089
Fmt 4703
Sfmt 4703
would be assessed the fees noted in
Options 7, Section 7.C as applicable. ISE
will sunset legacy FIX Ports, SQF Ports,
SQF Purge Ports, OTTO Ports, CTI Ports
and FIX DROP Ports on December 20,
2024 for all Members. Starting on
November 1, 2024 the port fees in
Options 7, Section 7.C would apply to
any substituted ports that a Member
continues to subscribe to after the
Transition Period.
Options 7, Section 8
The Exchange’s proposal to
discontinue Dedicated Access for SQF
Ports as of September 1, 2024 does not
impose an undue burden on
competition as all access to the
Exchange for all Members, for all ports
will be at no cost through shared access.
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.31 At any time
within 60 days of the filing of the
proposed rule change, the Commission
summarily may temporarily suspend
such rule change if it appears to the
Commission that such action is: (i)
necessary or appropriate in the public
interest; (ii) for the protection of
investors; or (iii) otherwise in
furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include file number SR–
ISE–2024–18 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
31 15
E:\FR\FM\17MYN1.SGM
U.S.C. 78s(b)(3)(A)(ii).
17MYN1
Federal Register / Vol. 89, No. 97 / Friday, May 17, 2024 / Notices
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to file
number SR–ISE–2024–18. 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–2024–18 and should be
submitted on or before June 7, 2024.
For the Commission, by the Division
of Trading and Markets, pursuant to
delegated authority.32
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–10818 Filed 5–16–24; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
khammond on DSKJM1Z7X2PROD with NOTICES
[Release No. 34–100121; File No. SR–MRX–
2024–10]
Self-Regulatory Organizations; Nasdaq
MRX, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Its Fees for
Connectivity and Co-Location Services
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
The Exchange proposes to amend the
Exchange’s fees for connectivity and colocation services, as described further
below.
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/mrx/rules, at the principal
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
The purpose of the proposed rule
change is to amend the Exchange’s fees
relating to connectivity and co-location
services.3 Specifically, the Exchange
proposes to raise its fees for
connectivity and co-location services in
General 8 as well as certain fees related
to its Testing Facilities in Options 7,
Section 7 by 5.5%, with certain
exceptions.
General 8, Section 1 includes the
Exchange’s fees that relate to
1 15
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
32 17
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
1. Purpose
BILLING CODE 8011–01–P
May 13, 2024.
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on April 29,
2024, Nasdaq MRX, LLC (‘‘MRX’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
17:20 May 16, 2024
Jkt 262001
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 The Exchange initially filed the proposed
pricing change on March 1, 2024 (SR–MRX–2024–
04). The instant filing replaces SR–MRX–2024–04,
which was withdrawn on April 29, 2024.
2 17
PO 00000
Frm 00090
Fmt 4703
Sfmt 4703
43459
connectivity, including fees for cabinets,
external telco/inter-cabinet connectivity
fees, fees for connectivity to the
Exchange, fees for connectivity to third
party services, fees for market data
connectivity, fees for cabinet power
install, and fees for additional charges
and services. General 8, Section 2
includes the Exchange’s fees for direct
connectivity services, including fees for
direct circuit connection to the
Exchange, fees for direct circuit
connection to third party services, and
fees for point of presence connectivity.
With the exception of the Exchange’s
GPS Antenna fees and the Cabinet
Proximity Option Fee for cabinets with
power density >10kW,4 the Exchange
proposes to increase its fees throughout
General 8 by 5.5%.
In addition to increasing fees in
General 8, the Exchange also proposes
to increase certain fees in Options 7,
Section 7, which relate to the Testing
Facility. Options 7, Section 7 provides
that subscribers to the Testing Facility
located in Carteret, New Jersey shall pay
a fee of $1,000 per hand-off, per month
for connection to the Testing Facility.
The hand-off fee includes either a 1Gb
or 10Gb switch port and a cross connect
to the Testing Facility. In addition,
Options 7, Section 7 provides that
subscribers shall also pay a one-time
installation fee of $1,000 per hand-off.
The Exchange proposes to increase
these aforementioned fees by 5.5% to
require that subscribers to the Testing
Facility shall pay a fee of $1,055 per
hand-off, per month for connection to
the Testing Facility and a one-time
installation fee of $1,055 per hand-off.
The proposed increases in fees would
enable the Exchange to maintain and
improve its market technology and
services. The Exchange has not
increased any of the fees included in the
proposal since 2017.5 However, since
2017, there has been notable inflation.
Between 2017 and 2024, the dollar had
an average inflation rate of 3.34% per
year, producing a cumulative price
4 The Exchange proposes to exclude the GPS
Antenna fees from the proposed fee increase
because, unlike the other fees in General 8, the
Exchange recently increased its GPS Antenna fees.
See Securities Exchange Act Release No. 34–99130
(December 11, 2023), 88 FR 87009 (December 15,
2023) (SR–MRX–2023–24). The Exchange also
proposes to exclude the Cabinet Proximity Option
Fee for cabinets with power density >10kW from
the proposed fee increase because the Exchange
recently established such fee. See Securities
Exchange Act Release No. 34–99798 (March 20,
2024), 89 FR 21126 (March 26, 2024) (SR–MRX–
2024–09).
5 See Securities Exchange Act Release No. 34–
81907 (October 19, 2017), 82 FR 49447 (October 25,
2017) (SRMRX–2017–21).
E:\FR\FM\17MYN1.SGM
17MYN1
]]>Agencies
[Federal Register Volume 89, Number 97 (Friday, May 17, 2024)]
[Notices]
[Pages 43455-43459]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-10818]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100123; File No. SR-ISE-2024-18]
Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend ISE
Options 7
May 13, 2024.
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 May 7, 2024, Nasdaq ISE, LLC (``ISE'' or ``Exchange'') filed with
the Securities and Exchange Commission (``SEC'' or ``Commission'') the
proposed rule change as described in Items I, II, and III, below, which
Items have been prepared by the Exchange. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend ISE's Pricing Schedule at Options
7.\3\
---------------------------------------------------------------------------
\3\ The Exchange withdrew SR-ISE-2024-15 on May 7, 2024 and
submitted this filing.
---------------------------------------------------------------------------
While the changes proposed herein are effective upon filing, the
Exchange has designated the pricing changes become operative on August
1, 2024, with the exception of the Exposed Order definition and
Dedicated Gateway amendments which would be effective on September 1,
2024.
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
ISE proposes to amend its Pricing Schedule at Options 7.
Specifically, ISE proposes to: (1) add the defined term ``Exposed
Order'' within Options 7, Section 1(c); (2) amend Options 7, Section
7.C to offer certain free ports in connection with an upcoming
technology migration; \4\ and (3) amend Options 7, Section 8.C to
discontinue offering Dedicated Gateway access services. Each change is
described below.
---------------------------------------------------------------------------
\4\ See Options Trader Alert #2024-5. The ISE migration will
commence on September 9, 2024.
---------------------------------------------------------------------------
Options 7, Section 1
The Exchange proposes to define an Exposed Order for purposes of
pricing within Options 7. The Exchange introduced the concept of an
``exposure'' in a rule change amending ISE's routing rules.\5\ In that
rule change, the Exchange noted that for purposes of ISE's Options 5,
Section 4 routing rule, ``exposure'' or ``exposing'' an order means a
notification sent to Members with the price, size, and side of interest
that is available for execution.\6\ The order exposure will apply to
both routed orders and non-routed or ``DNR Orders.'' The order exposure
process permits the Exchange to apply a Route Timer \7\ prior to the
initial and subsequent routing of an order and allows routing of the
order after exposure occurs (during open trading) every time an order
becomes marketable against the ABBO.\8\
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 94897 (May 12,
2022), 87 FR 30294 (May 18, 2022) (SR-ISE-2022-11) (Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Routing
Functionality in Connection With a Technology Migration). See also
Securities Exchange Act Release No. 97126 (March 13, 2023), 88 FR
16485 (March 17, 2023) (SR-ISE-2023-04) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change To Delay the
Implementation of Certain Trading Functionality).
\6\ See ISE Options 5, Section 4(a) which is effective but not
yet operative. See supra note 4.
\7\ For purposes of Options 5, Section 4, a Route Timer shall
not exceed one second and shall begin at the time orders are
accepted into the System, and the System will consider whether an
order can be routed at the conclusion of each Route Timer.
\8\ See supra note 4.
---------------------------------------------------------------------------
At this time, the Exchange proposes to amend Options 7, Section
1(c) to provide,
[[Page 43456]]
An ``Exposed Order'' is an order that is broadcast via an order
exposure alert as described within Options 5, Section 4 (Order
Routing). Unless otherwise noted in Options 7, Section 3 pricing,
Exposed Orders will be assessed the applicable ``Taker'' Fee and any
order or quote that executes against an Exposed Order during a Route
Timer will be paid/assessed the applicable ``Maker'' Rebate/Fee.
As proposed, the defined term would apply a Taker Fee, where
applicable, to an executed Exposed Order. If an order or quote
allocates against the Exposed Order during the Route Timer described
within Options 5, Section 4, the Exchange would pay/assess the
applicable Maker Rebate or Maker Fee. The Exchange believes that its
proposal should provide increased opportunities for participation in
executions on the Exchange, facilitating the ability of the Exchange to
bring together participants and encourage more robust competition for
orders.
Options 7, Section 6
In connection with a technology migration,\9\ Members may request
new FIX Ports,\10\ SQF Ports,\11\ SQF Purge Ports,\12\ OTTO Ports,\13\
CTI Ports,\14\ and FIX DROP Ports,\15\ at no additional cost, from
August 1, 2024 through October 31, 2024 (``Transition Period'') which
are duplicative of the type and quantity of their legacy ports. These
second set of new ports would allow Members time to test ports to the
new environment as well as provide continuous connection to the
Exchange's match engine during the Transition Period.\16\ During the
Transition Period, Members will be required to utilize their new ports
on the new ISE platform for symbols that have migrated to the new
platform, while continuing to leverage legacy ports for symbols that
have not yet migrated to the new platform.\17\ For example, an ISE
Member with 3 legacy SQF Ports, 1 legacy SQF Purge Port, 1 legacy FIX
DROP Port, 1 legacy OTTO Port, and 1 legacy CTI Port on August 1, 2024
could request the equivalent quantity and type of new ports (3 SQF
Ports, 1 SQF Purge Port, 1 FIX DROP Port, 1 OTTO Port, and 1 CTI Port)
for the new ISE environment during the Transition Period at no
additional cost. During the Transition Period, the ISE Member would be
assessed only for legacy ports and would not be assessed for the new
ports, which are duplicative of the legacy ports.
---------------------------------------------------------------------------
\9\ ISE is migrating its technology to an enhanced Nasdaq, Inc.
functionality which results in higher performance, scalability, and
more robust architecture.
\10\ ``Financial Information eXchange'' or ``FIX'' is an
interface that allows Members and their Sponsored Customers to
connect, send, and receive messages related to orders and auction
orders to the Exchange. Features include the following: (1)
execution messages; (2) order messages; (3) risk protection triggers
and cancel notifications; and (4) post trade allocation messages.
See Supplementary Material .03(a) to Options 3, Section 7.
\11\ ``Specialized Quote Feed'' or ``SQF'' is an interface that
allows Market Makers to connect, send, and receive messages related
to quotes, Immediate-or-Cancel Orders, and auction responses to the
Exchange. Features include the following: (1) options symbol
directory messages (e.g., underlying instruments); (2) System event
messages (e.g., start of trading hours messages and start of
opening); (3) trading action messages (e.g., halts and resumes); (4)
execution messages; (5) quote messages; (6) Immediate-or-Cancel
Order messages; (7) risk protection triggers and purge
notifications; (8) opening imbalance messages; (9) auction
notifications; and (10) auction responses. The SQF Purge Interface
only receives and notifies of purge requests from the Market Maker.
Market Makers may only enter interest into SQF in their assigned
options series. See Supplementary Material .03(c) to Options 3,
Section 7.
\12\ SQF Purge is a specific port for the SQF interface that
only receives and notifies of purge requests from the Market Maker.
Dedicated SQF Purge Ports enable Market Makers to seamlessly manage
their ability to remove their quotes in a swift manner.
\13\ ``Ouch to Trade Options'' or ``OTTO'' is an interface that
allows Members and their Sponsored Customers to connect, send, and
receive messages related to orders, auction orders, and auction
responses to the Exchange. Features include the following: (1)
options symbol directory messages (e.g., underlying instruments);
(2) System event messages (e.g., start of trading hours messages and
start of opening); (3) trading action messages (e.g., halts and
resumes); (4) execution messages; (5) order messages; (6) risk
protection triggers and cancel notifications; (7) auction
notifications; (8) auction responses; and (9) post trade allocation
messages. See Supplementary Material .03(b) to Options 3, Section 7.
\14\ Clearing Trade Interface (``CTI'') is a real-time cleared
trade update message that is sent to a Member after an execution has
occurred and contains trade details specific to that Member. The
information includes, among other things, the following: (i) The
Clearing Member Trade Agreement (``CMTA'') or The Options Clearing
Corporation (``OCC'') number; (ii) badge or mnemonic; (iii) account
number; (iv) information which identifies the transaction type (e.g.
auction type) for billing purposes; and (v) market participant
capacity. See Option 3, Section 23(b)(1).
\15\ FIX DROP is a real-time order and execution update message
that is sent to a Member after an order been received/modified or an
execution has occurred and contains trade details specific to that
Member. The information includes, among other things, the following:
(i) executions; (ii) cancellations; (iii) modifications to an
existing order; and (iv) busts or post-trade corrections. See
Options 3, Section 23(b)(3).
\16\ Members would contact Market Operations to acquire new
duplicative ports.
\17\ See Options Trader Alert #2024-5. The ISE migration will
commence on September 9, 2024 and end on September 23, 2024.
---------------------------------------------------------------------------
A Member may acquire additional legacy ports during the Transition
Period and would be assessed the charges indicated in the current
Pricing Schedule at Options 7, Section 7.C, respectively, for those
additional legacy ports.
The technology migration does not require a Member to acquire any
additional legacy ports or any specific number of new ports, rather the
technology migration requires a new port to connect to the new ISE
environment. As is the case today, a Member may decide the number of
ports they desire to subscribe to on the new technology platform.\18\
---------------------------------------------------------------------------
\18\ The technology migration is 1:1 and therefore would not
require a Member to acquire an additional quantity of new ports, nor
would it reduce the total number of ports needed to connect to the
match engine.
---------------------------------------------------------------------------
Of note, only ISE Members may utilize ports on ISE and only one
port is necessary to submit orders to ISE. Similarly, a Market Maker
quoting on ISE only requires 1 SQF Port.\19\ A Member may also obtain
any number of order and execution ports, such as a SQF Purge Ports, FIX
DROP Ports and CTI Ports and any number of market data ports.\20\
Members are able to elect the quantity and type of ports they purchase
based on that Member's business model.\21\
---------------------------------------------------------------------------
\19\ SQF Ports are utilized solely by Market Makers who are the
only Members permitted to quote on ISE.
\20\ ISE does not assess fees for the market data ports within
Options 7, Section 7.C(iii). Members may acquire any number of
market data ports at no cost.
\21\ For example, a Member may desire to utilize multiple FIX or
OTTO Ports for accounting purposes, to measure performance, for
regulatory reasons or other determinations that are specific to that
Member.
---------------------------------------------------------------------------
This proposal is not intended to impose any additional fees on any
ISE Member. Rather, this proposal is intended to permit an ISE Member
to utilize the new environment with the same type and quantity of
legacy ports, at no additional cost, during the Transition Period.
Starting November 1, 2024, the port fees in Options 7, Section 7.C
would apply to any substituted ports that a Member continues to
subscribe to after the Transition Period. ISE will sunset legacy FIX
Ports, SQF Ports, SQF Purge Ports, OTTO Ports, CTI Ports and FIX DROP
Ports on December 20, 2024.
Options 7, Section 8
Today, ISE offers Market Makers the ability to access the Exchange
through a
[[Page 43457]]
Dedicated Gateway. Only Market Makers that utilize SQF ports have the
option of utilizing this dedicated offering. Today, all other ports,
namely FIX, OTTO and Precise, are subject to shared access through a
Shared Gateway, at no cost, while an SQF port has the options of shared
access, at no cost, or dedicated access. Today, ISE charges a fee of
$2,250 per SQF gateway, per month, for dedicated access.
At this time, ISE proposes to discontinue Dedicated Gateway access
for SQF Ports as of September 1, 2024. Similar to FIX, OTTO and
Precise, SQF Ports will have shared access through a Shared Gateway at
no cost.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\22\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\23\ 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.
---------------------------------------------------------------------------
\22\ See 15 U.S.C. 78f(b).
\23\ See 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'. . . .'' \24\
---------------------------------------------------------------------------
\24\ 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.'' \25\
---------------------------------------------------------------------------
\25\ 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.
Options 7, Section 1
The Exchange's proposal to define an Exposed Order for purposes of
pricing within Options 7, Section 1(c) is reasonable because it will
provide Members information as to the manner in which pricing will be
applied to both the Exposed Order as well as an order or quote that
allocates against the Exposed Order.\26\ As proposed, the applicable
Taker Fee would apply to an executed Exposed Order and the applicable
Maker Rebate or Maker Fee would apply to an order or quote that
allocated against the Exposed Order during the Route Timer. The
Exchange believes the proposed pricing should provide increased
opportunities for participation in executions on the Exchange,
facilitating the ability of the Exchange to bring together participants
and encourage more robust competition for orders. Order exposure has
the potential to result in more efficient executions for participants
as responses to exposed orders could result in faster executions. Order
exposure assures that such exposed orders will only receive executions
at a price at least as good as the price disseminated by the best away
market at the time the order was received. Further, the Exchange
believes that it is reasonable, equitable and not unfairly
discriminatory to apply the Taker Fee to Exposed Orders and the Maker
Rebate/Fee to any order or quote that executes against an Exposed Order
during a Route Timer because the Exposed Order that would route to an
away market if not otherwise executed on ISE would be taking liquidity
from the Exchange's order book while a quote or order that executes
against the Exposed Order during the Route Timer would be considered
making liquidity in response to the notification sent to Members
indicating the order is available for execution. Nasdaq MRX, LLC
(``MRX'') and Nasdaq GEMX, LLC (``GEMX'') similarly assess a Taker Fee
to an exposed order and pay/assess a Maker Rebate/Fee to any order or
quote that executes against the exposed order during the Route
Timer.\27\
---------------------------------------------------------------------------
\26\ See Option 5, Section 4.
\27\ See MRX and GEMX Options 7, Section 1(c).
---------------------------------------------------------------------------
The Exchange's proposal to define an Exposed Order for purposes of
pricing within Options 7, Section 1(c) is equitable and not unfairly
discriminatory as the proposed pricing for Exposed Orders would be
uniformly applied to all orders subject to the Exchange's Route Timer,
as described in Options 5, Section 4.
Options 7, Section 6
The proposed amendments to Options 7, Section 7.C to permit Members
to acquire a second set of FIX Ports, SQF Ports, SQF Purge Ports, OTTO
Ports, CTI Ports and FIX DROP Ports, at no cost, as part of the
technology migration are reasonable because they will permit ISE
Members to migrate to the new platform without a pricing impact.
Specifically, the proposal is intended to permit ISE Members to migrate
their legacy FIX Ports, SQF Ports, SQF Purge Ports, OTTO Ports, CTI
Ports and FIX DROP Ports to new ports at no additional cost during the
Transition Period. This proposal will allow Members to test their ports
and maintain continuous connection to the Exchange's match engine
during the Transition Period.
The proposed amendments to Options 7, Section 7.C to permit Members
to acquire a second set of FIX Ports, SQF Ports, SQF Purge Ports, OTTO
Ports, CTI Ports and FIX DROP Ports, at no cost, as part of the
technology migration are equitable and not unfairly discriminatory
because no Member would have a pricing impact as a result of this
proposal, provided the Member did not obtain additional new ports to
connect to the ISE environment beyond the quantity and type the Member
had on August 1, 2024 or additional legacy ports. No Member would be
assessed a fee for the new second set of ports, provided they acquired
a new second set of ports commiserate with the type and quantity of
ports they subscribed to
[[Page 43458]]
as of August 1, 2024. A Member obtaining additional legacy ports,
beyond the current type and quantity of ports they have as of August 1,
2024, would be assessed the fees noted in Options 7, Section 7.C as
applicable. ISE will sunset legacy FIX Ports, SQF Ports, SQF Purge
Ports, OTTO Ports, CTI Ports and FIX DROP Ports on December 20, 2024
for all Members. Starting November 1, 2024, the port fees in Options 7,
Section 7.C would apply to any substituted ports that a Member
continues to subscribe to after the Transition Period.
The technology migration does not require a Member to acquire any
additional quantity of new ports, nor would it reduce the total number
of ports needed to connect to the match engine. Rather the technology
migration requires a new port to replace any legacy port provided the
Member desired to maintain the same number of ports on the new ISE
technology platform. Of note, only ISE Members may utilize ports on ISE
and only one port is necessary to submit orders to ISE. Similarly, a
Market Maker quoting on ISE only requires 1 SQF Port.\28\ A Member may
also obtain any number of order and execution ports, such as a SQF
Purge Ports, FIX DROP Ports and CTI Ports and any number of market data
ports.\29\ Members are able to elect the quantity and type of ports
they purchase based on that Member's business model.\30\
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\28\ SQF Ports are utilized solely by Market Makers who are the
only Members permitted to quote on ISE.
\29\ ISE does not assess fees for the market data ports within
Options 7, Section 7.C(iii). Members may acquire any number of
market data ports at no cost.
\30\ For example, a Member may desire to utilize multiple FIX or
OTTO Ports for accounting purposes, to measure performance, for
regulatory reasons or other determinations that are specific to that
Member.
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Options 7, Section 8
The Exchange's proposal to discontinue Dedicated Access for SQF
Ports as of September 1, 2024 is reasonable as all ports (FIX, OTTO,
Precise, SQF Ports) would utilize a shared gateway to access the
Exchange. There is no cost to utilize the Shared Gateway on ISE. The
Exchange notes that GEMX and MRX do not offer Shared Gateways, rather
they utilize shared access to all Members for all ports.
The Exchange's proposal to discontinue Dedicated Access for SQF
Ports as of September 1, 2024 is equitable and not unfairly
discriminatory as all access to the Exchange for all Members, for all
ports will be at no cost through shared access.
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.
Intermarket Competition
The Exchange believes its proposal remains competitive with other
options markets, and will offer market participants with another choice
of venue to transact options. 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. 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.
Intramarket Competition
Options 7, Section 1
The Exchange's proposal to define an Exposed Order for purposes of
pricing within Options 7, Section 1(c) does not impose an undue burden
on competition because the proposed pricing for Exposed Orders would be
uniformly applied to all orders subject to the Exchange's Route Timer,
as described in Options 4, Section 5.
Options 7, Section 6
The proposed amendments to Options 7, Section 7.C to permit Members
to acquire a second set of FIX Ports, SQF Ports, SQF Purge Ports, OTTO
Ports, CTI Ports and FIX DROP Ports, at no cost, as part of the
technology migration do not impose an undue burden on competition
because no Member would have a pricing impact as a result of this
proposal, provided the Member did not obtain additional new ports to
connect to the ISE environment beyond the quantity and type the Member
had on August 1, 2024 or additional legacy ports. No Member would be
assessed a fee for the new second set of ports, provided they acquired
a new second set of ports commiserate with the type and quantity of
ports they subscribed to as of August 1, 2024. A Member obtaining
additional legacy ports, beyond the current type and quantity of ports
they have as of August 1, 2024, would be assessed the fees noted in
Options 7, Section 7.C as applicable. ISE will sunset legacy FIX Ports,
SQF Ports, SQF Purge Ports, OTTO Ports, CTI Ports and FIX DROP Ports on
December 20, 2024 for all Members. Starting on November 1, 2024 the
port fees in Options 7, Section 7.C would apply to any substituted
ports that a Member continues to subscribe to after the Transition
Period.
Options 7, Section 8
The Exchange's proposal to discontinue Dedicated Access for SQF
Ports as of September 1, 2024 does not impose an undue burden on
competition as all access to the Exchange for all Members, for all
ports will be at no cost through shared access.
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.\31\ 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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\31\ 15 U.S.C. 78s(b)(3)(A)(ii).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-ISE-2024-18 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange
[[Page 43459]]
Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-ISE-2024-18. 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-2024-18 and should be
submitted on or before June 7, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\32\
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\32\ 17 CFR 200.30-3(a)(12).
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-10818 Filed 5-16-24; 8:45 am]
BILLING CODE 8011-01-P
