Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Options 7, Section 3, 68007-68009 [2024-18786]
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Federal Register / Vol. 89, No. 163 / Thursday, August 22, 2024 / Notices
ddrumheller on DSK120RN23PROD with NOTICES1
The Exchange believes the proposed
MPID fee structure, including waiver of
the MPID fees, will not result in any
burden on intra-market competition that
is not necessary or appropriate in
furtherance of the purposes of the Act
because there will be no cost for
Members to utilize MPIDs across their
firm and business lines. The Exchange
believes waiving such fees will not
impose any burden on intra-market
competition because this will provide
an incentive for market participants to
register and become Members of the
Exchange prior to launch. This in turn
should provide the Exchange with
potential order flow and liquidity
providers as it begins operations, which
may benefit all market participants of
the Exchange.
The Exchange believes the proposed
technical support request fee will not
result in any burden on intra-market
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act because it will be
assessed equally to all Members and
non-Members who request technical
support at the proposed hourly rate.
Furthermore, Members and nonMembers are not required to use the
service; instead, the Exchange proposes
to offer this services as a convenience to
all Members and non-Members. The
Exchange believes the proposed fee will
not impose any burden on intra-market
competition because it will permit both
Members and non-Members to request
the use of the Exchange’s on-site data
center personnel as technical support
and as a convenience in order to test or
otherwise assess the user’s connectivity
to the Exchange via its data centers. The
proposed fee is within the range of the
fee charged by the Exchange’s affiliated
markets for the same service.21
Inter-Market Competition
The Exchange believes that the
proposed changes will not result in any
burden on inter-market competition that
is not necessary or appropriate in
furtherance of the purposes of the Act.
As discussed above, market participants
are not forced to connect to and trade
on all exchanges. The Exchange believes
that the proposed pass-through of
external connectivity fees, MPID fee
structure, and technical support request
fee will not cause any burden on intermarket competition because none of
connectivity fees to Participants and nonParticipants that are assessed to BOX by these thirdparty external vendors on behalf of a Participant or
non-Participant. Connectivity fees can include onetime set-up fees, monthly charges, and other fees
charged by the third-party vendor in exchange for
the services provided to the market participant.’’).
21 See supra note 12.
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these changes impact other exchanges’
ability to compete.
Accordingly, the Exchange does not
believe its proposed fee changes impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor 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,22 and Rule
19b–4(f)(2) 23 thereunder. At any time
within 60 days of the filing of the
proposed rule change, the Commission
summarily may temporarily suspend
such rule change if it appears to the
Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act. If the Commission
takes such action, the Commission 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–
SAPPHIRE–2024–16 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–SAPPHIRE–2024–16. 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–SAPPHIRE–2024–16 and should be
submitted on or before September 12,
2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024–18789 Filed 8–21–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–100753; File No. SR–ISE–
2024–38]
Self-Regulatory Organizations; Nasdaq
ISE, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Options 7,
Section 3
August 16, 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 August 9,
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
24 17
22 15
U.S.C. 78s(b)(3)(A)(ii).
23 17 CFR 240.19b–4(f)(2).
PO 00000
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68007
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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68008
Federal Register / Vol. 89, No. 163 / Thursday, August 22, 2024 / Notices
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
Exchange’s Pricing Schedule at Options
7.3
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
ddrumheller on DSK120RN23PROD with NOTICES1
1. Purpose
ISE proposes to amend the Exchange’s
Pricing Schedule at Options 7, Section
3, Regular Order Fees and Rebates, to
increase the Priority Customer 4 Select
Symbol Taker Fee from $0.37 to $0.39
per contract.
Today, the Exchange assesses a Select
Symbol Maker Fee of $0.18 per contract
in regular orders to all Non-Priority
Customers.5 Priority Customers are not
assessed a Select Symbol Maker Fee in
regular orders. Additionally, today, ISE
assesses Market Makers 6 a $0.45 per
3 On July 31, 2024, ISE filed SR–ISE–2024–37 and
designated it effective on August 1, 2024. On
August 9, 2024, the Exchange withdrew SR–ISE–
2024–37 and filed this rule change.
4 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). Unless otherwise noted,
when used in this Pricing Schedule the term
‘‘Priority Customer’’ includes ‘‘Retail’’ as defined
below. See Options 7, Section 1(c).
5 ‘‘Non-Priority Customers’’ include Market
Makers, Non-Nasdaq ISE Market Makers (FarMMs),
Firm Proprietary/Broker-Dealers, and Professional
Customers. See Options 7, Section 1(c).
6 The term ‘‘Market Makers’’ refers to
‘‘Competitive Market Makers’’ and ‘‘Primary Market
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contract Select Symbol Taker Fee in
regular orders. Non-Nasdaq ISE Market
Makers (FarMMs),7 Firm Proprietary 8/
Broker Dealers,9 and Professional
Customers 10 are assessed a $0.46 per
contract Select Symbol Taker Fee in
regular orders. Priority Customers are
assessed a $0.37 per contract Select
Symbol Taker Fee in regular orders.
At this time, the Exchange proposes to
increase the Priority Customer Select
Symbol Taker Fee from $0.37 to $0.39
per contract in regular orders. While the
Exchange is increasing the Priority
Customer Select Symbol Taker Fee, it
will remain the lowest Select Symbol
Taker Fee assessed by ISE as compared
to Select Symbol Taker Fees assessed to
other market participants.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,11 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,12 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
Makers’’ collectively. See Options 1, Section
1(a)(21).
7 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. See Options 7, Section 1(c).
8 A ‘‘Firm Proprietary’’ order is an order
submitted by a member for its own proprietary
account. See Options 7, Section 1(c).
9 A ‘‘Broker-Dealer’’ order is an order submitted
by a member for a broker-dealer account that is not
its own proprietary account. See Options 7, Section
1(c).
10 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).
11 15 U.S.C. 78f(b).
12 15 U.S.C. 78f(b)(4) and (5).
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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’. . . .’’ 13
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.’’ 14
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.
The Exchange’s proposal to increase
the Priority Customer Select Symbol
Taker Fee from $0.37 to $0.39 per
contract for regular orders is reasonable
because its taker fees remain
competitive and lower than other
options exchanges.15 Further, while the
Taker Fee will be higher for Priority
Customers, the Exchange believes that
market participants will continue to be
incentivized to send Priority Customer
order flow to ISE because it will remain
the lowest Select Symbol Taker Fee
13 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)).
14 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
15 For example, Cboe C2 Exchange, Inc. (‘‘C2’’)
assesses Public Customers a $0.43 per contract fee
for removing liquidity in Penny Classes. See C2 Fee
Schedule at: https://www.cboe.com/us/options/
membership/fee_schedule/ctwo. In addition, MIAX
Emerald, LLC (‘‘MIAX Emerald’’) assesses Priority
Customers a $0.50 per contract taker fee in Penny
Classes. See MIAX Emerald Fee Schedule at:
https://www.miaxglobal.com/sites/default/files/fee_
schedule-files/MIAX_Emerald_Fee_Schedule_
08052024.pdf.
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Federal Register / Vol. 89, No. 163 / Thursday, August 22, 2024 / Notices
assessed by ISE as compared to Select
Symbol Taker Fees assessed to other
market participants.16
The Exchange’s proposal to increase
the Priority Customer Select Symbol
Taker Fee from $0.37 to $0.39 per
contract for regular orders is equitable
and not discriminatory because Priority
Customers would continue to be
assessed the lowest Select Symbol Taker
Fee on ISE among market participants.
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
(particularly in response to pricing) in
turn facilitates tighter spreads which
may cause an additional corresponding
increase in order flow from other market
participants. Attracting more liquidity
from Priority Customers will benefit all
market participants that trade on the
ISE.
proposal will place any category of
market participant at a competitive
disadvantage. The Exchange’s proposal
to increase the Priority Customer Select
Symbol Taker Fee from $0.37 to $0.39
per contract in regular orders does not
impose an undue burden on
competition because Priority Customers
would continue to be assessed the
lowest Select Symbol Taker Fee on ISE
among market participants. 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 (particularly
in response to pricing) in turn facilitates
tighter spreads which may cause an
additional corresponding increase in
order flow from other market
participants. Attracting more liquidity
from Priority Customers will benefit all
market participants that trade on the
ISE.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act.
In terms of inter-market competition,
the Exchange notes that it operates in a
highly competitive market in which
market participants can readily favor
competing venues if they deem fee
levels at a particular venue to be
excessive, or rebate opportunities
available at other venues to be more
favorable. In such an environment, the
Exchange must continually adjust its
fees to remain competitive with other
exchanges. Because competitors are free
to modify their own fees in response,
and because market participants may
readily adjust their order routing
practices, the Exchange believes that the
degree to which fee changes in this
market may impose any burden on
competition is extremely limited. In
sum, if the changes proposed herein are
unattractive to market participants, it is
likely that the Exchange will lose
market share as a result. Accordingly,
the Exchange does not believe that the
proposed changes will impair the ability
of members or competing order
execution venues to maintain their
competitive standing in the financial
markets.
In terms of intra-market competition,
the Exchange does not believe that this
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
16 Today, ISE assesses Market Makers a $0.45 per
contract Select Symbol Taker Fee. ISE assesses NonNasdaq ISE Market Makers (FarMMs), Firm
Proprietary/Broker Dealers, and Professional
Customers a $.46 per contract Select Symbol Taker
Fee in regular orders.
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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.17 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:
• Send an email to rule-comments@
sec.gov. Please include file number SR–
ISE–2024–38 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–2024–38. 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–2024–38 and should be
submitted on or before September 12,
2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024–18786 Filed 8–21–24; 8:45 am]
BILLING CODE 8011–01–P
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
17 15
PO 00000
U.S.C. 78s(b)(3)(A)(ii).
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18 17
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CFR 200.30–3(a)(12).
22AUN1
]]>Agencies
[Federal Register Volume 89, Number 163 (Thursday, August 22, 2024)]
[Notices]
[Pages 68007-68009]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-18786]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100753; File No. SR-ISE-2024-38]
Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Options 7,
Section 3
August 16, 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 August 9, 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
[[Page 68008]]
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.\3\
---------------------------------------------------------------------------
\3\ On July 31, 2024, ISE filed SR-ISE-2024-37 and designated it
effective on August 1, 2024. On August 9, 2024, the Exchange
withdrew SR-ISE-2024-37 and filed this rule change.
---------------------------------------------------------------------------
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 the Exchange's Pricing Schedule at Options 7,
Section 3, Regular Order Fees and Rebates, to increase the Priority
Customer \4\ Select Symbol Taker Fee from $0.37 to $0.39 per contract.
---------------------------------------------------------------------------
\4\ 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). Unless otherwise noted, when used in this Pricing
Schedule the term ``Priority Customer'' includes ``Retail'' as
defined below. See Options 7, Section 1(c).
---------------------------------------------------------------------------
Today, the Exchange assesses a Select Symbol Maker Fee of $0.18 per
contract in regular orders to all Non-Priority Customers.\5\ Priority
Customers are not assessed a Select Symbol Maker Fee in regular orders.
Additionally, today, ISE assesses Market Makers \6\ a $0.45 per
contract Select Symbol Taker Fee in regular orders. Non-Nasdaq ISE
Market Makers (FarMMs),\7\ Firm Proprietary \8\/Broker Dealers,\9\ and
Professional Customers \10\ are assessed a $0.46 per contract Select
Symbol Taker Fee in regular orders. Priority Customers are assessed a
$0.37 per contract Select Symbol Taker Fee in regular orders.
---------------------------------------------------------------------------
\5\ ``Non-Priority Customers'' include Market Makers, Non-Nasdaq
ISE Market Makers (FarMMs), Firm Proprietary/Broker-Dealers, and
Professional Customers. See Options 7, Section 1(c).
\6\ The term ``Market Makers'' refers to ``Competitive Market
Makers'' and ``Primary Market Makers'' collectively. See Options 1,
Section 1(a)(21).
\7\ 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. See Options 7, Section 1(c).
\8\ A ``Firm Proprietary'' order is an order submitted by a
member for its own proprietary account. See Options 7, Section 1(c).
\9\ A ``Broker-Dealer'' order is an order submitted by a member
for a broker-dealer account that is not its own proprietary account.
See Options 7, Section 1(c).
\10\ 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).
---------------------------------------------------------------------------
At this time, the Exchange proposes to increase the Priority
Customer Select Symbol Taker Fee from $0.37 to $0.39 per contract in
regular orders. While the Exchange is increasing the Priority Customer
Select Symbol Taker Fee, it will remain the lowest Select Symbol Taker
Fee assessed by ISE as compared to Select Symbol Taker Fees assessed to
other market participants.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\11\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\12\ 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.
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78f(b).
\12\ 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'. . . .'' \13\
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\13\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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The Commission and the courts have repeatedly expressed their
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. In Regulation
NMS, while adopting a series of steps to improve the current market
model, the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \14\
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\14\ Securities Exchange Act Release No. 51808 (June 9, 2005),
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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Numerous indicia demonstrate the competitive nature of this market.
For example, clear substitutes to the Exchange exist in the market for
options security transaction services. The Exchange is only one of
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.
The Exchange's proposal to increase the Priority Customer Select
Symbol Taker Fee from $0.37 to $0.39 per contract for regular orders is
reasonable because its taker fees remain competitive and lower than
other options exchanges.\15\ Further, while the Taker Fee will be
higher for Priority Customers, the Exchange believes that market
participants will continue to be incentivized to send Priority Customer
order flow to ISE because it will remain the lowest Select Symbol Taker
Fee
[[Page 68009]]
assessed by ISE as compared to Select Symbol Taker Fees assessed to
other market participants.\16\
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\15\ For example, Cboe C2 Exchange, Inc. (``C2'') assesses
Public Customers a $0.43 per contract fee for removing liquidity in
Penny Classes. See C2 Fee Schedule at: https://www.cboe.com/us/options/membership/fee_schedule/ctwo. In addition, MIAX Emerald, LLC
(``MIAX Emerald'') assesses Priority Customers a $0.50 per contract
taker fee in Penny Classes. See MIAX Emerald Fee Schedule at:
https://www.miaxglobal.com/sites/default/files/fee_schedule-files/MIAX_Emerald_Fee_Schedule_08052024.pdf.
\16\ Today, ISE assesses Market Makers a $0.45 per contract
Select Symbol Taker Fee. ISE assesses Non-Nasdaq ISE Market Makers
(FarMMs), Firm Proprietary/Broker Dealers, and Professional
Customers a $.46 per contract Select Symbol Taker Fee in regular
orders.
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The Exchange's proposal to increase the Priority Customer Select
Symbol Taker Fee from $0.37 to $0.39 per contract for regular orders is
equitable and not discriminatory because Priority Customers would
continue to be assessed the lowest Select Symbol Taker Fee on ISE among
market participants. 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
(particularly in response to pricing) in turn facilitates tighter
spreads which may cause an additional corresponding increase in order
flow from other market participants. Attracting more liquidity from
Priority Customers will benefit all market participants that trade on
the ISE.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
In terms of inter-market competition, the Exchange notes that it
operates in a highly competitive market in which market participants
can readily favor competing venues if they deem fee levels at a
particular venue to be excessive, or rebate opportunities available at
other venues to be more favorable. In such an environment, the Exchange
must continually adjust its fees to remain competitive with other
exchanges. Because competitors are free to modify their own fees in
response, and because market participants may readily adjust their
order routing practices, the Exchange believes that the degree to which
fee changes in this market may impose any burden on competition is
extremely limited. In sum, if the changes proposed herein are
unattractive to market participants, it is likely that the Exchange
will lose market share as a result. Accordingly, the Exchange does not
believe that the proposed changes will impair the ability of members or
competing order execution venues to maintain their competitive standing
in the financial markets.
In terms of intra-market competition, the Exchange does not believe
that this proposal will place any category of market participant at a
competitive disadvantage. The Exchange's proposal to increase the
Priority Customer Select Symbol Taker Fee from $0.37 to $0.39 per
contract in regular orders does not impose an undue burden on
competition because Priority Customers would continue to be assessed
the lowest Select Symbol Taker Fee on ISE among market participants.
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 (particularly in
response to pricing) in turn facilitates tighter spreads which may
cause an additional corresponding increase in order flow from other
market participants. Attracting more liquidity from Priority Customers
will benefit all market participants that trade on the ISE.
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.\17\ 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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\17\ 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-2024-38 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-2024-38. 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-2024-38 and should be
submitted on or before September 12, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-18786 Filed 8-21-24; 8:45 am]
BILLING CODE 8011-01-P
