Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Codify the Definition of ISE Open/Close Trade Profile, 77913-77919 [2024-21744]
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Federal Register / Vol. 89, No. 185 / Tuesday, September 24, 2024 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
Vanessa A. Countryman,
Secretary.
[FR Doc. 2024–21752 Filed 9–23–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–101096; File No. SR–ISE–
2024–46]
Self-Regulatory Organizations; Nasdaq
ISE, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Codify the Definition
of ISE Open/Close Trade Profile
September 18, 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
September 6, 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 and
II below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to codify the
definition of ISE Open/Close Trade
Profile in the ISE rulebook. This filing
also incorporates previously proposed
fee changes that: (i) adjusted fees for ISE
Open/Close End of Day and Intraday
Trade Profile; (ii) reduced fees for 36
months of historical data for current
customers; and (iii) allowed unlimited
external distribution of ISE Open/Close
End of Day and Intraday Trade Profile
for a fixed monthly fee.
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.
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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
25 17
CFR 200.30–3(a)(12), (59).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposed rule
change is to codify the definition of ISE
Open/Close Trade Profile in the ISE
rulebook. This filing also incorporates
previously proposed fee changes that: (i)
adjusted fees for ISE Open/Close End of
Day and Intraday Trade Profile; (ii)
reduced fees for 36 months of historical
data for current customers; and (iii)
allowed unlimited external distribution
of ISE Open/Close End of Day and
Intraday Trade Profile for a fixed
monthly fee.3
ISE Open/Close Trade Profile
ISE currently sells a market data
offering comprised of the entire opening
and closing trade data of ISE-listed
options of both customers and firms,
called the ISE Open/Close Trade
Profile.4 This product is designed to
3 The previously introduced fee proposal was
initially filed on July 1, 2024, as SR–ISE–2024–25.
On July 15, 2024, that filing was withdrawn and
refiled as SR–ISE–2024–32. On July 29, 2024, that
filing was withdrawn and refiled as SR–ISE–2024–
36. On August 12, 2024, that proposal was
withdrawn and replaced with SR–ISE–2024–40 to
incorporate those fees into a filing that codifies the
definition of ISE Open/Close Trade Profile. On
August 23, 2024, SR–ISE–2024–40 was withdrawn
and replaced with SR–ISE–2024–43 to provide
additional information. On September 6, 2024, SR–
ISE–2024–43 was withdrawn and replaced with the
instant filing to provide further information.
4 See Securities Exchange Act Release No. 77907
(May 25, 2016), 81 FR 35079 (June 1, 2016) (SR–
ISE–2016–14) (adopting a flat fee for the Complete
Set of historical data); Securities Exchange Act
Release No. 76501 (November 20, 2015), 80 FR
74181 (November 27, 2015) (SR–ISE–2015–40)
(offering a one month free trial to new customers);
Securities Exchange Act Release No. 67955 (October
1, 2012), 77 FR 61037 (October 5, 2012) (SR–ISE–
2012–76) (adopting reduced fees for historical data
for academic institutions); Securities Exchange Act
Release No. 61317 (January 8, 2010), 75 FR 2915
(January 19, 2010) (SR–ISE–2009–103) (establishing
the current fees for the end of day and intra-day
products); Securities Exchange Act Release No.
60859 (October 21, 2009), 74 FR 55610 (October 28,
2009) (SR–ISE–2009–64) (adjusting fees for
academic institutions); Securities Exchange Act
Release No. 60654 (September 11, 2009), 74 FR
47848 (September 17, 2009) (SR–ISE–2009–64)
(adjusting fees for academic institutions); Securities
Exchange Act Release No. 56957 (December 13,
2007), 72 FR 71988 (December 19, 2007) (SR–ISE–
2007–115) (establishing the sale of historical data);
Securities Exchange Act Release No. 56254 (August
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77913
provide data to subscribers regarding
investor sentiment and trading activity.
The ISE Open/Close Trade Profile
provides aggregate quantity and volume
information for trades on the Exchange
for all series 5 during a trading session.
Information is provided in the following
categories: (i) total exchange volume for
Intra-Day information and total
exchange and industry volume for End
of Day information for each reported
series; (ii) open interest for the series;
(iii) aggregate quantity of trades and
aggregate trade volume effected to open
a position, characterized by origin type
(Priority Customer,6 Broker-Dealer,7
Firm Proprietary,8 and Professional
Customer 9), and for Priority Customers
and Professional Customers, further
subdivided by trade size buckets; and
(iv) aggregate quantity of trades and
aggregate trade volume effected to close
a position, characterized by origin type
(Priority Customer, Broker-Dealer, Firm
Proprietary, and Professional Customer),
and for Priority Customers and
Professional Customers, further
subdivided by trade size buckets.
ISE Open/Close Trade Profile End of
Day also provides opening buy, closing
buy, opening sell and closing sell
information, which includes underlying
close, option close, and moneyness.
End of Day information is available
the next business day. Intra-Day
information is updated at 10-minute
intervals over the course of the trading
day. Historical information is available
upon request.
The ISE Open/Close Trade Profile
provides proprietary Exchange trade
data and does not include any intraday
trade data from any other exchange.10
The information provided, both in End
of Day and Intraday formats, is not a
real-time data feed.
15, 2007), 72 FR 47104 (August 22, 2007) (SR–ISE–
2007–70) (initial offering of ISE Open/Close Trade
Profile).
5 Every options series trades as a distinct symbol;
the terms ‘‘series’’ and ‘‘symbol’’ are therefore
synonyms.
6 A ‘‘Priority Customer’’ is a person or entity that
is not a broker/dealer in securities, and does not
place more than 390 orders in listed options per day
on average during a calendar month for its own
beneficial account(s), as defined in Nasdaq ISE
Options 1, Section 1(a)(37). See Options 7, Section
1(c).
7 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)
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 ‘‘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).
10 The End of Day report includes a field that
presents Total Industry Volume for the Series.
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Federal Register / Vol. 89, No. 185 / Tuesday, September 24, 2024 / Notices
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ISE Open/Close Trade Profile is a
completely voluntary product in that
the Exchange is not required by any rule
or regulation to make this data available
and potential subscribers may purchase
it only if they voluntarily choose to do
so.
This information is available to all
market participants, including both
members and non-members, for all
series and symbols in End of Day, IntraDay, and historical files (upon request).
The information provided is designed
to provide the ability to analyze option
trade and volume data and create and
test trading models and analytical
strategies, as well as build customized
sentiment indicators.
The End of Day file is updated during
an overnight process with additional
fields 11 and is available the following
morning.
The Intraday product is captured in
‘‘snapshots’’ taken every 10 minutes
throughout the trading day, available to
subscribers within 2 minutes of the
conclusion of each period. Subscribers
receive the first calculation at 9:42 a.m.
ET, representing data captured from
9:30 a.m. to 9:39 a.m., and the second
calculation at 9:52 a.m., representing
data from both the most recent snapshot
and previous snapshots, continuing over
the course of the trading day.
The current subscription rate for both
members and non-members for ISE
Trade Profile Open/Close End of Day is
$750 per month. The current fee for ISE
Open/Close Trade Profile Intraday is
$2,000 per month. An annual
subscription for end of day and Intraday
Trade Profile is $2,500 per month.
These fees have not changed since
2010.12
ISE also sells historical ISE Open/
Close Trade Profile data about the past
activity of all option series traded on the
Exchange for each trading session
conducted during a prior calendar
month selected by the subscriber. This
data is intended to enhance a
purchaser’s ability to analyze option
trade and volume data, evaluate
historical trends in the trading activity
of a particular option series, and create
and test trading models and analytical
strategies. Historical Trade Profile
provides the same fields of information
as the End of Day and Intraday files,
respectively. This market data offering
is comprised of the entire opening and
11 The additional fields are: First Trade Price, Last
Trade Price, Underlying Close, Moneyness, Total
Exchange volume, and Total Industry Volume for
the Series.
12 See Securities Exchange Act Release No. 61317
(January 8, 2010), 75 FR 2915 (January 19, 2010)
(SR–ISE–2009–103) (establishing the current fees
for the end of day and intra-day products).
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closing trade data of both customers and
firms starting in January 2006 for End of
Day and October 2009 for Intraday.13
Ad-hoc subscribers can purchase this
data for any number of months through
the current month.
Trade Profile is designed to enhance
the ability of customers to understand
market sentiment on the Exchange and
to create and test trading models and
analytical strategies useful in both
options and equities markets. It is not
necessary to execute a trade, but it
supplies the customer with information
about underlying market trends
designed to improve the quality of that
customer’s investment decisions.
Customers can, and often do, elect to
forego this information.
Products similar to Trade Profile have
been available on multiple exchanges
for many years and are well-established
in the market. Such products are
available from Nasdaq Phlx LLC
(‘‘Phlx’’),14 Nasdaq Options Market
(‘‘NOM’’),15 Nasdaq GEMX LLC
(‘‘GEMX’’),16 Cboe Options Exchange,17
NYSE American Options,18 NYSE Arca
Options,19 BOX Options Market LLC,20
MIAX Pearl Options Exchange,21 and
13 The current ISE rulebook states that historical
End of Day information is available starting in May
2005. The Exchange is updating this information to
correct the starting date to January 2006.
14 See Securities Exchange Act Release No. 62887
(September 10, 2010), 75 FR 57092 (September 17,
2010) (SR–Phlx–2010–121) (introducing PHOTO on
September 1, 2010),
15 See Nasdaq Stock Market Rules, Options 7,
Section 4 (Nasdaq Options Market Data Distributor
Fees).
16 See Nasdaq GEMX Rules, Options 7, Sections
7(D) (Nasdaq GEMX Open/Close End of Day Trade
Profile) and 7(E) (Nasdaq GEMX Open/Close Intraday Trade Profile)
17 See, e.g., Securities Exchange Act Release No.
94913 (May 13, 2022), 87 FR 30534 (May 19, 2022)
(SR–Cboe–2022–023) (describing End of Day and
Intra-day Open-Close Data as a summary of trading
activity on the exchange at the option level by
origin, side of the market, price and transaction
type).
18 See, e.g., Securities Exchange Act Release No.
93803 (December 16, 2021, 86 FR 72647 (December
22, 2021) (SR–NYSEAMER–2021–46) (describing
the NYSE Options Open-Close Volume Summary as
a volume summary of trading activity on the
exchange at the option level by origin, side of the
market, contract volume and transaction type).
19 See, e.g., Securities Exchange Act Release No.
93132 (September 27, 2021), 86 FR 54499 (October
1, 2021) (SR–NYSEArca–2021–82) (describing the
NYSE Options Open-Close Volume Summary as a
volume summary of trading activity on the
exchange at the option level by origin, side of the
market, contract volume and transaction type).
20 See, e.g., Securities Exchange Act Release No.
97174 (March 21, 2023), 88 FR 18201 (March 27,
2023) (SR–BOX–2023–09) (describing the BOX
exchange Open-Close Data report as providing
volume by origin, buying/selling, and opening/
closing criteria).
21 See, e.g., Securities Exchange Act Release No.
91964 (May 21, 2021), 86 FR 28667 (May 27, 2021)
(SR–PEARL–2021–24) (introducing the Open-Close
Report).
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others. In general, the relative value of
these products depends on the volume
of transactions included; the greater the
volume of transactions, the greater the
value of the data. The current
purchasers of Trade Profile are
investment banks, market makers, asset
managers and other buy-side investors.
Proposed Changes
Definition of ISE Open/Close Trade
Profile
The Exchange proposes to codify the
definition of ISE Open/Close Trade
Profile. Nothing in this codification is
intended to change the product in any
way, but rather is intended to describe
the product exactly as it exists.
Specifically, the Exchange proposes the
following definition:
ISE Open/Close Trade Profile provides
aggregate quantity and volume information
for trades on the Exchange for all series
during a trading session. Information is
provided in the following categories: (i) total
exchange volume for Intra-Day information
and total exchange and industry volume for
End of Day information for each reported
series; (ii) open interest for the series; (iii)
aggregate quantity of trades and aggregate
trade volume effected to open a position,
characterized by origin type (Priority
Customer, Broker-Dealer, Firm Proprietary,
and Professional Customer), and for Priority
Customers and Professional Customers,
further subdivided by trade size buckets; and
(iv) aggregate quantity of trades and aggregate
trade volume effected to close a position,
characterized by origin type (Priority
Customer, Broker-Dealer, Firm Proprietary,
and Professional Customer), and for Priority
Customers and Professional Customers,
further subdivided by trade size buckets.
ISE Open/Close Trade Profile End of Day
will also provide opening buy, closing buy,
opening sell and closing sell information,
which shall include option first trade price,
underlying close, option close, and
moneyness.
End of Day information will be available
the next business day. Intra-Day information
is updated at 10-minute intervals over the
course of the trading day. Historical
information will be available upon request.
The purpose of the proposed change is to
add clarity and specificity to the ISE
rulebook.
Previously Introduced Fee Changes
Fee Changes for End of Day and
Intraday Products
The Exchange proposes to increase
the fee for the End of Day product from
$750 to $850, and the Intraday Product
from $2,000 to $2,500. The discounted
rate of $2,500 per month for both end
of day and intraday information will be
increased to $3,100 to reflect the new
fees while preserving the $250 discount.
In addition, the Exchange proposes to
insert a comma after the phrase ‘‘or the
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Intraday Product for the current month’’
into the definition of Current
Distributor. The revised sentence will
read as follows:
A ‘‘Current Distributor’’ is any firm that
purchases either the End of Day Product for
the current month, or the Intraday Product
for the current month, in the same month
that the 36 months of historical End of Day
or Intraday data is ordered.
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The change is designed to clarify that
the phrase ‘‘the same month that the 36
months of historical End of Day or
Intraday data is ordered’’ applies to both
firms that purchase End of Day data in
the current month and firms that
purchase Intraday data for the current
month. The clarification will not change
how the fee is charged.
Discount for Historical Data
The Exchange proposes to alter
discounts for historical end of day and
intraday data for Current Distributors.22
Specifically, the Exchange proposes to
offer the most recent 36 months of end
of day data for $7,200, and the most
recent 36 months intraday data for
$12,000.
Ad-hoc requests for historical end of
day data are currently $600 per request
per month. A complete set of historical
end of day data is $27,500 per request.
For intraday data, there is a sliding scale
of charges: $1,000 per request per
month; $2,000 per request per quarter;
and $8,000 per request per year.
The proposed rates are a substantial
discount from current fees. With respect
to end of day data, ad hoc requests are
$600 per request per month. Three years
of such data would cost $21,600. The
proposed rate of $7,200 is far below this
level. With respect to intraday
information, the current rates are $1,000
per request per month, $2,000 per
request per quarter, and $8,000 per
request per year. Using the lowest rate
of $8,000 per request per year, the most
recent 36 months of intraday
information would cost $24,000. The
proposed rate of $12,000 for the most
recent 36 months of intraday data is a
substantial discount from the current
rate.
For customers that request more than
three years of information, end of day
historical information can still be
purchased for $600 per request per
month, and intraday information can be
purchased at $1,000 per request per
month. The discount for a complete set
of historical end of day data is $27,500
22 The Exchange proposes to define ‘‘Current
Distributor’’ as any firm that purchases either the
End of Day Product for the current month, or the
Intraday Product for the current month in the same
month that the 36 months of historical End of Day
or Intraday data is ordered.
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per request is being removed because
the Exchange has found that the most
recent three years of data is sufficient
for most customer needs. Many
customers use historical data to test
their strategies and models, and our
discussions with current and former
customers and experience indicate that
36 months of data is sufficient for most
customer needs, and is an effective
baseline for review.
The historical data will continue to
provide the same categories of
information available for current
subscribers under the new proposal.
Eligibility for the discount will
depend on the type of current
subscription. A current purchaser of
End of Day data would be eligible for
the historical End of Day product at the
reduced rate. A current purchaser of the
Intraday product would similarly be
able to purchase the historical Intraday
product at the reduced rate. A purchaser
of both the current End of Day and
Intraday products would be entitled to
purchase both types of history at the
reduced rate.
The 36-month period will be based on
the date of purchase of the 36 months
of data by a Current Distributor. For
example, a customer that buys the End
of Day product for the first time in July
2024 would also be able to purchase
historical End of Day data for the period
July 2021 through July 2024 (inclusive)
at the discounted rate. Similarly, a
customer with an existing End of Day
subscription in July 2024 would be able
to purchase the historical End of Day
data from July 2021 through July 2024
at the discounted rate. The same
reasoning would apply to Intraday
customers.23
The fees for historical data are linked
to the current product because effective
historical testing requires a comparison
of similar licenses. Effective testing of
the End of Day product, for example,
requires End of Day historical data, and
the same would hold true for Intraday
data.
Historical data for Intraday
information is currently offered in three
tiers, depending on the time period
requested: $1,000 per request per
month, $2,000 per request per quarter,
and $8,000 per request per year. The
Exchange receives almost no requests
23 A customer may use the proposed historical
data discount more than once. For example, a
Current Distributor that purchases 36 months of
historical data at a discount, but later terminates
that subscription, would be eligible to purchase
another 36 months of historical data (based on the
date of purchase) upon renewing that subscription.
(Current Distributors that never terminate would
have no need for a second purchase, as they would
already possess the most recent months of historical
data.).
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77915
for information on a quarterly or yearly
basis. If a potential customer were
interested in quarterly or yearly data,
the Exchange believes that such a
customer would be able to obtain more
data at a lower cost using the proposed
36-month discount. As such, the
Exchange expects that removal of the
quarterly and yearly pricing tiers will
have no material impact on customers.
The monthly tier will remain for
customers who wish to purchase data
outside of the 36-month window.
The Exchange proposes to remove the
fee of $2,000 per request per quarter and
$8,000 per request per year as no longer
useful in light of the much lower
discount being proposed for 36 months
of historical data.
Historical data is useful in analyzing
option trade and volume data,
evaluating historical trends in the
trading activity of a particular option
series, and creating and testing trading
models and analytical strategies, and is
often purchased concurrently with a
new subscription to ISE Open/Close
Trade Profile. Many customers use
historical data to test their strategies and
models, and our discussions with
current and past customers and
experience indicate that 36 months of
data is sufficient for most customer
needs, and is an effective baseline for
review.
External Distribution of Derived Data
The Exchange proposes to offer a
license for the unlimited external
distribution of Derived Data from ISE
Trade Profile for $4,500 per month.
Derived Data is ‘‘any information
generated in whole or in part from
Exchange Information 24 such that the
information generated cannot be reverse
engineered to recreate Exchange
Information, or be used to create other
data that is recognizable as a reasonable
substitute for such Exchange
Information.’’
Fees for external distribution of
Derived Data from ISE Trade Profile are
in addition to fees for the End of Day
product or the Intraday product, or both,
as applicable.
This is a new license to be offered by
the Exchange; external distribution of
24 ‘‘Exchange Information’’ is any data or
information that has been collected, validated,
processed and/or recorded by the Exchange and
made available for transmission relating to: (i)
Eligible securities or other financial instruments,
markets, products, vehicles, indicators, or devices;
(ii) activities of the Exchange; or (iii) other
information or data from the Exchange. Information
includes, but is not limited to, any element of
information used or processed in such a way that
Exchange Information or a substitute for such
Information can be identified, recalculated or reengineered from the processed information.
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Federal Register / Vol. 89, No. 185 / Tuesday, September 24, 2024 / Notices
Derived Data is not currently permitted.
The proposal, based on a similar license
offered by the Phlx Exchange,25 will
allow the external distribution of
analytic products derived from ISE
Trade Profile to the general investing
public. A similar product is also being
proposed for the Nasdaq Options Market
and the GEMX Exchange.
Experience with the Phlx Exchange
indicates that this license provides an
effective mechanism for market data
vendors to identify, develop, and sell
derived market data products, such as
sentiment indicators, harnessing the
power of the competitive marketplace to
promote innovation. The Exchange
expects that this product will have the
greatest utility for the general investing
public.
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2. Statutory Basis
The Exchange believes that its
proposal to codify the definition of ISE
Open/Close Trade Profile is consistent
with Section 6(b) of the Act,26 in
general, and furthers the objectives of
Section 6(b)(5) of the Act,27 in
particular, in that it is designed to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general to protect
investors and the public interest.
Adding the definition of ISE Open/
Close Trade Profile will provide
additional clarity and specificity to the
ISE rulebook. Nothing in this
codification is intended to change the
product or the way it functions, but
rather is intended to describe the
product exactly as it exists today.
Providing additional clarity about an
exchange product will help investors
make better informed decisions about
ISE Open/Close Trade Profile, and
therefore will help protect investors and
promote the public interest.
Similarly, clarifying the definition of
Current Distributor will also add clarity
and specificity to the rulebook without
changing the underlying fees. This
additional clarity will help investors
make better informed decisions about
ISE Open/Close Trade Profile, and
thereby help protect investors and
promote the public interest.
The Exchange also believes that its
proposal to change fees is consistent
with Section 6(b) of the Act,28 in
general, and furthers the objectives of
25 See Securities Exchange Act Release No. 93293
(October 12, 2021), 86 FR 57716 (October 18, 2021)
(SR–Phlx–2021–58).
26 15 U.S.C. 78f(b).
27 15 U.S.C. 78f(b)(5).
28 15 U.S.C. 78f(b).
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Sections 6(b)(4) and 6(b)(5) of the Act,29
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.
Equitable Allocation of Reasonable
Dues, Fees and Other Charges
The proposed changes are an
equitable allocation of reasonable dues,
fees and other charges because: (i) the
trade profile products offered by
multiple exchanges are substitutes, and
customers are free to choose which
product they purchase; and (ii) the
proposed fees are comparable to the fees
charged by other exchanges, and
customers are free to purchase other
products if the Exchange has mistaken
the value of its product.
Substitution
As noted above, products similar to
Trade Profile have been available on
multiple exchanges for many years and
are well-established in the market. Such
products are available from Phlx,30
ISE,31 GEMX,32 Cboe,33 NYSE
American,34 NYSE Arca,35 BOX,36
MIAX Pearl,37 and others.
29 15
U.S.C. 78f(b)(4) and (5).
Securities Exchange Act Release No. 62887
(September 10, 2010), 75 FR 57092 (September 17,
2010) (SR–Phlx–2010–121) (introducing PHOTO on
September 1, 2010),
31 See Nasdaq ISE Rules, Options 7, Section 10(A)
and (B) (Nasdaq ISE Open/Close Trade Profile End
of Day; Nasdaq ISE Open/Close Trade Profile Intraday).
32 See Nasdaq GEMX Rules, Options 7, Sections
7(D) (Nasdaq GEMX Open/Close End of Day Trade
Profile) and 7(E) (Nasdaq GEMX Open/Close Intraday Trade Profile)
33 See, e.g., Securities Exchange Act Release No.
94913 (May 13, 2022), 87 FR 30534 (May 19, 2022)
(SR–Cboe–2022–023) (describing End of Day and
Intra-day Open-Close Data as a summary of trading
activity on the exchange at the option level by
origin, side of the market, price and transaction
type).
34 See, e.g., Securities Exchange Act Release No.
93803 (December 16, 2021, 86 FR 72647 (December
22, 2021) (SR–NYSEAMER–2021–46) (describing
the NYSE Options Open-Close Volume Summary as
a volume summary of trading activity on the
exchange at the option level by origin, side of the
market, contract volume and transaction type).
35 See, e.g., Securities Exchange Act Release No.
93132 (September 27, 2021), 86 FR 54499 (October
1, 2021) (SR–NYSEArca–2021–82) (describing the
NYSE Options Open-Close Volume Summary as a
volume summary of trading activity on the
exchange at the option level by origin, side of the
market, contract volume and transaction type).
36 See, e.g., Securities Exchange Act Release No.
97174 (March 21, 2023), 88 FR 18201 (March 27,
2023) (SR–BOX–2023–09) (describing the BOX
exchange Open-Close Data report as providing
volume by origin, buying/selling, and opening/
closing criteria).
37 See, e.g., Securities Exchange Act Release No.
91964 (May 21, 2021), 86 FR 28667 (May 27, 2021)
30 See
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Trade outline products offer the same
categories of data through end of day or
intraday reports. The information
provided by one exchange is generally
similar to that provided by other
exchanges because order flow can move
from one exchange to another, and
market sentiment trends that appear on
one exchange are likely to be similar to
the sentiment trends on other
exchanges. The key differentiator in the
quality of the data depends on the
volume of transactions on a given
exchange; the greater the volume of
transactions, the greater the value of the
data. Customers can choose not to
purchase the trade outline product of
one exchange and substitute it for that
of another exchange.
Customers can also choose not to
purchase a trade outline product at all.
Trade outline products are designed to
help investors understand underlying
market trends to improve the quality of
investment decisions, but is not
necessary to execute a trade. Customers
can, and do, choose to forego the
information from Trade Profile or any of
its competitor products when making a
trade.
Nasdaq and its affiliates have
observed that customers purchase
sufficient data to provide a view of the
market, but not more, as the value of
data from each additional exchange
yields diminishing returns. As a result,
all exchanges are limited in what they
will be able to charge for a trade outline
product.
As the Commission and courts 38 have
recognized, ‘‘[i]f competitive forces are
operative, the self-interest of the
exchanges themselves will work
powerfully to constrain unreasonable or
(SR–PEARL–2021–24) (introducing the Open-Close
Report).
38 The decision of the United States Court of
Appeals for the District of Columbia Circuit in
NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010)
upheld the Commission’s reliance upon
competitive markets to set reasonable and equitably
allocated fees for market data. ‘‘In fact, the
legislative history indicates that the Congress
intended that the market system evolve through the
interplay of competitive forces as unnecessary
regulatory restrictions are removed and that the SEC
wield its regulatory power in those situations where
competition may not be sufficient, such as in the
creation of a consolidated transactional reporting
system.’’ NetCoalition I at 535 (quoting H.R. Rep.
No. 94–229, at 92 (1975), as reprinted in 1975
U.S.C.C.A.N. 321, 323) (internal quotation marks
omitted). The court agreed with the Commission’s
conclusion that ‘‘Congress intended that
competitive forces should dictate the services and
practices that constitute the U.S. national market
system for trading equity securities.’’ Id. (quoting
Securities Exchange Act Release No. 59039
(December 2, 2008), 73 FR 74770, 74771(December
9, 2008) (SR–NYSEArca–2006–21)).
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unfair behavior.’’ 39 Accordingly, ‘‘the
existence of significant competition
provides a substantial basis for finding
that the terms of an exchange’s fee
proposal are equitable, fair, reasonable,
and not unreasonably or unfairly
discriminatory.’’ 40 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.’’ 41
Trade Profile is in direct competition
with multiple exchanges that offer
similar products in end of day and
intraday formats.42
The license to allow the external
distribution of Derived Data, like the
purchase of the end of day and intraday
licenses, is also subject to competition.
Any exchange that wishes to allow
distribution of a Derived Data product
based on options trading information
would be able to do so with an
immediately effective fee filing similar
to this proposal.
Moreover, as explained above, the
proposal is designed to promote the
dissemination of a variety of analytical
insights—generally used only by
investment banks, market makers, asset
managers and other buy-side investors—
to the general investing public by
creating an incentive for market data
vendors to identify, develop, and sell
such indicators. As such, the proposal
will spur competition among not only
exchanges, but vendors as well.
The discounted fees for historical data
and the $250 discount for the purchase
of both end of day and intraday data
together, like the purchase of the end of
day, intraday and Derived Data licenses,
is also subject to competition. Any
exchange that wishes to provide
discounts for historical data or the joint
usage of end of day and intraday
39 See Securities Exchange Act Release No. 59039
(December 2, 2008), 73 FR 74770 (December 9,
2008) (SR–NYSEArca–2006–21).
40 See id.
41 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
42 These substitute products include NOTO, ISE
Trade Profile, GEMX Trade Profile data; open-close
data from Cboe C1, C2, BZX, and EDGX; and Open
Close Reports from MIAX Options, Pearl, and
Emerald.
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information would be able to do so with
an immediately effective fee filing in
response.
Comparability of Proposed Fees
The proposed fees are comparable to
the fees charged by similarly situated
exchanges.
As explained above, the value of
Trade Profile is determined in part by
the number of underlying transactions
reflected in the data.
ISE has a market share comparable to
NYSE American, MIAX, and MIAX
Pearl at approximately 6% to 7% in the
second quarter of 2024.43 For intraday
products, NYSE American charges
$2,000,44 MIAX charges $2,000,45 and
MIAX Pearl charges $2,000.46 The
proposed fees of $2,500 for ISE are
above this because ISE believes that the
other exchanges are not accurately
reflecting the value of the data. CBOE
C1, at a slightly larger market share of
approximately 9%,47 charges $3,000 for
intraday data,48 and we believe the
proposed fee of $2,500 is more in line
with the overall market for trade outline
information than the $2,000 charged by
other exchanges.
For end of day data, NYSE American
charges $750,49 MIAX charges $600,50
and MIAX Pearl charges $600.51 The
proposed fees of $850 are higher than
43 See NasdaqTrader.com, ‘‘Options Market
Statistics,’’ available at https://
www.nasdaqtrader.com/Trader.aspx?id=
OptionsVolumeSummary.
44 See NYSE American, ‘‘NYSE American Options
Proprietary Market Data Fees as of November 1,
2023,’’ available at https://www.nyse.com/
publicdocs/nyse/data/NYSE_American_Options_
Market_Data_Fee_Schedule.pdf
45 See MIAX Options Exchange, ‘‘Fee Schedule as
of April 23, 2024,’’ available at https://
www.miaxglobal.com/sites/default/files/fee_
schedule-files/MIAX_Options_Fee_Schedule_
04232024.pdf
46 See MIAX Pearl Options Exchange, ‘‘Fee
Schedule as of April 15, 2024,’’ available at https://
www.miaxglobal.com/sites/default/files/fee_
schedule-files/MIAX_Pearl_Options_Fee_Schedule_
04152024.pdf
47 See NasdaqTrader.com, ‘‘Options Market
Statistics,’’ available at https://
www.nasdaqtrader.com/Trader.aspx?id=
OptionsVolumeSummary.
48 See Cboe DataShop, ‘‘Cboe Open-Close Volume
Summary,’’ available at https://datashop.cboe.com/
cboe-options-open-close-volume-summary.
49 See NYSE American, ‘‘NYSE American Options
Proprietary Market Data Fees as of November 1,
2023,’’ available at https://www.nyse.com/
publicdocs/nyse/data/NYSE_American_Options_
Market_Data_Fee_Schedule.pdf.
50 See MIAX Options Exchange, ‘‘Fee Schedule as
of April 23, 2024,’’ available at https://
www.miaxglobal.com/sites/default/files/fee_
schedule-files/MIAX_Options_Fee_Schedule_
04232024.pdf.
51 See MIAX Pearl Options Exchange, ‘‘Fee
Schedule as of April 15, 2024,’’ available at https://
www.miaxglobal.com/sites/default/files/fee_
schedule-files/MIAX_Pearl_Options_Fee_Schedule_
04152024.pdf.
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77917
this range, but the Exchange believes
that its competitors are underestimating
the value of the product.
Nasdaq is not aware of another
exchange that provides a similar
discount for historical data other than
its own affiliates. The Phlx exchange,
which is affiliated with Nasdaq, offers
the most recent 36 months of historical
End of Day data to Current Distributors
for $6,000, and the most recent 36
months of Intraday data for $12,000.
Nasdaq believes that the proposed ISE
fees are reasonable in comparison to
Phlx because, although Phlx has a
somewhat larger market share
(approximately 9% for Phlx vs. about
7% for ‘‘ISE), the historical Phlx data is
somewhat undervalued. As such, ISE’s
proposed fees of $7,200 for 36 months
of ISE’s historical End of Day data and
$12,000 for 36 months of ISE’s Intraday
data are reasonable.
If the Exchange is wrong in these
assessments, it will lose sales as a result.
As noted above, clarifying the
definition of Current Distributor will not
change fees, and therefore will not
impact the equitable allocation of
reasonable dues, fees and other charges.
The Proposal Does Not Permit Unfair
Discrimination
Nothing in the proposal treats any
category of market participant any
differently from any other category of
market participant. On the contrary, the
proposal expands distribution of Trade
Profile beyond investment banks,
market makers, asset managers and
other buy-side investors to market data
vendors and the general investing
public. Allowing the distribution of
Derived Data to the general investing
public will broaden the availability of
such information while not treating any
current recipient of the product
differently in any way. The new fee
structure, which modifies fees to reflect
current market value and offers
historical data at a discount, applies
equally to all current and potential
distributors. Trade Profile is available to
all market participants, including
members and non-members, and all
market participants receive the same
information in the Trade Profile data
feed.
With respect to the specific fee
changes, it is reasonable and not unfair
discrimination to charge an external
distributor of Derived Data a $4,500
licensing fee. Vendors will ordinarily
charge a fee to their downstream
customers for this service, and, even if
the vendor is not charging a specific fee
for this particular service, Derived Data
products from the Exchange will be part
of a suite of offerings that generally
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promote sales. External distribution is
fundamentally different than internal
use, in that the former generates revenue
from external sales while the latter does
not. It is not unfair discrimination to
charge a licensing fee for a product that
generates downstream revenue.
Nor is it unfair discrimination to
allow the redistribution of Derived Data,
but not the underlying information, to
the general investing public. As
explained above, neither exchanges nor
vendors ordinarily allow redistribution
of analytic products—such products are
typically designed solely for the use of
direct customers, not for redistribution
to the customers of customers in the
manner of a data feed. Allowing the
redistribution of Derived Data provides
an incentive for vendors to innovate
with new compelling and varied
analytic products for the general
investing public that will provide access
to market sentiment insights currently
available only to sophisticated
investors. This proposal is therefore not
unfair discrimination, but rather allows
for more equitable access to market
sentiment information for the general
investing public.
It is also not unfair discrimination to
provide a discount for 36 months of
historical data to Current Distributors,
but not former distributors or firms that
have never purchased the product. Any
firm would be able to become a Current
Distributor at any time by subscribing to
Trade Profile, and would be able to
cancel the subscription at any time after
receiving the 36 months of historical
data for the proposed discounted fee.
More specifically, a firm that is not a
Current Distributor may obtain access to
the 36 months of historical data at a
discount by becoming a Current
Distributor for a limited time and then
terminating the subscription.
It is not unfair discrimination to limit
the historical data discount to Current
Distributors. Historical information is
generally used by Current Distributors
to test their strategies and trading
models, and Current Distributors are
therefore in the best position to benefit
from the historical data. Outside of the
36 month period, all firms will have the
opportunity to purchase historical data
on an ad hoc basis.
For all of these reasons, the proposal
does not permit unfair discrimination.
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
intermarket competition, the Exchange
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18:07 Sep 23, 2024
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notes that it operates in a highly
competitive market in which market
participants can readily favor competing
venues if they deem fee levels at a
particular venue to be excessive, or
rebate opportunities available at other
venues to be more favorable. In such an
environment, the Exchange must
continually adjust its fees to remain
competitive with other exchanges and
with alternative trading systems that
have been exempted from compliance
with the statutory standards applicable
to exchanges. Because competitors are
free to modify their own fees in
response, and because market
participants may readily adjust their
order routing practices, the Exchange
believes that the degree to which fee
changes in this market may impose any
burden on competition is extremely
limited.
Adding the definition of ISE Open/
Close Trade Profile will promote
competition by helping investors make
better informed decisions about ISE
Open/Close Trade Profile. Nothing
about the addition of a definition will
impact inter-market competition or
intra-market competition negatively.
Intermarket Competition
Nothing in the proposal burdens
inter-market competition (the
competition among self-regulatory
organizations).
As discussed above, ISE Open/Close
Trade Profile is subject to direct
competition from other options
exchanges that offer substitutes. Any of
these exchanges can replicate this
proposal in full or in part, and nothing
in the proposal would interfere with the
ability of any exchange to do so.
Intra-Market Competition
Nothing in the proposal burdens
intra-market competition (the
competition among consumers of
exchange data). Trade Profile is
available to any customer under the
same fee schedule as any other
customer, and any market participant
that wishes to purchase these products
can do so on a non-discriminatory basis.
Indeed, the proposal will foster
competition by expanding
dissemination of data to vendors and
the general investing public, and by
encouraging more market participants to
use Trade Profile data to help inform
their investments strategies and analytic
models.
Offering the 36 months of historical
data to Current Distributors, but not
former distributors or firms that have
never purchased the product, will not
burden competition because nonsubscribers are free to purchase a
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current subscription. Moreover, a firm
that is not a Current Distributor may
become a Current Distributor and then
cancel the product after receiving the
historical discount. As such, firms that
are not Current Distributors will have an
opportunity to pay the same fees for the
most recent 36 months of historical data
as Current Distributors. Outside of the
36 month period, all firms will have the
opportunity to purchase historical data
on an ad hoc basis.
Adding language to clarify the
definition of Current Distributor will not
change fees, and will promote
competition by better informing
investors.
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
Because the foregoing proposed rule
change does not: (i) significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days after the date of
the filing, or such shorter time as the
Commission may designate if consistent
with the protection of investors and the
public interest, it has become effective
pursuant to Section 19(b)(3)(A) of the
Act 52 and Rule 19b–4(f)(6) 53
thereunder.
A proposed rule change filed under
Rule 19b–4(f)(6) 54 normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b–4(f)(6)(iii),55 the
Commission may designate a shorter
time if such action is consistent with the
protection of investors and the public
interest. The Exchange has asked the
Commission to waive the 30-day
operative delay so that the proposed
rule change may become operative upon
filing. The Exchange has asked the
Commission to waive the 30-day
operative delay so that the proposed
rule change may become operative upon
filing. The Exchange states that adding
52 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
54 17 CFR 240.19b–4(f)(6).
55 17 CFR 240.19b–4(f)(6)(iii).
53 17
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Federal Register / Vol. 89, No. 185 / Tuesday, September 24, 2024 / Notices
the definition of ISE Open/Close Trade
Profile will provide additional clarity
and specificity to the ISE rulebook, and
nothing in the clarification changes the
product or the way it functions, but
rather describes the product exactly as
it exists today. The Exchange also states
that the fees included in this filing have
been in effect since July 1, 2024, and
waiver of the operative delay will allow
application of those fees to continue
uninterrupted. For these reasons, the
Commission believes that waiving the
30-day operative delay is consistent
with the protection of investors and the
public interest. Therefore, the
Commission hereby waives the
operative delay and designates the
proposal operative upon filing.56
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–
ISE–2024–46 on the subject line.
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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–ISE–2024–46. 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/
56 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
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18:07 Sep 23, 2024
Jkt 262001
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–2024–46 and should be
submitted on or before October 15,
2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.57
Vanessa A. Countryman,
Secretary.
[FR Doc. 2024–21744 Filed 9–23–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–101094; File No. SR–LCH
SA–2024–002]
Self-Regulatory Organizations; LCH
SA; Notice of Designation of Longer
Period for Commission Action on
Proceedings To Determine Whether To
Approve or Disapprove a Proposed
Rule Change Relating to the CDSClear
Select Membership Model
77919
thereunder to amend its CDS Clearing
Rule Book and CDS Clearing Procedures
to incorporate new terms and to make
conforming, clarifying, and clean-up
changes to implement a new model of
CDSClear select membership. The
Proposed Rule Change was published
for public comment in the Federal
Register on March 28, 2024.3 The
Commission has not received comments
regarding the Proposed Rule Change.
On May 9, 2024, pursuant to Section
19(b)(2) of the Exchange Act,4 the
Commission designated a longer period
within which to approve, disapprove, or
institute proceedings to determine
whether to approve or disapprove the
Proposed Rule Change, until June 26,
2024.5 On June 21, 2024, the
Commission instituted proceedings,
pursuant to Section 19(b)(2)(B) of the
Exchange Act,6 to determine whether to
approve or disapprove the Proposed
Rule Change.7
Section 19(b)(2) of the Exchange Act 8
provides that proceedings to determine
whether to approve or disapprove a
proposed rule change must be
concluded within 180 days of the date
of publication of notice of filing of the
proposed rule change. The time for
conclusion of the proceedings may be
extended for up to 60 days if the
Commission determines that a longer
period is appropriate and publishes the
reasons for such determination.9 The
180th day after publication of the Notice
in the Federal Register is September 24,
2024.
The Commission is extending the
period for Commission action on the
Proposed Rule Change. The Commission
finds that it is appropriate to designate
a longer period within which to take
action on the Proposed Rule Change so
that the Commission has sufficient time
to consider the issues raised by the
Proposed Rule Change and to take
action on the Proposed Rule Change.
Accordingly, pursuant to Section
19(b)(2)(B)(ii)(II) of the Exchange Act,10
the Commission designates November
23, 2024, as the date by which the
Commission should either approve or
September 18, 2024.
On March 13, 2024, Banque Centrale
de Compensation, which conducts
business under the name LCH SA (‘‘LCH
SA’’), filed with the Securities and
Exchange Commission (‘‘Commission’’)
the proposed rule change SR–LCH SA–
2024–002 (the ‘‘Proposed Rule Change’’)
pursuant to Section 19(b) of the
Securities Exchange Act of 1934
(‘‘Exchange Act’’) 1 and Rule 19b–4 2
57 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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3 Self-Regulatory Organizations; LCH SA; Notice
of Filing of Proposed Rule Change Relating to the
CDSClear Select Membership Model, Exchange Act
Release No. 34–99847 (Mar. 22, 2024); 89 FR 21579
(Mar. 28, 2024) (SR–LCH SA–2024–002) (‘‘Notice’’).
4 15 U.S.C. 78s(b)(2).
5 Exchange Act Release No. 100094 (May 9, 2024),
89 FR 42515 (May 15, 2024) (File No. SR–LCH SA–
2024–002).
6 15 U.S.C. 78s(b)(2)(B).
7 Securities Exchange Act Release No. 100394
(June 21, 2024), 89 FR 53685 (June 27, 2024) (File
No. SR–LCH SA–2024–002).
8 15 U.S.C. 78s(b)(2).
9 15 U.S.C. 78s(b)(2)(B)(ii)(II).
10 Id.
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]]>Agencies
[Federal Register Volume 89, Number 185 (Tuesday, September 24, 2024)]
[Notices]
[Pages 77913-77919]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-21744]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101096; File No. SR-ISE-2024-46]
Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Codify the
Definition of ISE Open/Close Trade Profile
September 18, 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 September 6, 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 and II below, which
Items have been prepared by the Exchange. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to codify the definition of ISE Open/Close
Trade Profile in the ISE rulebook. This filing also incorporates
previously proposed fee changes that: (i) adjusted fees for ISE Open/
Close End of Day and Intraday Trade Profile; (ii) reduced fees for 36
months of historical data for current customers; and (iii) allowed
unlimited external distribution of ISE Open/Close End of Day and
Intraday Trade Profile for a fixed monthly fee.
The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/ise/rules, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to codify the definition
of ISE Open/Close Trade Profile in the ISE rulebook. This filing also
incorporates previously proposed fee changes that: (i) adjusted fees
for ISE Open/Close End of Day and Intraday Trade Profile; (ii) reduced
fees for 36 months of historical data for current customers; and (iii)
allowed unlimited external distribution of ISE Open/Close End of Day
and Intraday Trade Profile for a fixed monthly fee.\3\
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\3\ The previously introduced fee proposal was initially filed
on July 1, 2024, as SR-ISE-2024-25. On July 15, 2024, that filing
was withdrawn and refiled as SR-ISE-2024-32. On July 29, 2024, that
filing was withdrawn and refiled as SR-ISE-2024-36. On August 12,
2024, that proposal was withdrawn and replaced with SR-ISE-2024-40
to incorporate those fees into a filing that codifies the definition
of ISE Open/Close Trade Profile. On August 23, 2024, SR-ISE-2024-40
was withdrawn and replaced with SR-ISE-2024-43 to provide additional
information. On September 6, 2024, SR-ISE-2024-43 was withdrawn and
replaced with the instant filing to provide further information.
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ISE Open/Close Trade Profile
ISE currently sells a market data offering comprised of the entire
opening and closing trade data of ISE-listed options of both customers
and firms, called the ISE Open/Close Trade Profile.\4\ This product is
designed to provide data to subscribers regarding investor sentiment
and trading activity.
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\4\ See Securities Exchange Act Release No. 77907 (May 25,
2016), 81 FR 35079 (June 1, 2016) (SR-ISE-2016-14) (adopting a flat
fee for the Complete Set of historical data); Securities Exchange
Act Release No. 76501 (November 20, 2015), 80 FR 74181 (November 27,
2015) (SR-ISE-2015-40) (offering a one month free trial to new
customers); Securities Exchange Act Release No. 67955 (October 1,
2012), 77 FR 61037 (October 5, 2012) (SR-ISE-2012-76) (adopting
reduced fees for historical data for academic institutions);
Securities Exchange Act Release No. 61317 (January 8, 2010), 75 FR
2915 (January 19, 2010) (SR-ISE-2009-103) (establishing the current
fees for the end of day and intra-day products); Securities Exchange
Act Release No. 60859 (October 21, 2009), 74 FR 55610 (October 28,
2009) (SR-ISE-2009-64) (adjusting fees for academic institutions);
Securities Exchange Act Release No. 60654 (September 11, 2009), 74
FR 47848 (September 17, 2009) (SR-ISE-2009-64) (adjusting fees for
academic institutions); Securities Exchange Act Release No. 56957
(December 13, 2007), 72 FR 71988 (December 19, 2007) (SR-ISE-2007-
115) (establishing the sale of historical data); Securities Exchange
Act Release No. 56254 (August 15, 2007), 72 FR 47104 (August 22,
2007) (SR-ISE-2007-70) (initial offering of ISE Open/Close Trade
Profile).
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The ISE Open/Close Trade Profile provides aggregate quantity and
volume information for trades on the Exchange for all series \5\ during
a trading session. Information is provided in the following categories:
(i) total exchange volume for Intra-Day information and total exchange
and industry volume for End of Day information for each reported
series; (ii) open interest for the series; (iii) aggregate quantity of
trades and aggregate trade volume effected to open a position,
characterized by origin type (Priority Customer,\6\ Broker-Dealer,\7\
Firm Proprietary,\8\ and Professional Customer \9\), and for Priority
Customers and Professional Customers, further subdivided by trade size
buckets; and (iv) aggregate quantity of trades and aggregate trade
volume effected to close a position, characterized by origin type
(Priority Customer, Broker-Dealer, Firm Proprietary, and Professional
Customer), and for Priority Customers and Professional Customers,
further subdivided by trade size buckets.
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\5\ Every options series trades as a distinct symbol; the terms
``series'' and ``symbol'' are therefore synonyms.
\6\ A ``Priority Customer'' is a person or entity that is not a
broker/dealer in securities, and does not place more than 390 orders
in listed options per day on average during a calendar month for its
own beneficial account(s), as defined in Nasdaq ISE Options 1,
Section 1(a)(37). See Options 7, Section 1(c).
\7\ 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)
\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 ``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).
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ISE Open/Close Trade Profile End of Day also provides opening buy,
closing buy, opening sell and closing sell information, which includes
underlying close, option close, and moneyness.
End of Day information is available the next business day. Intra-
Day information is updated at 10-minute intervals over the course of
the trading day. Historical information is available upon request.
The ISE Open/Close Trade Profile provides proprietary Exchange
trade data and does not include any intraday trade data from any other
exchange.\10\ The information provided, both in End of Day and Intraday
formats, is not a real-time data feed.
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\10\ The End of Day report includes a field that presents Total
Industry Volume for the Series.
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[[Page 77914]]
ISE Open/Close Trade Profile is a completely voluntary product in
that the Exchange is not required by any rule or regulation to make
this data available and potential subscribers may purchase it only if
they voluntarily choose to do so.
This information is available to all market participants, including
both members and non-members, for all series and symbols in End of Day,
Intra-Day, and historical files (upon request).
The information provided is designed to provide the ability to
analyze option trade and volume data and create and test trading models
and analytical strategies, as well as build customized sentiment
indicators.
The End of Day file is updated during an overnight process with
additional fields \11\ and is available the following morning.
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\11\ The additional fields are: First Trade Price, Last Trade
Price, Underlying Close, Moneyness, Total Exchange volume, and Total
Industry Volume for the Series.
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The Intraday product is captured in ``snapshots'' taken every 10
minutes throughout the trading day, available to subscribers within 2
minutes of the conclusion of each period. Subscribers receive the first
calculation at 9:42 a.m. ET, representing data captured from 9:30 a.m.
to 9:39 a.m., and the second calculation at 9:52 a.m., representing
data from both the most recent snapshot and previous snapshots,
continuing over the course of the trading day.
The current subscription rate for both members and non-members for
ISE Trade Profile Open/Close End of Day is $750 per month. The current
fee for ISE Open/Close Trade Profile Intraday is $2,000 per month. An
annual subscription for end of day and Intraday Trade Profile is $2,500
per month. These fees have not changed since 2010.\12\
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\12\ See Securities Exchange Act Release No. 61317 (January 8,
2010), 75 FR 2915 (January 19, 2010) (SR-ISE-2009-103) (establishing
the current fees for the end of day and intra-day products).
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ISE also sells historical ISE Open/Close Trade Profile data about
the past activity of all option series traded on the Exchange for each
trading session conducted during a prior calendar month selected by the
subscriber. This data is intended to enhance a purchaser's ability to
analyze option trade and volume data, evaluate historical trends in the
trading activity of a particular option series, and create and test
trading models and analytical strategies. Historical Trade Profile
provides the same fields of information as the End of Day and Intraday
files, respectively. This market data offering is comprised of the
entire opening and closing trade data of both customers and firms
starting in January 2006 for End of Day and October 2009 for
Intraday.\13\ Ad-hoc subscribers can purchase this data for any number
of months through the current month.
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\13\ The current ISE rulebook states that historical End of Day
information is available starting in May 2005. The Exchange is
updating this information to correct the starting date to January
2006.
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Trade Profile is designed to enhance the ability of customers to
understand market sentiment on the Exchange and to create and test
trading models and analytical strategies useful in both options and
equities markets. It is not necessary to execute a trade, but it
supplies the customer with information about underlying market trends
designed to improve the quality of that customer's investment
decisions. Customers can, and often do, elect to forego this
information.
Products similar to Trade Profile have been available on multiple
exchanges for many years and are well-established in the market. Such
products are available from Nasdaq Phlx LLC (``Phlx''),\14\ Nasdaq
Options Market (``NOM''),\15\ Nasdaq GEMX LLC (``GEMX''),\16\ Cboe
Options Exchange,\17\ NYSE American Options,\18\ NYSE Arca Options,\19\
BOX Options Market LLC,\20\ MIAX Pearl Options Exchange,\21\ and
others. In general, the relative value of these products depends on the
volume of transactions included; the greater the volume of
transactions, the greater the value of the data. The current purchasers
of Trade Profile are investment banks, market makers, asset managers
and other buy-side investors.
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\14\ See Securities Exchange Act Release No. 62887 (September
10, 2010), 75 FR 57092 (September 17, 2010) (SR-Phlx-2010-121)
(introducing PHOTO on September 1, 2010),
\15\ See Nasdaq Stock Market Rules, Options 7, Section 4 (Nasdaq
Options Market Data Distributor Fees).
\16\ See Nasdaq GEMX Rules, Options 7, Sections 7(D) (Nasdaq
GEMX Open/Close End of Day Trade Profile) and 7(E) (Nasdaq GEMX
Open/Close Intra-day Trade Profile)
\17\ See, e.g., Securities Exchange Act Release No. 94913 (May
13, 2022), 87 FR 30534 (May 19, 2022) (SR-Cboe-2022-023) (describing
End of Day and Intra-day Open-Close Data as a summary of trading
activity on the exchange at the option level by origin, side of the
market, price and transaction type).
\18\ See, e.g., Securities Exchange Act Release No. 93803
(December 16, 2021, 86 FR 72647 (December 22, 2021) (SR-NYSEAMER-
2021-46) (describing the NYSE Options Open-Close Volume Summary as a
volume summary of trading activity on the exchange at the option
level by origin, side of the market, contract volume and transaction
type).
\19\ See, e.g., Securities Exchange Act Release No. 93132
(September 27, 2021), 86 FR 54499 (October 1, 2021) (SR-NYSEArca-
2021-82) (describing the NYSE Options Open-Close Volume Summary as a
volume summary of trading activity on the exchange at the option
level by origin, side of the market, contract volume and transaction
type).
\20\ See, e.g., Securities Exchange Act Release No. 97174 (March
21, 2023), 88 FR 18201 (March 27, 2023) (SR-BOX-2023-09) (describing
the BOX exchange Open-Close Data report as providing volume by
origin, buying/selling, and opening/closing criteria).
\21\ See, e.g., Securities Exchange Act Release No. 91964 (May
21, 2021), 86 FR 28667 (May 27, 2021) (SR-PEARL-2021-24)
(introducing the Open-Close Report).
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Proposed Changes
Definition of ISE Open/Close Trade Profile
The Exchange proposes to codify the definition of ISE Open/Close
Trade Profile. Nothing in this codification is intended to change the
product in any way, but rather is intended to describe the product
exactly as it exists. Specifically, the Exchange proposes the following
definition:
ISE Open/Close Trade Profile provides aggregate quantity and
volume information for trades on the Exchange for all series during
a trading session. Information is provided in the following
categories: (i) total exchange volume for Intra-Day information and
total exchange and industry volume for End of Day information for
each reported series; (ii) open interest for the series; (iii)
aggregate quantity of trades and aggregate trade volume effected to
open a position, characterized by origin type (Priority Customer,
Broker-Dealer, Firm Proprietary, and Professional Customer), and for
Priority Customers and Professional Customers, further subdivided by
trade size buckets; and (iv) aggregate quantity of trades and
aggregate trade volume effected to close a position, characterized
by origin type (Priority Customer, Broker-Dealer, Firm Proprietary,
and Professional Customer), and for Priority Customers and
Professional Customers, further subdivided by trade size buckets.
ISE Open/Close Trade Profile End of Day will also provide
opening buy, closing buy, opening sell and closing sell information,
which shall include option first trade price, underlying close,
option close, and moneyness.
End of Day information will be available the next business day.
Intra-Day information is updated at 10-minute intervals over the
course of the trading day. Historical information will be available
upon request.
The purpose of the proposed change is to add clarity and
specificity to the ISE rulebook.
Previously Introduced Fee Changes
Fee Changes for End of Day and Intraday Products
The Exchange proposes to increase the fee for the End of Day
product from $750 to $850, and the Intraday Product from $2,000 to
$2,500. The discounted rate of $2,500 per month for both end of day and
intraday information will be increased to $3,100 to reflect the new
fees while preserving the $250 discount.
In addition, the Exchange proposes to insert a comma after the
phrase ``or the
[[Page 77915]]
Intraday Product for the current month'' into the definition of Current
Distributor. The revised sentence will read as follows:
A ``Current Distributor'' is any firm that purchases either the
End of Day Product for the current month, or the Intraday Product
for the current month, in the same month that the 36 months of
historical End of Day or Intraday data is ordered.
The change is designed to clarify that the phrase ``the same month
that the 36 months of historical End of Day or Intraday data is
ordered'' applies to both firms that purchase End of Day data in the
current month and firms that purchase Intraday data for the current
month. The clarification will not change how the fee is charged.
Discount for Historical Data
The Exchange proposes to alter discounts for historical end of day
and intraday data for Current Distributors.\22\ Specifically, the
Exchange proposes to offer the most recent 36 months of end of day data
for $7,200, and the most recent 36 months intraday data for $12,000.
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\22\ The Exchange proposes to define ``Current Distributor'' as
any firm that purchases either the End of Day Product for the
current month, or the Intraday Product for the current month in the
same month that the 36 months of historical End of Day or Intraday
data is ordered.
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Ad-hoc requests for historical end of day data are currently $600
per request per month. A complete set of historical end of day data is
$27,500 per request. For intraday data, there is a sliding scale of
charges: $1,000 per request per month; $2,000 per request per quarter;
and $8,000 per request per year.
The proposed rates are a substantial discount from current fees.
With respect to end of day data, ad hoc requests are $600 per request
per month. Three years of such data would cost $21,600. The proposed
rate of $7,200 is far below this level. With respect to intraday
information, the current rates are $1,000 per request per month, $2,000
per request per quarter, and $8,000 per request per year. Using the
lowest rate of $8,000 per request per year, the most recent 36 months
of intraday information would cost $24,000. The proposed rate of
$12,000 for the most recent 36 months of intraday data is a substantial
discount from the current rate.
For customers that request more than three years of information,
end of day historical information can still be purchased for $600 per
request per month, and intraday information can be purchased at $1,000
per request per month. The discount for a complete set of historical
end of day data is $27,500 per request is being removed because the
Exchange has found that the most recent three years of data is
sufficient for most customer needs. Many customers use historical data
to test their strategies and models, and our discussions with current
and former customers and experience indicate that 36 months of data is
sufficient for most customer needs, and is an effective baseline for
review.
The historical data will continue to provide the same categories of
information available for current subscribers under the new proposal.
Eligibility for the discount will depend on the type of current
subscription. A current purchaser of End of Day data would be eligible
for the historical End of Day product at the reduced rate. A current
purchaser of the Intraday product would similarly be able to purchase
the historical Intraday product at the reduced rate. A purchaser of
both the current End of Day and Intraday products would be entitled to
purchase both types of history at the reduced rate.
The 36-month period will be based on the date of purchase of the 36
months of data by a Current Distributor. For example, a customer that
buys the End of Day product for the first time in July 2024 would also
be able to purchase historical End of Day data for the period July 2021
through July 2024 (inclusive) at the discounted rate. Similarly, a
customer with an existing End of Day subscription in July 2024 would be
able to purchase the historical End of Day data from July 2021 through
July 2024 at the discounted rate. The same reasoning would apply to
Intraday customers.\23\
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\23\ A customer may use the proposed historical data discount
more than once. For example, a Current Distributor that purchases 36
months of historical data at a discount, but later terminates that
subscription, would be eligible to purchase another 36 months of
historical data (based on the date of purchase) upon renewing that
subscription. (Current Distributors that never terminate would have
no need for a second purchase, as they would already possess the
most recent months of historical data.).
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The fees for historical data are linked to the current product
because effective historical testing requires a comparison of similar
licenses. Effective testing of the End of Day product, for example,
requires End of Day historical data, and the same would hold true for
Intraday data.
Historical data for Intraday information is currently offered in
three tiers, depending on the time period requested: $1,000 per request
per month, $2,000 per request per quarter, and $8,000 per request per
year. The Exchange receives almost no requests for information on a
quarterly or yearly basis. If a potential customer were interested in
quarterly or yearly data, the Exchange believes that such a customer
would be able to obtain more data at a lower cost using the proposed
36-month discount. As such, the Exchange expects that removal of the
quarterly and yearly pricing tiers will have no material impact on
customers. The monthly tier will remain for customers who wish to
purchase data outside of the 36-month window.
The Exchange proposes to remove the fee of $2,000 per request per
quarter and $8,000 per request per year as no longer useful in light of
the much lower discount being proposed for 36 months of historical
data.
Historical data is useful in analyzing option trade and volume
data, evaluating historical trends in the trading activity of a
particular option series, and creating and testing trading models and
analytical strategies, and is often purchased concurrently with a new
subscription to ISE Open/Close Trade Profile. Many customers use
historical data to test their strategies and models, and our
discussions with current and past customers and experience indicate
that 36 months of data is sufficient for most customer needs, and is an
effective baseline for review.
External Distribution of Derived Data
The Exchange proposes to offer a license for the unlimited external
distribution of Derived Data from ISE Trade Profile for $4,500 per
month. Derived Data is ``any information generated in whole or in part
from Exchange Information \24\ such that the information generated
cannot be reverse engineered to recreate Exchange Information, or be
used to create other data that is recognizable as a reasonable
substitute for such Exchange Information.''
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\24\ ``Exchange Information'' is any data or information that
has been collected, validated, processed and/or recorded by the
Exchange and made available for transmission relating to: (i)
Eligible securities or other financial instruments, markets,
products, vehicles, indicators, or devices; (ii) activities of the
Exchange; or (iii) other information or data from the Exchange.
Information includes, but is not limited to, any element of
information used or processed in such a way that Exchange
Information or a substitute for such Information can be identified,
recalculated or re-engineered from the processed information.
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Fees for external distribution of Derived Data from ISE Trade
Profile are in addition to fees for the End of Day product or the
Intraday product, or both, as applicable.
This is a new license to be offered by the Exchange; external
distribution of
[[Page 77916]]
Derived Data is not currently permitted. The proposal, based on a
similar license offered by the Phlx Exchange,\25\ will allow the
external distribution of analytic products derived from ISE Trade
Profile to the general investing public. A similar product is also
being proposed for the Nasdaq Options Market and the GEMX Exchange.
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\25\ See Securities Exchange Act Release No. 93293 (October 12,
2021), 86 FR 57716 (October 18, 2021) (SR-Phlx-2021-58).
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Experience with the Phlx Exchange indicates that this license
provides an effective mechanism for market data vendors to identify,
develop, and sell derived market data products, such as sentiment
indicators, harnessing the power of the competitive marketplace to
promote innovation. The Exchange expects that this product will have
the greatest utility for the general investing public.
2. Statutory Basis
The Exchange believes that its proposal to codify the definition of
ISE Open/Close Trade Profile is consistent with Section 6(b) of the
Act,\26\ in general, and furthers the objectives of Section 6(b)(5) of
the Act,\27\ in particular, in that it is designed to promote just and
equitable principles of trade, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general to protect investors and the public interest.
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\26\ 15 U.S.C. 78f(b).
\27\ 15 U.S.C. 78f(b)(5).
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Adding the definition of ISE Open/Close Trade Profile will provide
additional clarity and specificity to the ISE rulebook. Nothing in this
codification is intended to change the product or the way it functions,
but rather is intended to describe the product exactly as it exists
today. Providing additional clarity about an exchange product will help
investors make better informed decisions about ISE Open/Close Trade
Profile, and therefore will help protect investors and promote the
public interest.
Similarly, clarifying the definition of Current Distributor will
also add clarity and specificity to the rulebook without changing the
underlying fees. This additional clarity will help investors make
better informed decisions about ISE Open/Close Trade Profile, and
thereby help protect investors and promote the public interest.
The Exchange also believes that its proposal to change fees is
consistent with Section 6(b) of the Act,\28\ in general, and furthers
the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\29\ 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.
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\28\ 15 U.S.C. 78f(b).
\29\ 15 U.S.C. 78f(b)(4) and (5).
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Equitable Allocation of Reasonable Dues, Fees and Other Charges
The proposed changes are an equitable allocation of reasonable
dues, fees and other charges because: (i) the trade profile products
offered by multiple exchanges are substitutes, and customers are free
to choose which product they purchase; and (ii) the proposed fees are
comparable to the fees charged by other exchanges, and customers are
free to purchase other products if the Exchange has mistaken the value
of its product.
Substitution
As noted above, products similar to Trade Profile have been
available on multiple exchanges for many years and are well-established
in the market. Such products are available from Phlx,\30\ ISE,\31\
GEMX,\32\ Cboe,\33\ NYSE American,\34\ NYSE Arca,\35\ BOX,\36\ MIAX
Pearl,\37\ and others.
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\30\ See Securities Exchange Act Release No. 62887 (September
10, 2010), 75 FR 57092 (September 17, 2010) (SR-Phlx-2010-121)
(introducing PHOTO on September 1, 2010),
\31\ See Nasdaq ISE Rules, Options 7, Section 10(A) and (B)
(Nasdaq ISE Open/Close Trade Profile End of Day; Nasdaq ISE Open/
Close Trade Profile Intra-day).
\32\ See Nasdaq GEMX Rules, Options 7, Sections 7(D) (Nasdaq
GEMX Open/Close End of Day Trade Profile) and 7(E) (Nasdaq GEMX
Open/Close Intra-day Trade Profile)
\33\ See, e.g., Securities Exchange Act Release No. 94913 (May
13, 2022), 87 FR 30534 (May 19, 2022) (SR-Cboe-2022-023) (describing
End of Day and Intra-day Open-Close Data as a summary of trading
activity on the exchange at the option level by origin, side of the
market, price and transaction type).
\34\ See, e.g., Securities Exchange Act Release No. 93803
(December 16, 2021, 86 FR 72647 (December 22, 2021) (SR-NYSEAMER-
2021-46) (describing the NYSE Options Open-Close Volume Summary as a
volume summary of trading activity on the exchange at the option
level by origin, side of the market, contract volume and transaction
type).
\35\ See, e.g., Securities Exchange Act Release No. 93132
(September 27, 2021), 86 FR 54499 (October 1, 2021) (SR-NYSEArca-
2021-82) (describing the NYSE Options Open-Close Volume Summary as a
volume summary of trading activity on the exchange at the option
level by origin, side of the market, contract volume and transaction
type).
\36\ See, e.g., Securities Exchange Act Release No. 97174 (March
21, 2023), 88 FR 18201 (March 27, 2023) (SR-BOX-2023-09) (describing
the BOX exchange Open-Close Data report as providing volume by
origin, buying/selling, and opening/closing criteria).
\37\ See, e.g., Securities Exchange Act Release No. 91964 (May
21, 2021), 86 FR 28667 (May 27, 2021) (SR-PEARL-2021-24)
(introducing the Open-Close Report).
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Trade outline products offer the same categories of data through
end of day or intraday reports. The information provided by one
exchange is generally similar to that provided by other exchanges
because order flow can move from one exchange to another, and market
sentiment trends that appear on one exchange are likely to be similar
to the sentiment trends on other exchanges. The key differentiator in
the quality of the data depends on the volume of transactions on a
given exchange; the greater the volume of transactions, the greater the
value of the data. Customers can choose not to purchase the trade
outline product of one exchange and substitute it for that of another
exchange.
Customers can also choose not to purchase a trade outline product
at all. Trade outline products are designed to help investors
understand underlying market trends to improve the quality of
investment decisions, but is not necessary to execute a trade.
Customers can, and do, choose to forego the information from Trade
Profile or any of its competitor products when making a trade.
Nasdaq and its affiliates have observed that customers purchase
sufficient data to provide a view of the market, but not more, as the
value of data from each additional exchange yields diminishing returns.
As a result, all exchanges are limited in what they will be able to
charge for a trade outline product.
As the Commission and courts \38\ have recognized, ``[i]f
competitive forces are operative, the self-interest of the exchanges
themselves will work powerfully to constrain unreasonable or
[[Page 77917]]
unfair behavior.'' \39\ Accordingly, ``the existence of significant
competition provides a substantial basis for finding that the terms of
an exchange's fee proposal are equitable, fair, reasonable, and not
unreasonably or unfairly discriminatory.'' \40\ 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.'' \41\ Trade Profile is in direct competition with multiple
exchanges that offer similar products in end of day and intraday
formats.\42\
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\38\ The decision of the United States Court of Appeals for the
District of Columbia Circuit in NetCoalition v. SEC, 615 F.3d 525
(D.C. Cir. 2010) upheld the Commission's reliance upon competitive
markets to set reasonable and equitably allocated fees for market
data. ``In fact, the legislative history indicates that the Congress
intended that the market system evolve through the interplay of
competitive forces as unnecessary regulatory restrictions are
removed and that the SEC wield its regulatory power in those
situations where competition may not be sufficient, such as in the
creation of a consolidated transactional reporting system.''
NetCoalition I at 535 (quoting H.R. Rep. No. 94-229, at 92 (1975),
as reprinted in 1975 U.S.C.C.A.N. 321, 323) (internal quotation
marks omitted). The court agreed with the Commission's conclusion
that ``Congress intended that competitive forces should dictate the
services and practices that constitute the U.S. national market
system for trading equity securities.'' Id. (quoting Securities
Exchange Act Release No. 59039 (December 2, 2008), 73 FR 74770,
74771(December 9, 2008) (SR-NYSEArca-2006-21)).
\39\ See Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770 (December 9, 2008) (SR-NYSEArca-2006-21).
\40\ See id.
\41\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
\42\ These substitute products include NOTO, ISE Trade Profile,
GEMX Trade Profile data; open-close data from Cboe C1, C2, BZX, and
EDGX; and Open Close Reports from MIAX Options, Pearl, and Emerald.
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The license to allow the external distribution of Derived Data,
like the purchase of the end of day and intraday licenses, is also
subject to competition. Any exchange that wishes to allow distribution
of a Derived Data product based on options trading information would be
able to do so with an immediately effective fee filing similar to this
proposal.
Moreover, as explained above, the proposal is designed to promote
the dissemination of a variety of analytical insights--generally used
only by investment banks, market makers, asset managers and other buy-
side investors--to the general investing public by creating an
incentive for market data vendors to identify, develop, and sell such
indicators. As such, the proposal will spur competition among not only
exchanges, but vendors as well.
The discounted fees for historical data and the $250 discount for
the purchase of both end of day and intraday data together, like the
purchase of the end of day, intraday and Derived Data licenses, is also
subject to competition. Any exchange that wishes to provide discounts
for historical data or the joint usage of end of day and intraday
information would be able to do so with an immediately effective fee
filing in response.
Comparability of Proposed Fees
The proposed fees are comparable to the fees charged by similarly
situated exchanges.
As explained above, the value of Trade Profile is determined in
part by the number of underlying transactions reflected in the data.
ISE has a market share comparable to NYSE American, MIAX, and MIAX
Pearl at approximately 6% to 7% in the second quarter of 2024.\43\ For
intraday products, NYSE American charges $2,000,\44\ MIAX charges
$2,000,\45\ and MIAX Pearl charges $2,000.\46\ The proposed fees of
$2,500 for ISE are above this because ISE believes that the other
exchanges are not accurately reflecting the value of the data. CBOE C1,
at a slightly larger market share of approximately 9%,\47\ charges
$3,000 for intraday data,\48\ and we believe the proposed fee of $2,500
is more in line with the overall market for trade outline information
than the $2,000 charged by other exchanges.
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\43\ See NasdaqTrader.com, ``Options Market Statistics,''
available at https://www.nasdaqtrader.com/Trader.aspx?id=OptionsVolumeSummary.
\44\ See NYSE American, ``NYSE American Options Proprietary
Market Data Fees as of November 1, 2023,'' available at https://www.nyse.com/publicdocs/nyse/data/NYSE_American_Options_Market_Data_Fee_Schedule.pdf
\45\ See MIAX Options Exchange, ``Fee Schedule as of April 23,
2024,'' available at https://www.miaxglobal.com/sites/default/files/fee_schedule-files/MIAX_Options_Fee_Schedule_04232024.pdf
\46\ See MIAX Pearl Options Exchange, ``Fee Schedule as of April
15, 2024,'' available at https://www.miaxglobal.com/sites/default/files/fee_schedule-files/MIAX_Pearl_Options_Fee_Schedule_04152024.pdf
\47\ See NasdaqTrader.com, ``Options Market Statistics,''
available at https://www.nasdaqtrader.com/Trader.aspx?id=OptionsVolumeSummary.
\48\ See Cboe DataShop, ``Cboe Open-Close Volume Summary,''
available at https://datashop.cboe.com/cboe-options-open-close-volume-summary.
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For end of day data, NYSE American charges $750,\49\ MIAX charges
$600,\50\ and MIAX Pearl charges $600.\51\ The proposed fees of $850
are higher than this range, but the Exchange believes that its
competitors are underestimating the value of the product.
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\49\ See NYSE American, ``NYSE American Options Proprietary
Market Data Fees as of November 1, 2023,'' available at https://www.nyse.com/publicdocs/nyse/data/NYSE_American_Options_Market_Data_Fee_Schedule.pdf.
\50\ See MIAX Options Exchange, ``Fee Schedule as of April 23,
2024,'' available at https://www.miaxglobal.com/sites/default/files/fee_schedule-files/MIAX_Options_Fee_Schedule_04232024.pdf.
\51\ See MIAX Pearl Options Exchange, ``Fee Schedule as of April
15, 2024,'' available at https://www.miaxglobal.com/sites/default/files/fee_schedule-files/MIAX_Pearl_Options_Fee_Schedule_04152024.pdf.
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Nasdaq is not aware of another exchange that provides a similar
discount for historical data other than its own affiliates. The Phlx
exchange, which is affiliated with Nasdaq, offers the most recent 36
months of historical End of Day data to Current Distributors for
$6,000, and the most recent 36 months of Intraday data for $12,000.
Nasdaq believes that the proposed ISE fees are reasonable in comparison
to Phlx because, although Phlx has a somewhat larger market share
(approximately 9% for Phlx vs. about 7% for ``ISE), the historical Phlx
data is somewhat undervalued. As such, ISE's proposed fees of $7,200
for 36 months of ISE's historical End of Day data and $12,000 for 36
months of ISE's Intraday data are reasonable.
If the Exchange is wrong in these assessments, it will lose sales
as a result.
As noted above, clarifying the definition of Current Distributor
will not change fees, and therefore will not impact the equitable
allocation of reasonable dues, fees and other charges.
The Proposal Does Not Permit Unfair Discrimination
Nothing in the proposal treats any category of market participant
any differently from any other category of market participant. On the
contrary, the proposal expands distribution of Trade Profile beyond
investment banks, market makers, asset managers and other buy-side
investors to market data vendors and the general investing public.
Allowing the distribution of Derived Data to the general investing
public will broaden the availability of such information while not
treating any current recipient of the product differently in any way.
The new fee structure, which modifies fees to reflect current market
value and offers historical data at a discount, applies equally to all
current and potential distributors. Trade Profile is available to all
market participants, including members and non-members, and all market
participants receive the same information in the Trade Profile data
feed.
With respect to the specific fee changes, it is reasonable and not
unfair discrimination to charge an external distributor of Derived Data
a $4,500 licensing fee. Vendors will ordinarily charge a fee to their
downstream customers for this service, and, even if the vendor is not
charging a specific fee for this particular service, Derived Data
products from the Exchange will be part of a suite of offerings that
generally
[[Page 77918]]
promote sales. External distribution is fundamentally different than
internal use, in that the former generates revenue from external sales
while the latter does not. It is not unfair discrimination to charge a
licensing fee for a product that generates downstream revenue.
Nor is it unfair discrimination to allow the redistribution of
Derived Data, but not the underlying information, to the general
investing public. As explained above, neither exchanges nor vendors
ordinarily allow redistribution of analytic products--such products are
typically designed solely for the use of direct customers, not for
redistribution to the customers of customers in the manner of a data
feed. Allowing the redistribution of Derived Data provides an incentive
for vendors to innovate with new compelling and varied analytic
products for the general investing public that will provide access to
market sentiment insights currently available only to sophisticated
investors. This proposal is therefore not unfair discrimination, but
rather allows for more equitable access to market sentiment information
for the general investing public.
It is also not unfair discrimination to provide a discount for 36
months of historical data to Current Distributors, but not former
distributors or firms that have never purchased the product. Any firm
would be able to become a Current Distributor at any time by
subscribing to Trade Profile, and would be able to cancel the
subscription at any time after receiving the 36 months of historical
data for the proposed discounted fee. More specifically, a firm that is
not a Current Distributor may obtain access to the 36 months of
historical data at a discount by becoming a Current Distributor for a
limited time and then terminating the subscription.
It is not unfair discrimination to limit the historical data
discount to Current Distributors. Historical information is generally
used by Current Distributors to test their strategies and trading
models, and Current Distributors are therefore in the best position to
benefit from the historical data. Outside of the 36 month period, all
firms will have the opportunity to purchase historical data on an ad
hoc basis.
For all of these reasons, the proposal does not permit unfair
discrimination.
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 intermarket
competition, the Exchange notes that it operates in a highly
competitive market in which market participants can readily favor
competing venues if they deem fee levels at a particular venue to be
excessive, or rebate opportunities available at other venues to be more
favorable. In such an environment, the Exchange must continually adjust
its fees to remain competitive with other exchanges and with
alternative trading systems that have been exempted from compliance
with the statutory standards applicable to exchanges. Because
competitors are free to modify their own fees in response, and because
market participants may readily adjust their order routing practices,
the Exchange believes that the degree to which fee changes in this
market may impose any burden on competition is extremely limited.
Adding the definition of ISE Open/Close Trade Profile will promote
competition by helping investors make better informed decisions about
ISE Open/Close Trade Profile. Nothing about the addition of a
definition will impact inter-market competition or intra-market
competition negatively.
Intermarket Competition
Nothing in the proposal burdens inter-market competition (the
competition among self-regulatory organizations).
As discussed above, ISE Open/Close Trade Profile is subject to
direct competition from other options exchanges that offer substitutes.
Any of these exchanges can replicate this proposal in full or in part,
and nothing in the proposal would interfere with the ability of any
exchange to do so.
Intra-Market Competition
Nothing in the proposal burdens intra-market competition (the
competition among consumers of exchange data). Trade Profile is
available to any customer under the same fee schedule as any other
customer, and any market participant that wishes to purchase these
products can do so on a non-discriminatory basis. Indeed, the proposal
will foster competition by expanding dissemination of data to vendors
and the general investing public, and by encouraging more market
participants to use Trade Profile data to help inform their investments
strategies and analytic models.
Offering the 36 months of historical data to Current Distributors,
but not former distributors or firms that have never purchased the
product, will not burden competition because non-subscribers are free
to purchase a current subscription. Moreover, a firm that is not a
Current Distributor may become a Current Distributor and then cancel
the product after receiving the historical discount. As such, firms
that are not Current Distributors will have an opportunity to pay the
same fees for the most recent 36 months of historical data as Current
Distributors. Outside of the 36 month period, all firms will have the
opportunity to purchase historical data on an ad hoc basis.
Adding language to clarify the definition of Current Distributor
will not change fees, and will promote competition by better informing
investors.
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
Because the foregoing proposed rule change does not: (i)
significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days after the date of the filing, or such
shorter time as the Commission may designate if consistent with the
protection of investors and the public interest, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \52\ and Rule 19b-
4(f)(6) \53\ thereunder.
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\52\ 15 U.S.C. 78s(b)(3)(A).
\53\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \54\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\55\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposed
rule change may become operative upon filing. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposed
rule change may become operative upon filing. The Exchange states that
adding
[[Page 77919]]
the definition of ISE Open/Close Trade Profile will provide additional
clarity and specificity to the ISE rulebook, and nothing in the
clarification changes the product or the way it functions, but rather
describes the product exactly as it exists today. The Exchange also
states that the fees included in this filing have been in effect since
July 1, 2024, and waiver of the operative delay will allow application
of those fees to continue uninterrupted. For these reasons, the
Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest.
Therefore, the Commission hereby waives the operative delay and
designates the proposal operative upon filing.\56\
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\54\ 17 CFR 240.19b-4(f)(6).
\55\ 17 CFR 240.19b-4(f)(6)(iii).
\56\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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 [email protected]. Please include
file number SR-ISE-2024-46 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-2024-46. 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-2024-46 and should be
submitted on or before October 15, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\57\
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\57\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-21744 Filed 9-23-24; 8:45 am]
BILLING CODE 8011-01-P
