Federal Register / Vol. 83, No. 156 / Monday, August 13, 2018 / Notices 40103 

14See supra note 4. 

15 15 U.S.C. 78s(b)(3)(A)(ii). 

16 17 CFR 240.19b–4(f)(2). 17 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19B–4. 

contrary, the Exchange believes that the 

proposed changes should increase both 

intermarket and intramarket 

competition. Specifically, the Exchange 

believes that the changes will promote 

competition by increasing the 

connectivity fees to become more within 

the range of comparable fees assessed by 

other competing exchanges.14

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. In such an environment, the 

Exchange must continually adjust its 

fees to remain competitive with other 

exchanges. The Exchange believes that 

the proposed changes reflect this 

competitive environment. To the extent 

that this purpose is achieved, all the 

Exchange’s market participants should 

benefit from the improved market 

liquidity. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

Written comments were neither 

solicited nor received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A)(ii) of the Act,15 and Rule 

19b–4(f)(2) 16 thereunder. At any time 

within 60 days of the filing of the 

proposed rule change, the Commission 

summarily may temporarily suspend 

such rule change if it appears to the 

Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in furtherance of the 

purposes of the Act. If the Commission 

takes such action, the Commission shall 

institute proceedings to determine 

whether the proposed rule should be 

approved or disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

PEARL–2018–16 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–PEARL–2018–16. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (http://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 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–PEARL–2018–16 and 

should be submitted on or before 

September 4, 2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.17

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–17251 Filed 8–10–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83793; File No. SR–ISE– 

2018–70] 

Self-Regulatory Organizations; Nasdaq 

ISE, LLC; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Amend the Options 

Regulatory Fee 

August 7, 2018. 

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 July 27, 

2018, Nasdaq ISE, LLC (‘‘ISE’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission (the 

‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III below, which Items have been 

prepared by the Exchange. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to revise ISE’s 

Schedule of Fees to amend its Options 

Regulatory Fee or ‘‘ORF’’. 

While the changes proposed herein 

are effective upon filing, the Exchange 

has designated the amendments become 

operative on August 1, 2018. 

The text of the proposed rule change 

is available on the Exchange’s website at 

http://ise.cchwallstreet.com/, 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. 


sradovich on DSK3GMQ082PROD with NOTICES
40104 Federal Register / Vol. 83, No. 156 / Monday, August 13, 2018 / Notices 

3On June 30, 2016, Nasdaq completed its 

acquisition of the International Securities Exchange. 

With the acquisition, ISE regulatory program has 

been examined and conformed to certain best 

practices which exist today on NASDAQ PHLX 

LLC, The NASDAQ Options Market LLC and 

NASDAQ BX, Inc. (collectively ‘‘Nasdaq Markets’’) 

and Nasdaq GEMX, LLC. These synergies in 

combination with conforming the expense and 

revenue review of ISE to that of the Nasdaq Markets 

resulted in decreased regulatory expenses for ISE. 

See Securities Exchange Act Release No. 81345 

(August 8, 2017), 82 FR 155 (August 14, 2017) (SR– 

ISE–2017–71). 

4Members must record the appropriate account 

origin code on all orders at the time of entry in 

order. The Exchange represents that it has 

surveillances in place to verify that members mark 

orders with the correct account origin code. 

5The Exchange uses reports from OCC when 

assessing and collecting the ORF. 

6CMTA or Clearing Member Trade Assignment is 

a form of ‘‘give-up’’ whereby the position will be 

assigned to a specific clearing firm at OCC. 

7See Options Trader Alert #2018–27. 

8 15 U.S.C. 78f(b). 

9 15 U.S.C. 78f(b)(4) and (5). 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

Currently, ISE assesses an ORF of 

$0.0016 per contract side. The Exchange 

proposes to increase this ORF to 

$0.0020 per contract side. In 2017, ISE 

reduced its ORF from $0.0039 per 

contract side to $0.0016 per contract 

side to account for synergies which 

resulted from Nasdaq’s acquisition 3 of 

the Exchange. At this time, the 

Exchange proposes an increase to its 

ORF that reflects its current expense 

profile. The Exchange’s proposed 

change to the ORF should balance the 

Exchange’s regulatory revenue against 

the anticipated costs. 

Collection of ORF 

Currently, ISE assesses its ORF for 

each customer option transaction that is 

either: (1) Executed by a Member on 

ISE; or (2) cleared by an ISE Member at 

The Options Clearing Corporation 

(‘‘OCC’’) in the customer range,4 even if 

the transaction was executed by a nonmember of ISE, regardless of the 

exchange on which the transaction 

occurs.5 If the OCC clearing member is 

an ISE Member, ORF is assessed and 

collected on all cleared customer 

contracts (after adjustment for CMTA 6); 

and (2) if the OCC clearing member is 

not an ISE Member, ORF is collected 

only on the cleared customer contracts 

executed at ISE, taking into account any 

CMTA instructions which may result in 

collecting the ORF from a non-member. 

By way of example, if Broker A, an 

ISE Member, routes a customer order to 

CBOE and the transaction executes on 

CBOE and clears in Broker A’s OCC 

Clearing account, ORF will be collected 

by ISE from Broker A’s clearing account 

at OCC via direct debit. While this 

transaction was executed on a market 

other than ISE, it was cleared by an ISE 

Member in the member’s OCC clearing 

account in the customer range, therefore 

there is a regulatory nexus between ISE 

and the transaction. If Broker A was not 

an ISE Member, then no ORF should be 

assessed and collected because there is 

no nexus; the transaction did not 

execute on ISE nor was it cleared by an 

ISE Member. 

In the case where a Member both 

executes a transaction and clears the 

transaction, the ORF is assessed to and 

collected from that Member. In the case 

where a Member executes a transaction 

and a different member clears the 

transaction, the ORF is assessed to and 

collected from the Member who clears 

the transaction and not the Member who 

executes the transaction. In the case 

where a non-member executes a 

transaction at an away market and a 

Member clears the transaction, the ORF 

is assessed to and collected from the 

Member who clears the transaction. In 

the case where a Member executes a 

transaction on ISE and a non-member 

clears the transaction, the ORF is 

assessed to the Member that executed 

the transaction on ISE and collected 

from the non-member who cleared the 

transaction. In the case where a Member 

executes a transaction at an away 

market and a non-member clears the 

transaction, the ORF is not assessed to 

the Member who executed the 

transaction or collected from the nonmember who cleared the transaction 

because the Exchange does not have 

access to the data to make absolutely 

certain that ORF should apply. Further, 

the data does not allow the Exchange to 

identify the Member executing the trade 

at an away market. 

ORF Revenue and Monitoring of ORF 

The Exchange monitors the amount of 

revenue collected from the ORF to 

ensure that it, in combination with other 

regulatory fees and fines, does not 

exceed regulatory costs. In determining 

whether an expense is considered a 

regulatory cost, the Exchange reviews 

all costs and makes determinations if 

there is a nexus between the expense 

and a regulatory function. The Exchange 

notes that fines collected by the 

Exchange in connection with a 

disciplinary matter offset ORF. 

The ORF is designed to recover a 

material portion of the costs to the 

Exchange of the supervision and 

regulation of its members, including 

performing routine surveillances, 

investigations, examinations, financial 

monitoring, and policy, rulemaking, 

interpretive, and enforcement activities. 

The Exchange believes that revenue 

generated from the ORF, when 

combined with all of the Exchange’s 

other regulatory fees, will cover a 

material portion, but not all, of the 

Exchange’s regulatory costs. The 

Exchange will continue to monitor the 

amount of revenue collected from the 

ORF to ensure that it, in combination 

with its other regulatory fees and fines, 

does not exceed regulatory costs. If the 

Exchange determines regulatory 

revenues exceed regulatory costs, the 

Exchange will adjust the ORF by 

submitting a fee change filing to the 

Commission. 

Proposal 

The Exchange is proposing to increase 

the ORF from $0.0016 to $0.0020 as of 

August 1, 2018 to reflect its current 

expense expenses while also ensuring 

that the ORF will not exceed costs. The 

Exchange regularly reviews its ORF to 

ensure that the ORF, in combination 

with its other regulatory fees and fines, 

does not exceed regulatory costs. The 

Exchange believes this adjustment will 

permit the Exchange to cover a material 

portion of its regulatory costs, while not 

exceeding regulatory costs. 

The Exchange notified Members via 

an Options Trader Alert of the proposed 

change to the ORF thirty (30) calendar 

days prior to the proposed operative 

date, August 1, 2018.7 The Exchange 

believes that the prior notification 

market participants will ensure market 

participants are prepared to configure 

their systems to properly account for the 

ORF. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act 8 in general, and furthers the 

objectives of Sections 6(b)(4) and 6(b)(5) 

of the Act 9 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 its facility and is not 

designed to permit unfair 

discrimination between customers, 

issuers, brokers, or dealers. 

The Exchange believes that increasing 

the ORF from $0.0016 to $0.0020 as of 

August 1, 2018 is reasonable because 

the Exchange’s collection of ORF needs 

to be balanced against the amount of 

regulatory costs incurred by the 

Exchange. The Exchange believes that 

the proposed adjustments noted herein 

will serve to balance the Exchange’s 

regulatory revenue against the 


sradovich on DSK3GMQ082PROD with NOTICES
Federal Register / Vol. 83, No. 156 / Monday, August 13, 2018 / Notices 40105 

10 15 U.S.C. 78s(b)(3)(A)(ii). 11 17 CFR 200.30–3(a)(12). 

anticipated regulatory costs. While these 

adjustments result in an increase, the 

increase is modest. 

The Exchange believes that amending 

the ORF from $0.0016 to $0.0020 as of 

August 1, 2018 is equitable and not 

unfairly discriminatory because 

assessing the ORF to each Member for 

options transactions cleared by OCC in 

the customer range where the execution 

occurs on another exchange and is 

cleared by an ISE Member is an 

equitable allocation of reasonable dues, 

fees, and other charges among its 

members and issuers and other persons 

using its facilities. The ORF is collected 

by OCC on behalf of ISE from Exchange 

clearing members for all customer 

transactions they clear or from nonmembers for all customer transactions 

they clear that were executed on ISE. 

The Exchange believes the ORF ensures 

fairness by assessing fees to Members 

based on the amount of customer 

options business they conduct. 

Regulating customer trading activity is 

much more labor intensive and requires 

greater expenditure of human and 

technical resources than regulating noncustomer trading activity, which tends 

to be more automated and less laborintensive. As a result, the costs 

associated with administering the 

customer component of the Exchange’s 

overall regulatory program are 

materially higher than the costs 

associated with administering the noncustomer component (e.g., Member 

proprietary transactions) of its 

regulatory program. 

The ORF is designed to recover a 

material portion of the costs of 

supervising and regulating Members’ 

customer options business including 

performing routine surveillances, 

investigations, examinations, financial 

monitoring, and policy, rulemaking, 

interpretive, and enforcement activities. 

The Exchange will monitor the amount 

of revenue collected from the ORF to 

ensure that it, in combination with its 

other regulatory fees and fines, does not 

exceed the Exchange’s total regulatory 

costs. The Exchange has designed the 

ORF to generate revenues that, when 

combined with all of the Exchange’s 

other regulatory fees, will be less than 

or equal to the Exchange’s regulatory 

costs, which is consistent with the 

Commission’s view that regulatory fees 

be used for regulatory purposes and not 

to support the Exchange’s business side. 

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. This 

proposal does not create an unnecessary 

or inappropriate intra-market burden on 

competition because the ORF applies to 

all customer activity, thereby raising 

regulatory revenue to offset regulatory 

expenses. It also supplements the 

regulatory revenue derived from noncustomer activity. This proposal does 

not create an unnecessary or 

inappropriate inter-market burden on 

competition because it is a regulatory 

fee that supports regulation in 

furtherance of the purposes of the Act. 

The Exchange is obligated to ensure that 

the amount of regulatory revenue 

collected from the ORF, in combination 

with its other regulatory fees and fines, 

does not exceed regulatory costs. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were either 

solicited or received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A)(ii) of the Act.10 At any time 

within 60 days of the filing of the 

proposed rule change, the Commission 

summarily may temporarily suspend 

such rule change if it appears to the 

Commission that such action is: (i) 

necessary or appropriate in the public 

interest; (ii) for the protection of 

investors; or (iii) otherwise in 

furtherance of the purposes of the Act. 

If the Commission takes such action, the 

Commission shall institute proceedings 

to determine whether the proposed rule 

should be approved or disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File No. SR–ISE– 

2018–70 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 No. 

SR–ISE–2018–70. 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 (http://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 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File No. 

SR–ISE–2018–70, and should be 

submitted on or before September 4, 

2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–17257 Filed 8–10–18; 8:45 am] 

BILLING CODE 8011–01–P 


sradovich on DSK3GMQ082PROD with NOTICES