[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]


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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.
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    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    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

    <bullet> Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#2654534a430b45494b4b434852556655434508414950"><span class="__cf_email__" data-cfemail="780a0d141d551b1715151d160c0b380b1d1b561f170e">[email protected]</span></a>. Please include 
file number SR-ISE-2024-46 on the subject line.

Paper Comments

    <bullet> 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


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