[Federal Register Volume 89, Number 203 (Monday, October 21, 2024)]
[Notices]
[Pages 84214-84216]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-24209]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101349; File No. SR-ISE-2024-48]


Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the 
Exchange's Pricing Schedule at Options 7, Section 3

October 15, 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 October 1, 2024, Nasdaq ISE, LLC (``ISE'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``SEC'' or ``Commission'') 
the proposed rule change as described in Items I, II, and III, below, 
which Items have been prepared by the Exchange. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
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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 amend the Exchange's Pricing Schedule at 
Options 7, Section 3.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/ise/rules, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to amend the Exchange's 
Pricing Schedule in Options 7, Section 3.
    Today, as set forth in Options 7, Section 3, the Exchange assesses 
all market participants (except Priority Customers) \3\ a uniform 
regular order maker fee of $0.70 per contract for Non-Select Symbol \4\ 
executions that add liquidity on the Exchange. Priority Customers are 
assessed a $1.00 per contract regular order maker rebate in Non-Select 
Symbols.\5\ Additionally, the Exchange also currently offers Members an 
additional rebate of $0.14 per contract if they execute more than 0.10% 
of Regular Order Non-Select Symbol Priority Customer volume (excluding 
Crossing Orders \6\ and Responses to Crossing Orders) \7\ calculated as 
a percentage of Customer Total Consolidated Volume \8\ per day in a 
given month (``Note 15 Incentive'').\9\ The Note 15 Incentive is 
designed to encourage Members to transact in greater regular Non-Select 
Symbol Priority Customer volume on the Exchange to receive rebates up 
to $1.14 per contract (i.e., the $1.00 base maker rebate plus the 
additional $0.14 Note 15 Incentive).
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    \3\ 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).
    \4\ ``Non-Select Symbols'' are options overlying all symbols 
excluding Select Symbols. ``Select Symbols'' are options overlying 
all symbols listed on the Exchange that are in the Penny Interval 
Program.
    \5\ In addition, for Priority Customer orders adding liquidity 
in Non-Select Symbols, there is no fee or rebate provided when 
trading against Priority Customer complex orders that leg into the 
regular order book. See Options 7, Section 3, note 18.
    \6\ A ``Crossing Order'' is an order executed in the Exchange's 
Facilitation Mechanism, Solicited Order Mechanism, Price Improvement 
Mechanism (PIM) or submitted as a Qualified Contingent Cross order. 
For purposes of this Pricing Schedule, orders executed in the Block 
Order Mechanism are also considered Crossing Orders.
    \7\ ``Responses to Crossing Order'' is any contra-side interest 
submitted after the commencement of an auction in the Exchange's 
Facilitation Mechanism, Solicited Order Mechanism, Block Order 
Mechanism or PIM.
    \8\ ``Customer Total Consolidated Volume'' means the total 
national volume cleared at The Options Clearing Corporation in the 
Customer range in equity and ETF options in that month.
    \9\ See Options 7, Section 3, note 15.
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    The Exchange now proposes to amend the Note 15 Incentive by 
increasing the additional $0.14 rebate to $0.18 per contract. The 
additional rebate qualifications are not changing under this proposal. 
Accordingly, Members would be eligible to receive higher rebates of up 
to $1.18 per contract (i.e., the base $1.00 maker rebate plus the 
proposed additional $0.18 Note 15 Incentive) under this proposal when 
sending the same amount of regular Non-Select Symbol Priority Customer 
volume as they do today. Ultimately, the Exchange believes that the 
proposed changes will attract more Priority Customer Non-Select Symbol 
order flow to ISE because Members may be incentivized to send such 
order flow to ISE to receive the increased rebate.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\10\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\11\ 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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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange's proposed changes to its Pricing Schedule are 
reasonable in several respects. As a threshold matter, the Exchange is 
subject to significant competitive forces in the market for options 
securities transaction services that constrain its pricing 
determinations in that market. The fact that this market is competitive 
has long been recognized by the courts. In NetCoalition v. Securities 
and Exchange Commission, the D.C. Circuit stated as follows: ``[n]o

[[Page 84215]]

one disputes that competition for order flow is `fierce.' . . . As the 
SEC explained, `[i]n the U.S. national market system, buyers and 
sellers of securities, and the broker-dealers that act as their order-
routing agents, have a wide range of choices of where to route orders 
for execution'; [and] `no exchange can afford to take its market share 
percentages for granted' because `no exchange possesses a monopoly, 
regulatory or otherwise, in the execution of order flow from broker 
dealers' . . . .'' \12\
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    \12\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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    The Commission and the courts have repeatedly expressed their 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. In Regulation 
NMS, while adopting a series of steps to improve the current market 
model, the Commission highlighted the importance of market forces in 
determining prices and SRO revenues and, also, recognized that current 
regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' \13\
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    \13\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    Numerous indicia demonstrate the competitive nature of this market. 
For example, clear substitutes to the Exchange exist in the market for 
options security transaction services. The Exchange is only one of 
eighteen options exchanges to which market participants may direct 
their order flow. Within this environment, market participants can 
freely and often do shift their order flow among the Exchange and 
competing venues in response to changes in their respective pricing 
schedules. As such, the proposal represents a reasonable attempt by the 
Exchange to increase its liquidity and market share relative to its 
competitors.
    The Exchange believes that the proposed changes to the Note 15 
Incentive are reasonable for the reasons that follow. As discussed 
above, the Exchange is increasing the additional $0.14 rebate to $0.18 
per contract without amending the additional rebate volume 
qualifications discussed above. Accordingly, Members would be eligible 
to receive higher rebates of up to $1.18 per contract (i.e., the base 
$1.00 maker rebate plus the proposed additional $0.18 Note 15 
Incentive) under this proposal when sending the same amount of regular 
Non-Select Symbol Priority Customer volume as they do today. As 
discussed above, the Exchange believes that the proposed changes will 
attract more Priority Customer Non-Select Symbol order flow to ISE 
because Members may be incentivized to send such order flow to ISE to 
receive the increased rebate. Increased Priority Customer order flow in 
Non-Select Symbols would create additional liquidity to the benefit of 
all market participants and investors that trade on the Exchange.
    The Exchange further believes that increasing the Note 15 Incentive 
from $0.14 to $0.18 per contract is equitable and not unfairly 
discriminatory because the proposed change will apply uniformly to all 
similarly situated market participants. The Exchange believes that it 
is equitable and not unfairly discriminatory to offer the Note 15 
Incentive to only Priority Customers because Priority Customer 
liquidity benefits all market participants by providing more trading 
opportunities, which attracts Market Makers. An increase in the 
activity of these market participants in turn facilitates tighter 
spreads, which may cause an additional corresponding increase in order 
flow from other market participants.

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.
    The Exchange does not believe that the proposed changes to the Note 
15 Incentive to increase the additional $0.14 rebate to $0.18 per 
contract will impose an undue burden on intra-market competition as the 
proposal will apply uniformly to all Priority Customers. While the 
proposed Note 15 incentive will only apply to Priority Customers, 
Priority Customer liquidity benefits all market participants by 
providing more trading opportunities, which attracts Market Makers. An 
increase in the activity of these market participants in turn 
facilitates tighter spreads, which may cause an additional 
corresponding increase in order flow from other market participants.
    In terms of inter-market competition, the Exchange notes that it 
operates in a highly competitive market in which market participants 
can readily favor competing venues if they deem fee levels at a 
particular venue to be excessive, or rebate opportunities available at 
other venues to be more favorable. In such an environment, the Exchange 
must continually adjust its fees to remain competitive with other 
exchanges. Because competitors are free to modify their own fees in 
response, and because market participants may readily adjust their 
order routing practices, the Exchange believes that the degree to which 
fee changes in this market may impose any burden on competition is 
extremely limited. In sum, if the changes proposed herein are 
unattractive to market participants, it is likely that the Exchange 
will lose market share as a result. Accordingly, the Exchange does not 
believe that the proposed changes will impair the ability of members or 
competing order execution venues to maintain their competitive standing 
in the financial markets.

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.\14\ At any time within 60 days of the 
filing of the proposed rule change, the Commission summarily may 
temporarily suspend such rule change if it appears to the Commission 
that such action is: (i) necessary or appropriate in the public 
interest; (ii) for the protection of investors; or (iii) otherwise in 
furtherance of the purposes of the Act. If the Commission takes such 
action, the Commission shall institute proceedings to determine whether 
the proposed rule should be approved or disapproved.
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    \14\ 15 U.S.C. 78s(b)(3)(A)(ii).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

    <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#b3c1c6dfd69ed0dcdeded6ddc7c0f3c0d6d09dd4dcc5"><span class="__cf_email__" data-cfemail="6d1f180108400e0200000803191e2d1e080e430a021b">[email protected]</span></a>. Please include 
file number SR-ISE-2024-48 on the subject line.

Paper Comments

    <bullet> Send paper comments in triplicate to Secretary, Securities 
and Exchange

[[Page 84216]]

Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to file number SR-ISE-2024-48. 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-2024-48 and should be 
submitted on or before November 12, 2024.
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    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-24209 Filed 10-18-24; 8:45 am]
BILLING CODE 8011-01-P


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