Document ID: SEC-2018-0045-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Nasdaq ISE, LLC
Posted Date: 2018-01-11T05:00Z

[Federal Register Volume 83, Number 8 (Thursday, January 11, 2018)]
[Notices]
[Pages 1446-1448]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-00305]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82446; File No. SR-ISE-2017-112]

Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Certain 
Non-Transaction Fees in the Exchange's Schedule of Fees

January 5, 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 December 22, 2017, Nasdaq ISE, LLC (``ISE'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``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

[[Page 1447]]

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 certain non-transaction fees in the 
Exchange's Schedule of Fees.
    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.

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 certain non-
transaction fees in the Exchange's Schedule of Fees. ISE currently 
charges its members various non-transaction fees to trade on the 
Exchange and use its facilities, including a monthly access fee and an 
annual regulatory fee. Such fees are designed to help defray the 
technical, regulatory, and administrative costs associated with a 
member's use of the Exchange. Specifically, the Exchange currently 
assesses a monthly access fee to all its members that is $500 per month 
per Electronic Access Member (``EAM'') membership, $4,000 per month per 
Primary Market Maker (``PMM'') membership, and $2,000 per month per 
Competitive Market Maker (``CMM'') membership.\3\ Payment of the 
monthly access fee entitles members to trade on ISE as a PMM, CMM, or 
EAM based on their membership type. In addition, Exchange currently 
charges a tiered annual regulatory fee to all its members that is: (i) 
For PMMs, a fee of $7,500 for the first PMM membership, $1,500 for each 
additional PMM membership, and $1,000 for each CMM membership; (ii) for 
CMMs, (who are not also PMMs), a fee of $5,000 per membership for the 
first CMM membership \4\ and $1,000 for each additional CMM membership; 
and (iii) for EAMs, a fee of $5,000 for each EAM membership.\5\
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    \3\ See ISE Schedule of Fees, Section VI.A Access Fees. In the 
event where a single member firm has multiple ISE memberships, the 
monthly access fee is charged for each membership. For example, if a 
single member firm is both an EAM and a CMM, or owns multiple CMM 
memberships, the firm is subject to the monthly access fee for each 
of those memberships.
    \4\ This fee will only be charged for the first CMM membership 
within each group of affiliated companies. Affiliated CMMs will pay 
the incremental regulatory fee charged for additional CMM 
memberships.
    \5\ See ISE Schedule of Fees, Section VII.D Regulatory Fee.
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    In order to keep pace with rising overhead, the Exchange now 
proposes to increase the monthly access fee for Market Makers (i.e., 
PMMs and CMMs) from $4,000 to $5,000 per PMM membership and from $2,000 
to $2,500 per CMM membership. The monthly access fee of $500 per 
membership for EAMs will remain unchanged under this proposal. In 
connection with the proposed increase in the monthly access fees for 
Market Makers, the Exchange also proposes to eliminate the annual 
regulatory fee for all its members.
    As noted above, members are required to pay a variety of non-
transaction fees, including the monthly access fee and annual 
regulatory fee, to be able to trade on the Exchange and use its 
facilities. By increasing the monthly access fee and eliminating the 
annual regulatory fee in the manner discussed above, the Exchange is 
essentially consolidating these fees rather than having members pay two 
separate charges for their use of the Exchange. With the proposed 
changes, Market Makers may be assessed at a higher rate overall to use 
the Exchange, while EAMs may be assessed at a lower rate because the 
Exchange is increasing the monthly access fee for Market Makers only, 
but eliminating the annual regulatory fee for all members.\6\ The 
Exchange will absorb the cost of the eliminated annual regulatory fee 
for EAMs going forward.
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    \6\ For example, a PMM currently pays a total of $55,500 per 
year in access and regulatory fees ($48,000 of annual access fees 
plus the $7,500 annual regulatory fee) for one PMM membership while 
an EAM pays a total of $11,000 per year ($6,000 of annual access 
fees plus the $5,000 annual regulatory fee) for one EAM membership. 
As proposed, the PMM would pay a total of $60,000 per year in access 
fees for one PMM membership while the EAM would pay a total of 
$6,000 per year for one EAM membership.
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    The access fee and regulatory fee were adopted in 2000 to help 
recover the costs of operating a trading market,\7\ including the 
technical, regulatory, and administrative costs associated with a 
member's use of the Exchange. The monthly access fee amounts have not 
changed since this fee was adopted, while the annual regulatory fee was 
last amended in 2006.\8\ Accordingly, the Exchange believes that the 
fee changes proposed herein should be a more accurate reflection of the 
costs associated with a member's use of the Exchange today.
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    \7\ See Securities Exchange Act Release No. 42370 (April 28, 
2000), 65 FR 26256 (May 5, 2000) (SR-ISE-00-02).
    \8\ See Securities Exchange Act Release No. 53634 (April 12, 
2006), 71 FR 20147 (April19, 2006) (SR-ISE-2006-16).
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\9\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\10\ 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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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed increase in the monthly 
Market Maker access fees to $5,000 per PMM membership and $2,500 per 
CMM membership is reasonable and equitable. The proposed access fees 
will help the Exchange keep pace with rising overhead, and are within 
the range of similar fees charged by other options exchanges, including 
for example, C2 Options Exchange (``C2''), which charges its market 
makers a monthly access fee of $5,000 per permit.\11\
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    \11\ See C2 Fee Schedule, Section 3 Access Fees.
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    Furthermore, while the Exchange is increasing the monthly access 
fees for Market Makers, the Exchange believes that this is partially 
offset by the elimination of the annual regulatory fees for all 
members. As noted above, members are required to pay a variety of non-
transaction fees, including the monthly access fee and annual 
regulatory fee, to be able to trade on the Exchange and use its 
facilities. By consolidating the annual regulatory fee with the access 
fee in the manner discussed above rather than having members pay two 
separate charges for their use of the Exchange, ISE is simplifying the 
Schedule of Fees to the benefit of its members. The Exchange also 
believes that the proposed changes are reasonable and equitable because 
the

[[Page 1448]]

fees should be a more accurate representation of the costs associated 
with a member's use of the Exchange today for the reasons discussed 
above.
    As noted above, some members will be impacted more than others with 
this proposal because the Exchange is increasing the monthly access fee 
for Market Makers only, but eliminating the annual regulatory fee for 
all members. The Exchange does not believe that this is unfairly 
discriminatory because the resources dedicated to the supporting and 
regulating a member vary on the type of membership. Generally, PMMs are 
subject to greater obligations than CMMs are and CMMs are subject to 
greater obligations than EAMs are. Furthermore, the technical, 
regulatory, and administrative costs associated with an EAM's use of 
the Exchange are not as high as those associated with Market Makers.

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. As discussed above, the 
proposed fee changes are designed to more accurately reflect the 
technical, regulatory, and administrative costs associated with a 
member's use of the Exchange, and the fees remain competitive with 
similar fees offered on other options exchanges. The Exchange 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. 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.

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,\12\ and Rule 19b-4(f)(2) \13\ 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: (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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    \12\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \13\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-ISE-2017-112 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-ISE-2017-112. 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-ISE-2017-112 and should be submitted on 
or before February 1, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-00305 Filed 1-10-18; 8:45 am]
 BILLING CODE 8011-01-P