Document ID: SEC-2018-0796-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Nasdaq ISE, LLC
Posted Date: 2018-05-22T04:00Z

[Federal Register Volume 83, Number 99 (Tuesday, May 22, 2018)]
[Notices]
[Pages 23752-23755]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-10830]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83257; File No. SR-ISE-2018-42]

Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the 
Exchanges Schedule of Fees

May 16, 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 May 1, 2018, 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 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 Exchanges 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 the Exchange's 
Schedule of Fees, as described further below.

[[Page 23753]]

Fee for Responses to PIM Orders
    Currently, for regular orders in Non-Select Symbols,\3\ the 
Exchange charges all market participants a fee for Responses to Price 
Improvement Mechanism (``PIM'') orders that is $0.20 per contract. For 
complex orders in both Select Symbols \4\ and Non-Select Symbols, the 
fee for Responses to PIM orders is likewise $0.20 per contract for all 
market participants. The Exchange now proposes to increase the 
aforementioned fees to $0.25 per contract for all market participants.
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    \3\ ``Non-Select Symbols'' are options overlying all symbols 
excluding Select Symbols.
    \4\ ``Select Symbols'' are options overlying all symbols listed 
on the Nasdaq ISE that are in the Penny Pilot Program.
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Fee for Responses to Crossing Orders Except PIM Orders
    Today, the Exchange charges all market participants a fee for 
Responses to Crossing Orders \5\ except PIM orders that is $0.48 per 
contract for complex orders in Select Symbols. The Exchange now 
proposes to increase this fee to $0.50 per contract for all market 
participants.
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    \5\ A ``Crossing Order'' is an order executed in the Exchange's 
Facilitation Mechanism, Solicited Order Mechanism, PIM or submitted 
as a Qualified Contingent Cross (``QCC'') order. For purposes of the 
Fee Schedule, orders executed in the Block Order Mechanism are also 
considered Crossing Orders.
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QCC and Solicitation Rebate
    Currently, members using QCC and/or other solicited crossing 
orders, including solicited orders executed in the Solicitation, 
Facilitation or Price Improvement Mechanisms, receive rebates for each 
originating contract side in all symbols traded on the Exchange. Once a 
member reaches a certain volume threshold in QCC orders and/or 
solicited crossing orders during a month, the Exchange provides rebates 
to that member for all of its QCC and solicited crossing order traded 
contracts for that month.\6\ The applicable rebates are applied on QCC 
and solicited crossing order traded contracts once the volume threshold 
is met. Members receive the Non-``Customer to Customer'' rebate for all 
QCC and/or other solicited crossing orders except for QCC and solicited 
orders between two Priority Customers.\7\ QCC and solicited orders 
between two Priority Customers receive the ``Customer to Customer'' 
rebate. Non-``Customer to Customer'' and ``Customer to Customer'' 
volume is aggregated in determining the applicable volume tier. The 
current volume threshold and corresponding rebates are as follows:
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    \6\ All eligible volume from affiliated members will be 
aggregated in determining QCC and Solicitation volume totals, 
provided there is at least 75% common ownership between the members 
as reflected on each member's Form BD, Schedule A.
    \7\ 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 Rule 
100(a)(37A).

------------------------------------------------------------------------
                                    Non-``Customer to    ``Customer to
    Originating contract sides      Customer'' rebate  Customer'' rebate
------------------------------------------------------------------------
0 to 99,999.......................              $0.00              $0.00
100,000 to 199,999................             (0.05)             (0.01)
200,000 to 499,999................             (0.07)             (0.01)
500,000 to 999,999................             (0.09)             (0.03)
1,000,000+........................             (0.11)             (0.03)
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    To incentive greater QCC and/or other solicited crossing order flow 
to ISE, the Exchange now proposes to amend the tier schedule by 
adjusting current tier 4 (i.e., 500,000 to 999,999) so that it becomes 
500,000 to 749,999 originating contract sides, and adopting a new tier 
5 for 750,000 to 999,999 originating contract sides. With this proposed 
change, members that execute between 500,000 to 749,999 originating 
contract sides of eligible volume will earn the current tier 4 rebates 
(i.e., a Non-``Customer to Customer'' rebate of $0.09 per originating 
contract side and a ``Customer to Customer'' rebate of $0.03 per 
originating contract side). For members that meet the volume threshold 
in the new tier 5, the Exchange proposes to pay a Non-``Customer to 
Customer'' rebate of $0.10 per originating contract side and a 
``Customer to Customer'' rebate of $0.03 per originating contract side. 
The new tier schedule and corresponding rebates will be as follows:

------------------------------------------------------------------------
                                    Non-``Customer to    ``Customer to
    Originating contract sides      Customer'' rebate  Customer'' rebate
------------------------------------------------------------------------
0 to 99,999.......................              $0.00              $0.00
100,000 to 199,999................             (0.05)             (0.01)
200,000 to 499,999................             (0.07)             (0.01)
500,000 to 749,999................             (0.09)             (0.03)
750,000 to 999,999................             (0.10)             (0.03)
1,000,000+........................             (0.11)             (0.03)
------------------------------------------------------------------------

Clean-up Change
    The Exchange proposes to make a non-substantive change to remove an 
obsolete reference to its old website in its Schedule of Fees. In 
particular, the definition of Select Symbols in the Exchange's Schedule 
of Fees presently states that: `` `Select Symbols' are options 
overlying all symbols listed on the Nasdaq ISE that are in the Penny 
Pilot Program. The current list of Nasdaq ISE-listed Penny Pilot 
Program symbols is available at http://www.ise.com/assets/files/products/pennies/penny_stocks.xls.'' The Exchange proposes to delete 
the second sentence in the definition of Select Symbols now that the 
legacy website is no longer available.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\8\ in general, and furthers the

[[Page 23754]]

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 any facility, and is not designed to permit unfair 
discrimination between customers, issuers, brokers, or dealers.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4) and (5).
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Fee for Responses to PIM Orders
    The Exchange believes that its proposal to increase the regular and 
complex order fees for Responses to PIM orders from $0.20 to $0.25 per 
contract for all market participants is reasonable, equitable and not 
unfairly discriminatory. With the proposed changes, market participants 
that respond to PIM auctions will pay response fees that remain 
significantly lower than those charged for Responses to other Crossing 
Orders. Accordingly, the Exchange believes that the PIM response fees 
proposed herein will remain attractive to market participants and will 
continue to encourage them to respond to PIM auctions, thereby 
increasing price improvement opportunities for PIM orders. Furthermore, 
the Exchange believes that the proposed PIM response fees are equitable 
and not unfairly discriminatory they will apply uniformly to all market 
participants.
Fee for Responses to Crossing Orders Except PIM Orders
    The Exchange believes that its proposal to increase the complex 
order fees for Responses to Crossing Orders except PIM orders in Select 
Symbols to $0.50 per contract for all market participants is reasonable 
because the proposed fee remains within the range of similar fees 
charged by other options exchanges, including, for example, BOX Options 
Exchange (``BOX''), which charges up to $0.50 per contract for 
responses in its solicitation or facilitation auction mechanisms for 
penny pilot classes.\10\ Accordingly, the Exchange believes that the 
response fees proposed herein for Crossing Orders except PIM orders are 
set at levels that the Exchange believes will remain attractive to 
market participants that trade on ISE. Additionally, the Exchange 
believes that the proposed fees for Responses to Crossing Orders except 
PIM orders are equitable and not unfairly discriminatory because they 
will apply uniformly to all market participants.
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    \10\ BOX charges a fee for responses in the solicitation or 
facilitation auction mechanisms for all account types that is $0.25 
per contract for penny pilot classes. See BOX Fee Schedule, Section 
I.C. As set forth in the BOX Fee Schedule, ``[r]esponses to 
Facilitation and Solicitation Orders executed in these mechanisms 
shall be charged the ``add'' fee.'' Id. at Section III.B, second 
bullet. For all account types, this fee (i.e., the Fee for Adding 
Liquidity) is $0.25 for penny pilot classes. Id. Thus, BOX may 
charge a fee for responses in its solicitation or facilitation 
auction mechanisms of up to $0.50 per contract.
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QCC and Solicitation Rebate
    The Exchange believes that the proposed changes to the QCC and 
Solicitation rebate tier schedule are reasonable because the proposed 
changes are designed to encourage members to bring additional QCC and/
or other solicited crossing order volume to the Exchange in order to 
benefit from the enhanced rebates. As explained above, the Exchange is 
(i) adjusting the volume threshold in the current tier 4 from 500,000 
to 999,999 to 500,000 to 749,999 originating contract sides and 
offering the current tier 4 Non-``Customer to Customer'' rebate of 
$0.09 per originating contract side and ``Customer to Customer'' rebate 
of $0.03 per originating contract side, and (ii) adopting a new tier 5 
for 750,000 to 999,999 originating contract sides with a corresponding 
Non-``Customer to Customer'' rebate of $0.10 per originating contract 
side and ``Customer to Customer'' rebate of $0.03 per originating 
contract side. With the proposed changes, members will be provided more 
opportunities to meet the volume thresholds and qualify for enhanced 
rebates by bringing greater QCC and/or other solicited crossing order 
flow to the Exchange. The Exchange also believes that the proposed 
changes to the tier schedule are equitable and not unfairly 
discriminatory because all members will be able to attain the enhanced 
rebates by executing the required volume of QCC and/or other solicited 
crossing orders on the Exchange.
Clean-up Change
    The Exchange believes that its proposal to remove the obsolete 
reference to its old website from its Schedule of Fees is reasonable, 
equitable and not unfairly discriminatory because it is a non-
substantive change designed to make the Schedule of Fees more 
transparent to members and investors.

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 this instance, the Exchange 
is proposing various changes to its fees and rebates program for 
Crossing Orders, specifically to increase the response fees for 
Crossing Orders, including PIM orders, and to enhance its QCC and 
Solicitation rebate program by modifying the current tier schedule, 
each as described in detail above. The Exchange does not believe that 
the proposed changes impose an undue burden on competition because the 
proposed fees and rebates will apply uniformly to all market 
participants, as discussed above. Furthermore, the Exchange believes 
that its fees and rebates program for Crossing Orders will remain 
attractive with the changes proposed herein, and will continue to 
attract additional order flow to ISE, thereby enhancing the 
competitiveness of ISE relative to other options exchanges.
    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. 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,\11\ and Rule

[[Page 23755]]

19b-4(f)(2) \12\ 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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    \11\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \12\ 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-2018-42 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-2018-42. 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-2018-42 and should be submitted on 
or before June 12, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-10830 Filed 5-21-18; 8:45 am]
 BILLING CODE 8011-01-P