Document ID: SEC-2017-0784-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Nasdaq ISE, LLC
Posted Date: 2017-05-16T04:00Z

[Federal Register Volume 82, Number 93 (Tuesday, May 16, 2017)]
[Notices]
[Pages 22576-22580]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-09812]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80637; File No. SR-ISE-2017-35]

Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the 
Exchange's Schedule of Fees To Amend Pricing Related to Options 
Overlying NDX and MNX

May 10, 2017.
    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 April 25, 2017, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the Exchange's Schedule of Fees to 
amend pricing related to options overlying NDX \3\ and MNX,\4\ as 
described further below. While changes to the Schedule of Fees pursuant 
to this proposal are effective upon filing, the Exchange has designated 
these changes to be operative on May 1, 2017.
---------------------------------------------------------------------------

    \3\ NDX represents options on the Nasdaq 100 Index traded under 
the symbol NDX (``NDX'').
    \4\ MNX represents options on one-tenth the value of the Nasdaq 
100 Index traded under the symbol MNX (``MNX'').
---------------------------------------------------------------------------

    The text of the proposed rule change is available on the Exchange's 
Web site at www.ise.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 to make changes to pricing related to NDX and MNX. The 
proposed changes are discussed in the following sections.
Fees and Rebates for Regular Orders in NDX
    The Exchange proposes to amend its Schedule of Fees to make pricing 
changes related to NDX. The Exchange notes that NDX is transitioning to 
be exclusively listed on the Exchange and its affiliated markets in 
2017.\5\ In light of this transition, the Exchange seeks to amend its 
NDX pricing structure.
---------------------------------------------------------------------------

    \5\ The Exchange and its affiliates will exclusively list NDX in 
the near future upon expiration of open expiries in this product on 
other markets.
---------------------------------------------------------------------------

    Today, as set forth in Section I of the Schedule of Fees, the 
Exchange charges the following transaction fees for regular orders in 
Non-Select Symbols \6\ (``Existing Transaction Fees''): (i) $0.25 per 
contract for Market Maker \7\ orders not sent by an Electronic Access 
Member (``EAM''); \8\ (ii) $0.20 per contract for Market Maker orders 
sent by an EAM; (iii) $0.72 per contract for Non-Nasdaq ISE Market 
Maker \9\ orders; (iv) $0.72 per contract for Firm Proprietary \10\/
Broker-Dealer \11\ orders; and (v) $0.72 per contract for Professional 
Customer \12\ orders. Priority Customers \13\ are not assessed a 
transaction fee for regular orders in Non-Select Symbols (including 
NDX). In addition, as set forth in Section IV.B of the Schedule of 
Fees, the Exchange charges a $0.25 per contract license surcharge for 
all Non-Priority Customer \14\ orders in NDX (``NDX Surcharge'').
---------------------------------------------------------------------------

    \6\ ``Non-Select Symbols'' are options overlying all symbols 
that are not in the Penny Pilot Program. NDX is a Non-Select Symbol.
    \7\ The term ``Market Makers'' refers to ``Competitive Market 
Makers'' and ``Primary Market Makers'' collectively. See Rule 
100(a)(25).
    \8\ In addition, these Market Maker fees are subject to tier 
discounts. Specifically, Market Makers that execute a monthly volume 
of 250,000 contracts or more are entitled to a discounted rate of 
$0.20 per contract. See Schedule of Fees, Section IV.C.
    \9\ A ``Non-Nasdaq ISE Market Maker'' is a market maker as 
defined in Section 3(a)(38) of the Securities Exchange Act of 1934, 
as amended, registered in the same options class on another options 
exchange.
    \10\ A ``Firm Proprietary'' order is an order submitted by a 
member for its own proprietary account.
    \11\ A ``Broker-Dealer'' order is an order submitted by a member 
for a broker-dealer account that is not its own proprietary account.
    \12\ A ``Professional Customer'' is a person or entity that is 
not a broker/dealer and is not a Priority Customer.
    \13\ 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 ISE Rule 100(a)(37A).
    \14\ Non-Priority Customer includes Market Maker, Non-Nasdaq ISE 
Market Maker, Firm Proprietary/Broker-Dealer, and Professional 
Customer.
---------------------------------------------------------------------------

    The Exchange also currently assesses different fees for regular 
Non-Select Symbol orders executed in the Exchange's crossing 
mechanisms, as set forth in Section I of the Schedule of Fees (such 
orders, ``Auction Orders''). In particular, the Exchange charges fees 
for Crossing Orders,\15\ including separate fees for PIM orders of 100 
or fewer contracts, which fees apply to all regular Non-Priority 
Customer orders in Non-Select Symbols (including NDX) on both the 
originating and contra side of a Crossing Order.\16\ For regular Market 
Maker orders not sent by an EAM, the fee for Crossing Orders is 
currently $0.25 per contract, subject to applicable tier discounts.\17\ 
For all other regular Non-Priority Customer orders (i.e. Market Maker 
orders sent by an EAM, Non-Nasdaq ISE Market Maker orders, Firm 
Proprietary/Broker-Dealer orders, and Professional Customers orders), 
the fee for Crossing Orders is currently $0.20 per contract.\18\ For 
regular Priority Customer orders in Non-Select Symbols,

[[Page 22577]]

the Exchange does not assess a fee for Crossing Orders.
---------------------------------------------------------------------------

    \15\ 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 Fee Schedule, orders executed in the 
Block Order Mechanism are also considered Crossing Orders.
    \16\ Firm Proprietary and Non-Nasdaq ISE Market Maker Crossing 
Orders (including PIM orders of 100 or fewer contracts) are also 
subject to the Crossing Fee Cap provided in Section IV.H of the 
Schedule of Fees.
    \17\ See Schedule of Fees, Section IV.C.
    \18\ This fee is reduced to $0.10 per contract for Professional 
Customer orders either submitted as a Qualified Contingent Cross 
order or executed in the Exchange's Solicited Order Mechanism.
---------------------------------------------------------------------------

    In addition, the Exchange charges a separate fee for regular Non-
Priority Customer PIM orders of 100 or fewer contracts in Non-Select 
Symbols. This fee is currently $0.05 per contract for all regular Non-
Priority Customer orders for 100 or fewer contracts executed in the 
PIM. For exchange members that execute an average daily volume 
(``ADV'') in regular Priority Customer PIM orders of 20,000 or more 
contracts in a given month, the fee for Non-Priority Customer orders is 
further reduced to $0.03 per contract, which will be applied 
retroactively to all eligible PIM volume in that month once the 
threshold has been reached.\19\ PIM orders of greater than 100 
contracts, as well as orders executed in the Exchange's other crossing 
mechanisms, pay the fee for Crossing Orders as described above. The 
Exchange does not charge a fee for regular Priority Customer PIM orders 
of 100 or fewer in Non-Select Symbols. Lastly, the Exchange charges a 
fee for Responses to Crossing Orders \20\ in Non-Select Symbols that is 
$0.50 per contract for all regular market participant (including 
Priority Customer) orders.
---------------------------------------------------------------------------

    \19\ Market Maker PIM orders of 100 or fewer contracts in Non-
Select Symbols (for orders not sent by an EAM) are not eligible for 
the current tier discounts provided under Section IV.C of the 
Schedule of Fees.
    \20\ ``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.
---------------------------------------------------------------------------

    The Exchange also provides a break-up rebate for certain PIM orders 
in Non-Select Symbols that do not trade with their contra order. 
Specifically, the Exchange assesses a break-up rebate of $0.15 per 
contract for regular Non-Nasdaq ISE Market Maker, Firm Proprietary/
Broker-Dealer, Professional Customer, and Priority Customer orders in 
Non-Select Symbols.\21\ Market Makers are not permitted to enter orders 
into the PIM and are therefore not eligible for this rebate.
---------------------------------------------------------------------------

    \21\ The applicable fee is applied to any contracts for which a 
rebate is provided.
---------------------------------------------------------------------------

    In light of NDX's transition to becoming exclusively listed, the 
Exchange seeks to amend its NDX pricing structure. Specifically, the 
Exchange seeks to eliminate the current fee structure for NDX by 
excluding this index option from all the fees currently applicable to 
regular Non-Select Symbol orders, and instead adopt standard 
transaction fees as set forth in a new table in Section I of the 
Schedule of Fees.\22\ The Exchange also seeks to eliminate the PIM 
break-up rebates it currently provides for Non-Nasdaq ISE Market Maker, 
Firm Proprietary/Broker-Dealer, Professional Customer, and Priority 
Customer orders in NDX. As such, all regular Non-Priority Customer 
orders in NDX (including Non-Priority Customer Auction Orders) will be 
assessed a uniform transaction fee of $0.75.\23\ Additionally, Firm 
Proprietary and Non-Nasdaq ISE Market Maker orders in NDX, for both 
Crossing Orders and PIM orders of 100 or fewer contracts, will no 
longer be subject to the Crossing Fee Cap provided in Section IV.H of 
the Schedule of Fees. The Exchange will therefore provide in Section 
IV.H that those orders will not be included in the calculation of the 
monthly fee cap. All regular Priority Customer orders in NDX (including 
Priority Customer Auction Orders) will not be assessed any fees. The 
Exchange will continue to charge the $0.25 NDX Surcharge for all Non-
Priority Customer orders in NDX. There will be no proposed changes to 
the complex order fees and rebates in Section II of the Schedule of 
Fees.
---------------------------------------------------------------------------

    \22\ The Exchange will therefore add note 7 in Section I of the 
Schedule of Fees to provide that the fees set forth in the new 
pricing table for index options will apply only to NDX. Furthermore, 
note 7 will state that these fees are assessed to all executions in 
NDX to clarify that the proposed pricing also applies to regular 
Auction Orders in NDX.
    \23\ Therefore, the current tier discounts set forth in Section 
IV.C of the Schedule of Fees will no longer apply to Market Maker 
orders in NDX (for orders not sent by an EAM) as specified above. 
Such orders in NDX, however, will still count toward the volume 
requirement to qualify for a tier discount. For example, a Market 
Maker that executes a monthly volume of more than 250,000 contracts 
would normally be charged a fee of $0.20 per contract for regular 
orders in Non-Select Symbols instead of the normal $0.25 per 
contract fee. With the proposed changes, that Market Maker would not 
be entitled to any discount for trades in NDX, and would instead pay 
a fee of $0.75 per contract. That Market Maker's executions in NDX, 
however, would still be counted towards the monthly volume 
calculation (i.e., to reach the 250,000 contract threshold).
---------------------------------------------------------------------------

Non-Priority Customer License Surcharge for MNX
    As set forth in Section IV.B of the Schedule of Fees, the Exchange 
currently charges a $0.25 per contract license surcharge for all Non-
Priority Customer orders in MNX (``MNX Surcharge''). The Exchange now 
seeks to eliminate the MNX Surcharge, and proposes to remove any 
references to MNX currently in Section IV.B of the Schedule of Fees.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\24\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\25\ 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.
---------------------------------------------------------------------------

    \24\ 15 U.S.C. 78f(b).
    \25\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    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.'' \26\
---------------------------------------------------------------------------

    \26\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
---------------------------------------------------------------------------

    Likewise, in NetCoalition v. Securities and Exchange Commission 
\27\ (``NetCoalition'') the D.C. Circuit upheld the Commission's use of 
a market-based approach in evaluating the fairness of market data fees 
against a challenge claiming that Congress mandated a cost-based 
approach.\28\ As the court emphasized, the Commission ``intended in 
Regulation NMS that `market forces, rather than regulatory 
requirements' play a role in determining the market data . . . to be 
made available to investors and at what cost.'' \29\
---------------------------------------------------------------------------

    \27\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
    \28\ See NetCoalition, at 534-535.
    \29\ Id. at 537.
---------------------------------------------------------------------------

    Further, ``[n]o 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'. . . .'' \30\ Although the court and 
the SEC were discussing the cash equities markets, the Exchange 
believes

[[Page 22578]]

that these views apply with equal force to the options markets.
---------------------------------------------------------------------------

    \30\ Id. at 539 (quoting Securities Exchange Act Release No. 
59039 (December 2, 2008), 73 FR 74770, 74782-83 (December 9, 2008) 
(SR-NYSEArca-2006-21)).
---------------------------------------------------------------------------

Fees and Rebates for Regular Orders in NDX
    The Exchange believes that the proposed pricing changes for NDX are 
reasonable, equitable and not unfairly discriminatory as NDX 
transitions to an exclusively-listed product. Similar to other 
proprietary products, the Exchange seeks to recoup the operational 
costs for listing proprietary products.\31\ Also, pricing by symbol is 
a common practice on many U.S. options exchanges as a means to 
incentivize order flow to be sent to an exchange for execution in 
particular products. Other options exchanges price by symbol.\32\ 
Further, the Exchange notes that with its products, market participants 
are offered an opportunity to either transact options overlying NDX or 
separately execute options overlying PowerShares QQQ Trust 
(``QQQ'').\33\ Offering products such as QQQ provides market 
participants with a variety of choices in selecting the product they 
desire to utilize to transact NDX.\34\ When exchanges are able to 
recoup costs associated with offering proprietary products, it 
incentivizes growth and competition for the innovation of additional 
products.
---------------------------------------------------------------------------

    \31\ By way of example, in analyzing an obvious error, the 
Exchange would have additional data points available in establishing 
a theoretical price for a multiply listed option as compared to a 
proprietary product, which requires additional analysis and 
administrative time to comply with Exchange rules to resolve an 
obvious error.
    \32\ See pricing for Russell 2000 Index (``RUT'') on Chicago 
Board Options Exchange, Incorporated's (``CBOE'') Fees Schedule.
    \33\ QQQ is an exchange-traded fund based on the Nasdaq-100 
Index[supreg].
    \34\ By comparison, a market participant may trade options 
overlying RUT or separately the market participant has the choice of 
trading iShares Russell 2000 Index Fund (``IWM'') Exchange-Traded 
Fund Shares options, which are also multiply listed.
---------------------------------------------------------------------------

    As proposed, the Exchange seeks to eliminate the existing fee 
structure for regular NDX orders, and instead adopt standard 
transaction fees for all such orders. Specifically, the proposed 
pricing changes for NDX will result in a flat fee of $0.75 per contract 
for all regular Non-Priority Customer orders, and no fees for all 
regular Priority Customer orders. While the proposed fee amounts for 
Non-Priority Customer orders in NDX are higher than the existing fees 
assessed for such orders, the Exchange believes, as noted above, that 
the proposed fee amounts are reasonable as NDX transitions to an 
exclusively-listed product. Similar to other proprietary products, the 
Exchange seeks to recoup the operational costs for listing proprietary 
products. The Exchange also believes that the proposed elimination of 
the Crossing Fee Cap for Firm Proprietary and Non-Nasdaq ISE Market 
Maker orders in NDX is reasonable for the same reason.
    Furthermore, as it relates to the Existing Transaction Fees, the 
Exchange believes that the increased fees for Non-Priority Customer 
orders in NDX are reasonable because the proposed fee amounts are in 
line with NASDAQ PHLX LLC's $0.75 per contract options transaction 
charge in NDX assessed to all electronic market participant orders 
other than customer orders.\35\ While the Exchange is proposing a 
greater fee increase for Market Maker NDX orders than all other Non-
Priority Customer NDX orders,\36\ the Exchange also recently waived the 
$0.70 marketing fee for NDX orders.\37\ The Exchange therefore believes 
that the increased fees for Market Maker orders in NDX are reasonable 
because the total fees assessed to Market Makers NDX orders are lower 
overall than the fees historically assessed to such orders. For 
example, a Market Maker transacting a regular order in NDX would 
previously be assessed a $0.25 or $0.20 (for orders sent by an EAM) per 
contract transaction fee for orders in Non-Select Symbols, a $0.22 per 
contract license surcharge for Non-Priority Customer orders in NDX, and 
a $0.70 per contract marketing fee for a total charge of $1.17 or $1.12 
(for orders sent by an EAM). With this proposal, a Market Maker 
transacting a regular order in NDX will be assessed a $0.75 per 
contract transaction fee, a $0.25 per contract license surcharge, and 
no marketing fee for a total charge of $1.00. Finally, the Exchange 
will not charge a transaction fee for any regular Priority Customer 
orders in NDX, which also is in line with Phlx, where customers are not 
charged an options transaction charge in NDX.\38\
---------------------------------------------------------------------------

    \35\ See Phlx's Pricing Schedule, Section II.
    \36\ The fees are increasing from $0.25 to $0.75 per contract 
for Market Maker orders not sent by an EAM, and from $0.20 to $0.75 
per contract for Market Maker orders sent by an EAM. The fees for 
all other Non-Priority Customer NDX orders are increasing from $0.72 
to $0.75.
    \37\ See Securities Exchange Act Release No. 80249 (March 15, 
2017), 82 FR 14586 (March 21, 2017) (SR-ISE-2017-23). The Exchange 
also increased the license surcharge for Non-Priority Customer 
orders in NDX from $0.22 to $0.25 as part of this rule filing.
    \38\ See Phlx's Pricing Schedule, Section II.
---------------------------------------------------------------------------

    As it relates to Auction Orders in NDX, the Exchange believes that 
the increased fees for Market Maker orders in NDX are reasonable 
because the total fees are generally lower overall under the Exchange's 
proposal than the total fees historically assessed to such orders. As 
noted above, the Exchange recently waived the $0.70 marketing fee for 
NDX orders. As such, a Market Maker transacting a regular Crossing 
Order in NDX would previously be assessed a $0.25 or $0.20 (for orders 
sent by an EAM) per contract fee for orders in Non-Select Symbols, a 
$0.22 per contract NDX Surcharge, and a $0.70 per contract marketing 
fee for a total charge of $1.17 or $1.12 (for orders sent by an EAM). 
For Responses to Crossing Orders in NDX, a Market Maker would 
previously be assessed a $0.50 per contract fee for Responses to 
Crossing Orders in Non-Select Symbols, a $0.22 per contract NDX 
Surcharge, and a $0.70 per contract marketing fee for a total charge of 
$1.42. That Market Maker would be charged a considerably lower total 
amount of $1.00 for both types of Auction Orders under the Exchange's 
proposal. While the total fees assessed for Market Makers transacting 
regular PIM orders of 100 or fewer NDX contracts are slightly higher 
under this proposal than the total fees historically assessed to such 
orders,\39\ the Exchange believes that the slight increase is 
reasonable because it is offset by the significant decrease for the 
other two Auction Orders as previously discussed.
---------------------------------------------------------------------------

    \39\ The total fees previously assessed to a Market Maker for 
such PIM orders in NDX would be $0.97 per contract because of the 
$0.05 PIM order fee, the $0.22 NDX Surcharge, and the $0.70 
marketing fee.
---------------------------------------------------------------------------

    The Exchange also believes that the increased fees for the other 
Non-Priority Customer Auction Orders in NDX are reasonable because the 
total fee of $1.00 per contract under the Exchange's proposal is 
comparable to the total amounts charged for similar proprietary 
products on other exchanges. For example, C2 Options Exchange, Inc. 
(``C2'') charges all market participants other than public customers 
and C2 market makers a $0.55 transaction fee and a $0.45 index license 
surcharge fee in RUT, which is another broad-based index option and 
similar proprietary product, for a total of $1.00.\40\
---------------------------------------------------------------------------

    \40\ See C2's Fees Schedule, Section 1C. As it relates to the 
market participants noted above, C2 applies the $0.55 transaction 
fee to all executions in RUT other than trades on the open.
---------------------------------------------------------------------------

    Furthermore, the Exchange believes that its proposal to eliminate 
the break-up rebate for regular Non-Nasdaq ISE Market Maker, Firm 
Proprietary/Broker-Dealer, Professional Customer, and Priority Customer 
orders in NDX is reasonable because it is similar to other exchanges, 
which do not provide rebates for certain proprietary products. On Phlx, 
no rebates are paid on NDX contracts.\41\ Additionally, C2 does not

[[Page 22579]]

provide any rebates for RUT.\42\ In addition, the Exchange believes 
that it is reasonable to eliminate the break-up rebate for regular 
Priority Customer orders in NDX because even after the elimination of 
the rebate, such Priority Customer orders (including Priority Customer 
Auction Orders) will not be assessed any fees under the proposed 
pricing structure.
---------------------------------------------------------------------------

    \41\ See Phlx's Pricing Schedule, Section B.
    \42\ See pricing for RUT on C2's Fees Schedule.
---------------------------------------------------------------------------

    The Exchange's proposed fee amounts for all regular Non-Priority 
Customer orders in NDX (including Non-Priority Customer Auction Orders) 
is also equitable and not unfairly discriminatory because the Exchange 
will uniformly assess a $0.75 per contract fee for all such market 
participant orders. The Exchange believes it is equitable and not 
unfairly discriminatory to assess this increased fee on all 
participants except Priority Customers because the Exchange seeks to 
encourage Priority Customer order flow and the liquidity such order 
flow brings to the marketplace, which in turn benefits all market 
participants.
    Additionally, the Exchange believes that the proposed elimination 
of the Crossing Fee Cap for Firm Proprietary and Non-Nasdaq ISE Market 
Maker orders in NDX is equitable and not unfairly discriminatory 
because the Exchange will eliminate the Crossing Fee Cap for all 
similarly-situated members.
    Finally, the Exchange's proposal to eliminate the break-up rebate 
for regular Non-Nasdaq ISE Market Maker, Firm Proprietary/Broker-
Dealer, Professional Customer, and Priority Customer orders in NDX is 
an equitable allocation and is not unfairly discriminatory because the 
Exchange will eliminate the rebate for all similarly-situated members. 
As noted above, the Exchange believes it is equitable and not unfairly 
discriminatory to eliminate the rebate for Priority Customer NDX orders 
as well because these orders (including Priority Customer Auction 
Orders) will no longer be assessed any fees under the proposed pricing 
structure.
Non-Priority Customer License Surcharge for MNX
    The Exchange believes its proposal to remove any references to MNX 
in Section IV.B of the Schedule of Fees is reasonable because the 
Exchange is seeking to eliminate the $0.25 MNX Surcharge. The 
Exchange's proposal to remove references to the MNX Surcharge is also 
equitable and not unfairly discriminatory because the Exchange will 
eliminate the surcharge for all similarly-situated members.

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 inter-market or intra-market competition that is 
not necessary or appropriate in furtherance of the purposes of the Act. 
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 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 terms of intra-market competition, the proposed changes to adopt 
separate pricing for all regular orders in NDX will result in total 
fees for orders in NDX becoming more uniform across all classes of 
market participants, while still permitting Priority Customers to 
transact in NDX free of any transaction charge. Removing the break-up 
rebate will also enhance the Exchange's ability to offer other rebates 
or reduced fees that could incentivize behavior that would enhance 
market quality on the Exchange, which would benefit all members. 
Finally, the Exchange's proposal to remove any references to MNX from 
Section IV.B of the Schedule of Fees will not have an impact on 
competition as it is simply designed to eliminate the MNX Surcharge for 
all Non-Priority Customers. Lastly, it is also important to note that 
despite the proposed fee increases with respect to NDX, members may 
continue to separately execute options overlying PowerShares QQQ Trust 
(``QQQ'').

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,\43\ and Rule 19b-4(f)(2) \44\ 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.
---------------------------------------------------------------------------

    \43\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \44\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-ISE-2017-35 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-2017-35. 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 Web site (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 Web site viewing and

[[Page 22580]]

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; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-ISE-2017-35 and should be 
submitted on or before June 6, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\45\
---------------------------------------------------------------------------

    \45\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-09812 Filed 5-15-17; 8:45 am]
 BILLING CODE 8011-01-P