Document ID: SEC-2023-1387-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Nasdaq ISE, LLC
Posted Date: 2023-12-01T05:00Z

[Federal Register Volume 88, Number 230 (Friday, December 1, 2023)]
[Notices]
[Pages 84014-84020]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-26499]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99024; File No. SR-ISE-2023-28]

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

November 28, 2023.
    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 November 13, 2023, 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 amend the Exchange's Pricing Schedule at 
Options 7.
    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 at Options 7. Each change is described below.
    The Exchange initially filed the proposed pricing changes on 
November 1, 2023 (SR-ISE-2023-26). On November 13, 2023, the Exchange 
withdrew that filing and submitted this filing.
Background
Regular Order Fees and Rebates
    As set forth in Options 7, Section 3, the Exchange currently has a 
maker/taker pricing model where all market participants (except 
Priority Customers) \3\ are assessed a uniform Regular Order maker fee 
of $0.70 per contract for Non-Select Symbol \4\ executions that add 
liquidity on the Exchange, and a uniform Regular Order taker fee of 
$0.90 per contract for Non-Select Symbol executions that remove 
liquidity. Priority Customers are currently assessed a $0.86 per 
contract Regular Order maker rebate in Non-Select Symbols and a $0.00 
per contract Regular Order taker fee in Non-Select Symbols. 
Additionally, all market participants are charged higher Regular Order 
taker fees for trades in Non-Select Symbols executed against Priority 
Customers. Specifically, Non-Priority Customers \5\ are charged a taker 
fee of $1.10 per contract for trades executed against a Priority 
Customer, while Priority Customers are charged a taker fee of $0.86 per 
contract for trades executed against another Priority Customer.\6\
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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\ ``Non-Priority Customers'' include Market Makers, Non-Nasdaq 
ISE Market Makers (FarMMs), Firm Proprietary/Broker-Dealers, and 
Professional Customers.
    \6\ See Options 7, Section 3, note 3.
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    As it relates to the $0.86 per contract Priority Customer Regular 
Order maker

[[Page 84015]]

rebate described above, the Exchange also currently offers Members an 
additional rebate of $0.14 per contract if they execute more than 0.06% 
of Regular Order Non-Select Symbol Priority Customer volume (excluding 
Crossing Orders \7\ and Responses to Crossing Orders) \8\ calculated as 
a percentage of Customer Total Consolidated Volume \9\ per day in a 
given month (``Note 15 Incentive'').\10\ The Note 15 Incentive is 
designed to encourage Members to transact in greater Regular Order Non-
Select Symbol Priority Customer volume on the Exchange to receive 
rebates up to $1.00 per contract (i.e., the current $0.86 base maker 
rebate plus the additional $0.14 Note 15 Incentive).
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    \7\ 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.
    \8\ ``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.
    \9\ ``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.
    \10\ See Options 7, Section 3, note 15.
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Complex Order Fees and Rebates
    As set forth in Options 7, Section 4, the Exchange currently offers 
tiered Complex Order Priority Customer rebates for Select Symbols and 
Non-Select Symbols based on the Priority Customer Complex Tier 
achieved.\11\ The tiered Complex Order Priority Customer rebates for 
Select Symbols and Non-Select Symbols are presently as follows:
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    \11\ Priority Customer Complex Tiers are based on Total 
Affiliated Member or Affiliated Entity Complex Order Volume 
(Excluding Crossing Orders and Responses to Crossing Orders) 
Calculated as a Percentage of Customer Total Consolidated Volume. 
All Complex Order volume executed on the Exchange, including volume 
executed by Affiliated Members, is included in the volume 
calculation, except for volume executed as Crossing Orders and 
Responses to Crossing Orders. Affiliated Entities may aggregate 
their Complex Order volume for purposes of calculating Priority 
Customer Rebates. The Appointed OFP would receive the rebate 
associated with the qualifying volume tier based on aggregated 
volume. See Options 7, Section 4, note 16.

                        Total Affiliated Member or Affiliated Entity Complex Order Volume
                          [Excluding Crossing Orders and Responses to Crossing Orders]
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                                                Calculated as a percentage of       Rebate for    Rebate for non-
       Priority customer complex tier         customer total consolidated volume  select symbols  select symbols
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Tier 1.....................................  0.000%-0.200%......................         ($0.25)         ($0.40)
Tier 2.....................................  Above 0.200%-0.400%................          (0.30)          (0.55)
Tier 3.....................................  Above 0.400%-0.450%................          (0.35)          (0.70)
Tier 4.....................................  Above 0.450%-0.750%................          (0.40)          (0.75)
Tier 5.....................................  Above 0.750%-1.000%................          (0.45)          (0.80)
Tier 6.....................................  Above 1.000%-1.350%................          (0.48)          (0.85)
Tier 7.....................................  Above 1.350%-1.750%................          (0.51)          (0.92)
Tier 8.....................................  Above 1.750%-2.750%................          (0.55)          (1.03)
Tier 9.....................................  Above 2.750%-4.500%................          (0.56)          (1.04)
Tier 10....................................  Above 4.500%.......................          (0.57)          (1.05)
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    The above rebates are provided per contract per leg if the order 
trades with Non-Priority Customer orders in the Complex Order Book. 
Today, this rebate is reduced by $0.15 per contract in Select Symbols 
where the largest leg of the Complex Order is under fifty (50) 
contracts and trades with quotes and orders on the regular order book 
(the ``Note 1 Rebate Discount''). No Priority Customer Complex Order 
rebates are provided in Select Symbols if any leg of the order that 
trades with interest on the regular order book is fifty (50) contracts 
or more. Lastly, no Priority Customer Complex Order rebates are 
provided in Non-Select Symbols if any leg of the order trades with 
interest on the regular order book, irrespective of order size.\12\
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    \12\ See Options 7, Section 4, note 1.
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    Separately, the Exchange currently assesses Complex Order maker and 
taker fees for Select and Non-Select Symbols based on the pricing 
schedule below:

                                                                  Maker and Taker Fees
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                                                                                                           Maker fee for
                                                                                           Maker fee for    non-select
                                                                           Maker fee for  select symbols   symbols when                    Taker fee for
                   Market participant                      Maker fee for    non-select     when trading       trading      Taker fee for    non- select
                                                          select symbols      symbols         against         against     select symbols      symbols
                                                                                             priority        priority
                                                                                             customer        customer
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Market Maker............................................            0.10            0.20            0.50            0.86            0.50            0.98
Non-Nasdaq ISE Market Maker (FarMM).....................            0.20            0.20            0.50            0.88            0.50            0.98
Firm Proprietary/Broker-Dealer..........................            0.10            0.20            0.50            0.88            0.50            0.98
Professional Customer...................................            0.10            0.20            0.50            0.88            0.50            0.98
Priority Customer.......................................            0.00            0.00            0.00            0.00            0.00            0.00
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Proposal 1--Regular Priority Customer Maker Rebates in Non-Select 
Symbols
    The Exchange proposes to increase the Regular Order Non-Select 
Symbol Priority Customer maker rebate in Options 7, Section 3 from 
$0.86 to $1.00 per contract.
Proposal 2--Note 15 Incentive
    The Exchange also proposes to amend the qualifications for the Note 
15 Incentive by increasing the volume

[[Page 84016]]

threshold from 0.06% to 0.10% of Regular Order Non-Select Symbol 
Priority Customer volume on ISE (excluding Crossing Orders and 
Responses to Crossing Orders) calculated as a percentage of Customer 
Total Consolidated Volume per day in a given month. While the Exchange 
is increasing the volume threshold in the Note 15 Incentive, the 
Exchange is not amending the $0.14 per contract additional rebate under 
this proposal. As such, Members that meet the proposed volume threshold 
may be eligible for rebates up to $1.14 per contract (i.e., the 
proposed $1.00 base maker rebate plus the additional $0.14 Note 15 
Incentive) on their Priority Customer Regular Orders in Non-Select 
Symbols that add liquidity on ISE.
    Further, the Exchange proposes to link the amended Note 15 
Incentive to the Priority Customer Complex Order rebates in Options 7, 
Section 4, as further described above. Specifically, Members that meet 
the amended Note 15 Incentive volume requirement (i.e., execute more 
than 0.10% of regular order Non-Select Symbol Priority Customer volume 
on ISE (excluding Crossing Orders and Responses to Crossing Orders) 
calculated as a percentage of Customer Total Consolidated Volume per 
day in a given month) will also be eligible to receive the Section 4 
Priority Customer Complex Order rebates in Select Symbols and Non-
Select Symbols that apply to one tier higher than the tier for which 
they currently qualify. For example, if a Member currently qualifies 
for Priority Customer Complex Tier 1 AND meets the proposed 0.10% 
volume requirement in the Note 15 Incentive, that Member will be 
eligible to receive the Priority Customer Complex Tier 2 rebate for 
Select Symbols and Non-Select Symbols instead of the Priority Customer 
Complex Tier 1 rebate for Select Symbols and Non-Select Symbols. The 
Exchange also proposes that Members that already qualify for the 
highest Priority Customer Complex Tier (i.e., Tier 10) will instead 
receive an additional rebate of $0.01 per contract in Select Symbols 
and Non-Select Symbols because they are already in the highest tier 
(and therefore unable to receive the benefit of a higher tier).\13\
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    \13\ As discussed later in this filing, the Exchange is also 
proposing a number of changes to the Priority Customer Complex Order 
rebates for both Select and Non-Select Symbols in Options 7, Section 
4.
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    In connection with linking the Note 15 Incentive with the Priority 
Customer Complex Order rebates in Options 7, Section 4, the Exchange 
also proposes to add new note 17 in Options 7, Section 4 that would 
provide: ``Members that execute more than 0.10% of Regular Order Non-
Select Symbol Priority Customer Volume (excluding Crossing Orders and 
Responses to Crossing Orders) calculated as a percentage of Customer 
Total Consolidated Volume per day in a given month will be eligible to 
receive the Priority Customer Complex Order rebates in Select Symbols 
and Non-Select Symbols that apply to one tier higher than the tier for 
which they currently qualify, except Members that already qualify for 
the highest Priority Customer Complex Tier will instead receive an 
additional rebate of $0.01 per contract in Select Symbols and Non-
Select Symbols.'' New note 17 would make clear that the Priority 
Customer Complex Order rebates in Section 4 are linked to the proposed 
volume threshold in the note 15 incentive, as further described above.
Proposal 3--Regular Taker Fees in Non-Select Symbols
    The Exchange proposes to increase the Regular Order taker fees in 
note 3 of Options 7, Section 3 for trades in Non-Select Symbols that 
are executed against Priority Customers. As proposed, Non-Priority 
Customer orders will be charged a taker fee of $1.25 (increased from 
$1.10) per contract for trades executed against a Priority Customer. 
Priority Customer orders will be charged a taker fee of $1.00 
(increased from $0.86) per contract for trades executed against a 
Priority Customer.
Proposal 4--Complex Priority Customer Rebates
    The Exchange proposes a number of adjustments to the tiered 
Priority Customer Complex Order rebates described above. Specifically, 
the Exchange proposes to increase the Priority Customer Complex Tier 7 
rebate in Select Symbols from $0.51 to $0.54 per contract. The Exchange 
also proposes to increase the Priority Customer Complex Order rebates 
in Non-Select Symbols as follows: Tier 1 would increase from $0.40 to 
$0.50 per contract, Tier 2 would increase from $0.55 to $0.60 per 
contract, Tier 3 would increase from $0.70 to $0.75 per contract, Tier 
4 would increase from $0.75 to $0.80 per contract, Tier 5 would 
increase from $0.80 to $0.85 per contract, Tier 6 would increase from 
$0.85 to $0.95 per contract, Tier 7 would increase from $0.92 to $1.00 
per contract, Tier 8 would increase from $1.03 to $1.10 per contract, 
Tier 9 would increase from $1.04 to $1.12 per contract, and Tier 10 
would increase from $1.05 to $1.15 per contract. The Exchange is 
amending the rebate amounts without changing the tier qualifications so 
that Members can send the same amount of order flow as they do today to 
receive larger rebates described above. Overall, the Exchange believes 
that these increased Complex Order Priority Customer rebates will 
attract more Complex Order flow to ISE.
    The Exchange also proposes to increase the Note 1 Rebate Discount 
for smaller-sized Complex Orders in Select Symbols that leg into the 
regular order book and trade with regular interest. Today, the Note 1 
Rebate Discount reduces the Priority Customer Complex Tiers 1-10 
rebates for Select Symbols by $0.15 per contract when the largest leg 
of the Complex Order is under fifty (50) contracts and trades with 
quotes and orders on the regular order book. The Exchange now proposes 
to increase this reduction to $0.20 per contract.
Proposal 5--Complex Maker and Taker Fees in Non-Select Symbols
    The Exchange proposes to increase the Complex Order maker and taker 
fees in Non-Select Symbols described above. Specifically, the Exchange 
proposes to increase the maker fees in Non-Select Symbols when trading 
against Priority Customers as follows: $0.86 to $1.03 per contract for 
Market Makers \14\ and $0.88 to $1.05 per contract for all other Non-
Priority Customers. Further, the Exchange proposes to increase the 
taker fees in Non-Select Symbols from $0.98 to $1.15 per contract for 
all Non-Priority Customers. Priority Customers will continue to receive 
free executions for their Complex Orders.
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    \14\ The term ``Market Makers'' refers to ``Competitive Market 
Makers'' and ``Primary Market Makers'' collectively. See Options 1, 
Section 1(a)(21).
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Proposal 6--Routing Fees
    The Exchange proposes to amend the Exchange's Pricing Schedule at 
Options 7, Section 6.F (Route-Out Fees). The routing fees in this 
section apply to executions of orders in all symbols that are routed to 
one or more exchanges in connection with the Options Order Protection 
and Locked/Crossed Market Plan.
    Today, the Exchange assesses Market Makers, Non-Nasdaq ISE Market 
Makers (FarMM),\15\ Firm Proprietary \16\/Broker-

[[Page 84017]]

Dealers \17\ and Professional Customers \18\ a $0.55 per contract 
Select Symbol routing fee and a $1.09 Non-Select Symbol routing fee to 
route to another options exchange. Additionally, today, the Exchange 
assess Priority Customers a $0.48 per contract Select Symbol routing 
fee and a $0.70 Non-Select Symbol routing fee to route to another 
options exchange.
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    \15\ 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.
    \16\ A ``Firm Proprietary'' order is an order submitted by a 
member for its own proprietary account.
    \17\ A ``Broker-Dealer'' order is an order submitted by a member 
for a broker-dealer account that is not its own proprietary account.
    \18\ 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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    The Exchange now proposes to assess a $0.60 per contract Select 
Symbol routing fee and a $1.20 Non-Select Symbol routing fee to route 
to another options exchange, regardless of the capacity of the order. 
The purpose of the proposed routing fees is to recoup costs incurred by 
the Exchange when routing orders to other options exchanges on behalf 
of options Members. In determining its proposed routing fees, the 
Exchange took into account transaction fees assessed by other options 
exchanges, the Exchange's projected clearing costs, and the projected 
administrative, regulatory, and technical costs associated with routing 
orders to other options exchanges. The Exchange will continue to use 
its affiliated broker-dealer, Nasdaq Execution Services, to route 
orders to other options exchanges. Routing services offered by the 
Exchange are completely optional and market participants can readily 
select between various providers of routing services, including other 
exchanges and broker-dealers. Also, the Exchange notes that market 
participants may elect to mark their orders as ``Do-Not-Route'' to 
avoid any routing fees.\19\ The proposed structure for routing fees is 
similar to another options market.\20\ The Exchange believes that the 
proposed routing fees would enable the Exchange to recover the costs it 
incurs to route orders to away markets after taking into account the 
other costs associated with routing orders to other options exchanges.
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    \19\ See Supplementary Material .04 to Options 3, Section 7.
    \20\ See MEMX's Options Fee Schedule at https://info.memxtrading.com/us-options-trading-resources/us-options-fee-schedule/. MEMX assesses a $0.60 per contract Penny Symbol routing 
fee and a $1.20 Non-Penny Symbol routing fee.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with section 
6(b) of the Act,\21\ in general, and furthers the objectives of 
sections 6(b)(4) and 6(b)(5) of the Act,\22\ 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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    \21\ 15 U.S.C. 78f(b).
    \22\ 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 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' . . . .'' \23\
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    \23\ 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.'' \24\
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    \24\ 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 
seventeen 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.
Proposal 1--Regular Priority Customer Maker Rebates in Non-Select 
Symbols
    The Exchange believes that its proposal to increase the Regular 
Order Priority Customer maker rebate in Non-Select Symbols from $0.86 
to $1.00 per contract is reasonable because Members will be further 
incentivized to add liquidity in Priority Customer Regular Orders in 
Non-Select Symbols in order to receive the increased rebate. The 
Exchange believes that this proposal is equitable and not unfairly 
discriminatory as all Priority Customers will be uniformly assessed the 
$1.00 maker rebate. The Exchange further believes that it is equitable 
and not unfairly discriminatory to provide only Priority Customers with 
this maker rebate because the Exchange has historically offered more 
favorable pricing for those market participants. In addition, increased 
Priority Customer order flow enhances liquidity on the Exchange for the 
benefit of all market participants by providing more trading 
opportunities, which in turn attracts Market Makers and other market 
participants that may trade with this order flow.
Proposal 2--Note 15 Incentive
    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 volume threshold from 0.06% to 
0.10% such that Members would now need to execute more than 0.10% of 
Regular Order Non-Select Symbol Priority Customer volume (excluding 
Crossing Orders and Responses to Crossing Orders) calculated as a 
percentage of Customer Total Consolidated Volume per day in a given 
month in order to receive an additional rebate of $0.14 per contract. 
While the volume threshold is increasing under this proposal, the 
Exchange believes that Members will continue to be incentivized to 
increase market participation in Non-Select Symbol Priority Customer 
orders to qualify for the $0.14 additional Note 15 Incentive, 
especially in light of the significant increase in the base Non-Select 
Symbol Priority Customer maker rebate to $1.00 per contract as 
discussed above. Taken together, Members would be able to receive up to 
$1.14 per contract on their Priority Customer Regular Orders in Non-
Select Symbols

[[Page 84018]]

that add liquidity on ISE. The Exchange believes that 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 also believes that linking the proposed volume 
threshold in the Note 15 Incentive to the Options 7, Section 4 Priority 
Customer Complex Order rebates in the manner described above is 
reasonable because the proposal may further incentivize Members to 
increase market participation in Priority Customer Regular Orders in 
Non-Select Symbols to receive the next higher Priority Customer Complex 
Tier rebate than the tier for which they currently qualify (or $0.01 
additional rebate if they are already in the highest Priority Customer 
Complex Tier 10). The Exchange also believes that the proposal would 
incentivize Members to increase their Priority Customer Complex Order 
flow in both Select and Non-Select Symbols to the Exchange in order to 
qualify for a higher Priority Customer Complex Tier (which in turn 
could set the Member up to receive the next higher Priority Customer 
Complex Tier rebate--or an additional $0.01 rebate if they are already 
in Priority Customer Complex Tier 10--if they meet the proposed volume 
threshold in the amended Note 15 Incentive).
    The Exchange believes that the proposed changes to the Note 15 
Incentive as discussed above are equitable and not unfairly 
discriminatory because they 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.
Proposal 3--Regular Taker Fees in Non-Select Symbols
    The Exchange believes that its proposal to increase the Regular 
Order taker fees in note 3 of Options 7, Section 3 for trades in Non-
Select Symbols that are executed against Priority Customers is 
reasonable because they are designed to offset the significant 
incentives that the Exchange is proposing for Priority Customer 
orders.\25\ As discussed above, Non-Priority Customer orders will be 
charged a taker fee of $1.25 (increased from $1.10) per contract for 
trades executed against a Priority Customer. Priority Customer orders 
will be charged a taker fee of $1.00 (increased from $0.86) per 
contract for trades executed against a Priority Customer. The Exchange 
believes that Members will benefit from the additional liquidity 
created by the Priority Customer incentives proposed in this filing, 
and it is therefore appropriate to charge increased taker fees for 
trades executed against a Priority Customer.
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    \25\ As previously discussed, the Exchange is proposing a 
significant increase in the base maker rebate provided to Priority 
Customer Regular Orders in Non-Select Symbols from $0.86 to $1.00 
per contract. In addition, the Exchange is linking the Note 15 
Incentive to the Section 4 Priority Customer Complex Tier rebates to 
further incentivize Priority Customer order flow to the Exchange. 
Finally, the Exchange is increasing the Section 4 Priority Customer 
Complex Tier rebates without changing the tier qualifications so 
that Members can send the same amount of order flow as they do today 
to receive larger rebates.
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    The Exchange believes that its proposal to increase the taker fees 
in note 3 of Options 7, Section 3 for trades that are executed against 
Priority Customers is equitable and not unfairly discriminatory because 
the changes will apply uniformly to all similarly situated market 
participants. Priority Customers will continue to be charged a lower 
taker fee pursuant to note 3 compared to other market participants, 
which the Exchange believes is equitable and not unfairly 
discriminatory because the Exchange has historically provided Priority 
Customers with more favorable pricing. Furthermore, 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.
Proposal 4--Complex Priority Customer Rebates
    The Exchange believes that its proposal to increase the tiered 
Priority Customer Complex Order rebates in the manner discussed above 
is reasonable because these increased Complex Order Priority Customer 
rebates will attract more Complex Order flow to ISE to the benefit of 
all market participants. The Exchange believes that each rebate is set 
at appropriate levels that will encourage market participants to 
increase their Priority Customer Complex Order activity on the 
Exchange. As noted above, the Exchange is amending the rebate amounts 
without changing the tier qualifications so that Members can send the 
same amount of order flow as they do today to receive larger rebates 
described above.
    The Exchange also believes that its proposal to increase the Note 1 
Rebate Discount for smaller-sized Complex Orders (i.e., largest leg of 
the order is under fifty contracts) in Select Symbols that leg into the 
regular order book and trade with regular interest from $0.15 to $0.20 
per contract is reasonable because Members will continue to be 
incentivized to send Priority Customer Complex Order flow to the 
Exchange despite the increased reduction in order to receive the tiered 
rebates. Also, the Exchange will continue to pay rebates for Priority 
Customer Complex Orders of any size that trade with Non-Priority 
Customer orders in the Complex Order Book, based on the Priority 
Customer Complex Tier achieved, thereby continuing to incentivize 
Members to bring Complex Order flow to the Exchange to earn the rebate 
on their Priority Customer Complex Order volume. Overall, the Exchange 
believes that the Priority Customer Complex Order rebate program, as 
modified under this proposal, is reasonable because the program is 
optional and all Members can choose to participate or not.
    The Exchange believes that offering the Priority Customer Complex 
Order rebate program, as modified, to only Priority Customers is 
equitable and not unfairly discriminatory as the proposed changes are 
intended to increase Priority Customer Complex Order flow to ISE. An 
increase in Priority Customer order flow enhances liquidity on the 
Exchange to the benefit of all market participants by providing more 
trading opportunities, which in turn attracts Market Makers and other 
market participants that may interact with this order flow.
Proposal 5--Complex Maker and Taker Fees in Non-Select Symbols
    The Exchange believes that its proposal to increase the Complex 
Order maker and taker fees in Non-Select Symbols in the manner 
described above is reasonable because it is designed to offset the 
significant incentives that the Exchange is proposing for Priority 
Customer orders.\26\ The Exchange believes that Members will benefit 
from the additional liquidity created by the Priority Customer 
incentives proposed in this filing, and it is therefore appropriate to 
charge all Non-Priority

[[Page 84019]]

Customers increased maker fees for trades executed against a Priority 
Customer and increased taker fees.
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    \26\ See supra note 25.
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    The Exchange also believes that its proposal is equitable and not 
unfairly discriminatory. As discussed above, the Exchange proposes to 
increase the maker fees in Non-Select Symbols when trading against 
Priority Customers as follows: $0.86 to $1.03 per contract for Market 
Makers and $0.88 to $1.05 per contract for all other Non-Priority 
Customers. Further, the Exchange proposes to increase the taker fees in 
Non-Select Symbols from $0.98 to $1.15 per contract for all Non-
Priority Customers. Priority Customers will continue to receive free 
executions for their Complex Orders. Market Makers will continue to be 
assessed lower maker fees in Non-Select Symbols than other Non-Priority 
Customers when trading against Priority Customers. The Exchange 
believes this is equitable and not unfairly discriminatory because 
Market Makers are subject to additional requirements and obligations 
(such as quoting obligations) that other market participants are not. 
In addition, the Exchange believes that it is equitable and not 
unfairly discriminatory to continue to offer Priority Customers Complex 
Orders free executions in order to incentivize Priority Customer order 
flow to ISE. Priority Customer order flow enhances liquidity on the 
Exchange for the benefit of all market participants by providing more 
trading opportunities, which in turn attracts Market Makers and other 
market participants that may interact with this order flow.
Proposal 6--Routing Fees
    The Exchange's proposal to amend its routing fees such that all 
Members would pay a $0.60 per contract Select Symbol routing fee and a 
$1.20 Non-Select Symbol routing fee to route to another options 
exchange, regardless of capacity, is reasonable because the proposed 
routing fees would enable the Exchange to recover the costs it incurs 
to route orders to away markets after taking into account the other 
costs associated with routing orders to other options exchanges. 
Routing services offered by the Exchange are completely optional and 
market participants can readily select between various providers of 
routing services, including other exchanges and broker-dealers. Also, 
the Exchange notes that market participants may elect to mark their 
orders as ``Do-Not-Route'' to avoid any routing fees. As noted above, 
the proposed structure for routing fee is similar to another options 
market.\27\
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    \27\ See supra note 20.
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    The Exchange's proposal to amend its routing fees such that all 
Members would pay a $0.60 per contract Select Symbol Routing Fee and a 
$1.20 Non-Select Symbol Routing Fee, regardless of capacity, to route 
to another options exchange is equitable and not unfairly 
discriminatory because these uniform Routing Fees will apply equally to 
all options 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 competition not necessary or appropriate in 
furtherance of the purposes of the Act.
Intra-Market Competition
    In terms of intra-market competition, the Exchange does not believe 
that its proposal will place any category of market participant at a 
competitive disadvantage. While some aspects of the proposal apply 
directly to Priority Customers (through rebates or more favorable 
pricing) and Market Makers (through lower Complex Order maker fees when 
trading against Priority Customers) as discussed above, the Exchange 
believes that the changes, taken together, will ultimately fortify and 
encourage activity on the Exchange. As discussed above, all market 
participants will benefit from any increase in market activity that the 
proposal effectuates.
Proposal 1--Regular Priority Customer Maker Rebates in Non-Select 
Symbols
    The Exchange does not believe that its proposal to increase the 
Regular Order Priority Customer maker rebate in Non-Select Symbols from 
$0.86 to $1.00 per contract will impose an undue burden on intra-market 
competition all Priority Customers will be uniformly assessed the $1.00 
maker rebate. The Exchange does not believe that its proposal to 
provide only Priority Customers with this maker rebate will impose an 
undue burden on intra-market competition because the Exchange has 
historically offered more favorable pricing for those market 
participants. In addition, increased Priority Customer order flow 
enhances liquidity on the Exchange for the benefit of all market 
participants by providing more trading opportunities, which in turn 
attracts Market Makers and other market participants that may trade 
with this order flow.
Proposal 2--Note 15 Incentive
    The Exchange does not believe that the proposed changes to the Note 
15 Incentive as discussed above 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.
Proposal 3--Regular Taker Fees in Non-Select Symbols
    The Exchange does not believe that its proposal to increase the 
taker fees in note 3 of Options 7, Section 3 for trades that are 
executed against Priority Customers will impose an undue burden on 
intra-market competition because the changes will apply uniformly to 
all similarly situated market participants. Priority Customers will 
continue to be charged a lower taker fee pursuant to note 3 compared to 
other market participants, which the Exchange believes is equitable and 
not unfairly discriminatory because the Exchange has historically 
provided Priority Customers with more favorable pricing. Furthermore, 
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.
Proposal 4--Complex Priority Customer Rebates
    The Exchange does not believe that offering the Priority Customer 
Complex Order rebate program, as modified under this proposal, to only 
Priority Customers will impose an undue burden on intra-market 
competition because the proposed changes are intended to increase 
Priority Customer Complex Order flow to ISE. An increase in Priority 
Customer order flow enhances liquidity on the Exchange to the benefit 
of all market participants by providing more trading opportunities, 
which in turn attracts Market Makers and other market participants that 
may interact with this order flow.

[[Page 84020]]

Proposal 5--Complex Maker and Taker Fees in Non-Select Symbols
    The Exchange does not believe that its proposal to increase the 
Complex Order maker and taker fees in Non-Select Symbols in the manner 
described above will impose an undue burden on intra-market 
competition. As discussed above, the Exchange proposes to increase the 
maker fees in Non-Select Symbols when trading against Priority 
Customers as follows: $0.86 to $1.03 per contract for Market Makers and 
$0.88 to $1.05 per contract for all other Non-Priority Customers. 
Further, the Exchange proposes to increase the taker fees in Non-Select 
Symbols from $0.98 to $1.15 per contract for all Non-Priority 
Customers. Priority Customers will continue to receive free executions 
for their Complex Orders. Market Makers will continue to be assessed 
lower maker fees in Non-Select Symbols than other Non-Priority 
Customers when trading against Priority Customers. The Exchange 
believes this is equitable and not unfairly discriminatory because 
Market Makers are subject to additional requirements and obligations 
(such as quoting obligations) that other market participants are not. 
In addition, the Exchange believes that it is equitable and not 
unfairly discriminatory to continue to offer Priority Customers Complex 
Orders free executions in order to incentivize Priority Customer order 
flow to ISE. Priority Customer order flow enhances liquidity on the 
Exchange for the benefit of all market participants by providing more 
trading opportunities, which in turn attracts Market Makers and other 
market participants that may interact with this order flow.
Proposal 6--Routing Fees
    The Exchange's proposal to amend its routing fees such that all 
Members would pay a $0.60 per contract Select Symbol routing fee and a 
$1.20 Non-Select Symbol routing fee to route to another options 
exchange, regardless of capacity, will not impose an undue burden on 
intra-market competition because these uniform routing fees will apply 
equally to all options Members.
Inter-Market Competition
    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 \28\ and Rule 19b-4(f)(2) \29\ 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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    \28\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \29\ 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-ISE-2023-28 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-2023-28. 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-2023-28 and should be 
submitted on or before December 22, 2023.
    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\30\
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    \30\ 17 CFR 200.30-3(a)(12).

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-26499 Filed 11-30-23; 8:45 am]
BILLING CODE 8011-01-P