Document ID: SEC-2022-1436-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Nasdaq ISE, LLC
Posted Date: 2022-11-07T05:00Z

[Federal Register Volume 87, Number 214 (Monday, November 7, 2022)]
[Notices]
[Pages 67086-67091]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-24144]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96199; File No. SR-ISE-2022-24]

Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the 
Pricing Schedule at Options 7, Section 6 To Adopt a New Qualified 
Contingent Cross Rebate Program and Increase the Crossing Fee Cap

November 1, 2022.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on October 24, 2022, Nasdaq ISE, LLC (``ISE'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``SEC'' or ``Commission'') 
the proposed rule change as described in Items I, II, and III, below, 
which Items have been prepared by the Exchange. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the Exchange's Pricing Schedule at 
Options 7, Section 6.
    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.

[[Page 67087]]

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, Section 6 to: (1) adopt a new Qualified 
Contingent Cross (``QCC'') \3\ rebate program, and (2) increase the 
Crossing Fee Cap.
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    \3\ A QCC Order is comprised of an originating order to buy or 
sell at least 1000 contracts that is identified as being part of a 
qualified contingent trade, as that term is defined in Supplementary 
Material .01 to Options 3, Section 7, coupled with a contra-side 
order or orders totaling an equal number of contracts. See Options 
3, Section 7(j).
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    The Exchange initially filed the proposed pricing changes on 
October 3, 2022 (SR-ISE-2022-21). On October 14, 2022, the Exchange 
withdrew that filing and submitted SR-ISE-2022-22. On October 24, 2022, 
the Exchange withdrew that filing and submitted this filing.
QCC Rebate
Background
    Today, the Exchange offers a QCC and Solicitation Rebate program in 
Options 7, Section 6.A whereby Members using QCC and/or other solicited 
orders executed in the Solicitation \4\ or Facilitation \5\ Mechanisms 
(together with QCC, collectively, ``Current Solicited Orders'') receive 
rebates for each originating contract side in all symbols traded on the 
Exchange. Once a Member reaches a certain volume threshold in Current 
Solicited Orders during a month, the Exchange provides rebates to that 
Member for all of its eligible Current Solicited Order traded contracts 
for that month.\6\ Members receive the rebate for all Current Solicited 
Orders except for Current Solicited Orders between two Priority 
Customers.\7\ Today, the volume threshold and corresponding QCC and 
Solicitation Rebates in Section 6.A are as follows:
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    \4\ The Solicitation or Solicited Order Mechanism is a process 
by which an Electronic Access Member (``EAM'') can attempt to 
execute orders of 500 or more contracts it represents as agent 
against contra orders that it solicited. See Options 3, Section 
11(d). The Exchange will make a corrective change in Section 6.A to 
replace the reference to Solicitation Mechanism with Solicited Order 
Mechanism.
    \5\ The Facilitation Mechanism is a process by which an EAM can 
execute a transaction wherein the EAM seeks to facilitate a block-
size order it represents as agent, and/or a transaction wherein the 
EAM solicited interest to execute against a block-size order it 
represents as agent. See Options 3, Section 11(b).
    \6\ All eligible volume from affiliated Members is 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 Options 1, 
Section 1(a)(37).

------------------------------------------------------------------------
               Originating contract sides                     Rebate
------------------------------------------------------------------------
0 to 99,999.............................................           $0.00
100,000 to 199,999......................................         ($0.05)
200,000 to 499,999......................................         ($0.07)
500,000 to 749,999......................................         ($0.09)
750,000 to 999,999......................................         ($0.10)
1,000,000+..............................................         ($0.11)
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    Volume resulting from all Current Solicited Orders is aggregated in 
determining the applicable volume tier as set forth above. For Members 
that achieve the highest volume threshold of 1,000,000 or more 
originating contract sides, the Exchange also currently provides an 
additional rebate of $0.01 per originating contract side on Current 
Solicited Orders that qualify for the QCC and Solicitation Rebate 
program if the Member achieves in a given month: (i) combined Current 
Solicited Order volume of more than 1,750,000 originating contract 
sides and (ii) Priority Customer Complex Tiers 6 or higher in Section 4 
(the ``note * incentive'').\8\ In addition, the Exchange provides an 
additional rebate of $0.01 per originating contract side that is 
applied to each QCC and Solicitation Rebate volume tier where the 
Member receives the rebate (i.e., tier 2 or higher) if the Member also 
achieves Priority Customer Complex Tier 2 or higher in a given month 
(the ``note &'' incentive). Thus, qualifying Members may receive up to 
$0.06 in the second QCC and Solicitation Rebate volume tier, $0.08 in 
the third tier, $0.10 in the fourth tier, $0.11 in the fifth tier, and 
$0.13 in the sixth and highest tier (i.e., the $0.11 base rebate, the 
$0.01 note * incentive, and the $0.01 note & incentive).
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    \8\ As set forth in Options 7, Section 4, 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.
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Proposal
    To further encourage QCC order flow, the Exchange now proposes to 
adopt a new QCC Rebate program in Section 6.B. As a result of this 
change, the Exchange will no longer provide the Section 6.A rebates, as 
described above, for QCC orders. With the proposed changes, the 
Exchange will continue to provide the Section 6.A rebates for solicited 
orders executed in the Solicited Order Mechanism or Facilitation 
Mechanism (``Amended Solicited Orders''). In addition, executed QCC 
volume will continue to be combined with executed Amended Solicited 
Order volume to count towards the Section 6.A rebate tiers described 
above; however, the Section 6.A rebates will only be provided to the 
Amended Solicited Orders as the Exchange will pay the new QCC Rebates 
in Section 6.B to QCC orders under this proposal.
    To effectuate the foregoing changes, the Exchange first proposes to 
update all references to the ``QCC and Solicitation Rebate'' in Section 
6.A to the ``Solicitation Rebate.'' The Exchange also proposes to amend 
the first paragraph of Section 6.A to provide that Members using the 
QCC and/or other solicited orders executed in the Solicited Order 
Mechanism or Facilitation Mechanism will receive rebates for solicited 
orders executed in the Solicited Order Mechanism or Facilitation 
Mechanism (i.e., Amended Solicited Orders) according to the table in 
Section 6.A for each originating contract side in all symbols traded on 
the Exchange. Volume associated with QCC executions will be aggregated 
in calculating the Solicitation Rebate volume tiers in Section 6.A, but 
Members that execute QCC volume will receive the QCC Rebate in Section 
6.B.
    The Exchange also proposes to update each instance in Section 6.A 
where the current language refers to Amended Solicited Order volume to 
add a reference to QCC volume as well, and to make clear in the second 
paragraph of Section 6.A that the volume aggregation in Section 6.A 
would include combined QCC and Amended Solicited Order volume (as is 
the case today). The Exchange further proposes a corrective change in 
the second paragraph of Section 6.A to replace the reference to QCC and 
Solicitation volume totals with QCC and Amended Solicited Order volume 
totals to use correct terminology.
    Next, the Exchange proposes to set forth the new QCC Rebate in 
Section 6.B, and relocate the PIM and Facilitation Rebate currently in 
Section 6.B into Section 6.C, which is currently reserved. As proposed, 
Section 6.B will provide that Members that submit QCC orders when at 
least one side of the QCC transaction is a Non-Priority Customer will 
receive the below QCC Rebates. QCC Rebates will be paid to each agency 
contract side (``QCC Agency Side'') in all symbols traded on the 
Exchange. Specifically:

[[Page 67088]]

     When only one side of the QCC transaction is a Non-
Priority Customer,\9\ the Member will receive a $0.14 per contract 
rebate for each QCC Agency Side.
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    \9\ Non-Priority Customers include Market Makers, Non-Nasdaq ISE 
Market Makers (FarMMs), Firm Proprietary/Broker-Dealers, and 
Professional Customers.
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     When both sides of the QCC transaction are Non-Priority 
Customers, the Member will receive a $0.22 per contract rebate for each 
QCC Agency Side.
    In addition, the Exchange proposes to provide an additional 
incentive of $0.03 per contract for each QCC Agency Side that qualifies 
for the QCC Rebate program if they achieve Priority Customer Complex 
Tier 2 or higher in a given month. The proposed incentive will be 
structured similarly to the existing note & incentive within Section 
6.A in that Members will need to achieve the same Priority Customer 
Complex Tier 2 or higher to be eligible for the incentive. The proposed 
incentive will also be applied to each QCC Rebate and will be 
cumulative of the QCC Rebates so that qualifying Members could receive 
up to $0.17 per contract for each QCC Agency Side when only one side of 
the QCC transaction is a Non-Priority Customer, and up to $0.25 per 
contract for each QCC Agency Side when both sides of the QCC 
transaction are Non-Priority Customers.
    Lastly, the Exchange proposes to define Non-Priority Customers in 
Section 1 because this term is currently used throughout Options 7,\10\ 
and will also be used in proposed Section 6.B. Today, Non-Priority 
Customers include every market participant capacity in the Exchange's 
Pricing Schedule except for Priority Customers. This is also how the 
Exchange will use this term in proposed Section 6.B. As such, the 
Exchange proposes to define Non-Priority Customers in Section 1 as 
including Market Makers,\11\ Non-Nasdaq ISE Market Makers (FarMMs),\12\ 
Firm Proprietary \13\/Broker-Dealers,\14\ and Professional 
Customers.\15\
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    \10\ See Section 3, Section 4, and Section 5.C.
    \11\ The term ``Market Makers'' refers to Competitive Market 
Makers and Primary Market Makers, collectively. See Options 1, 
Section 1(a)(21).
    \12\ 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.
    \13\ A Firm Proprietary order is an order submitted by a member 
for its own proprietary account.
    \14\ A Broker-Dealer order is an order submitted by a member for 
a broker-dealer account that is not its own proprietary account.
    \15\ A Professional Customer is a person or entity that is not a 
broker/dealer and is not a Priority Customer. See also Options 1, 
section 1(a)(40).
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    Overall, Members will be eligible to receive higher rebates on 
qualifying QCC orders under Section 6.B compared to the rebates they 
receive today under Section 6.A. As such, Members may be incentivized 
to send more QCC and complex order flow to the Exchange.
Crossing Fee Cap
    As set forth in Options 7, Section 6.H, the Exchange presently 
offers a Crossing Fee Cap of $90,000 per month, per Member, on all Firm 
Proprietary transactions that are part of the originating or contra-
side of a Crossing Order.\16\ Fees charged by the Exchange for 
Responses to Crossing Orders are not included in the calculation of the 
monthly fee cap. Surcharge fees charged by the Exchange for licensed 
products and the fees for index options as set forth in Section 5 are 
not included in the calculation of the monthly fee cap.\17\ For 
purposes of the Crossing Fee Cap the Exchange attributes eligible 
volume to the ISE Member on whose behalf the Crossing Order was 
executed.
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    \16\ Crossing Orders are contracts that are submitted as part of 
a Facilitation, Solicitation, PIM, Block or QCC order. All eligible 
volume from affiliated Members is aggregated for purposes of the 
Crossing Fee Cap, provided there is at least 75% common ownership 
between the Members as reflected on each Member's Form BD, Schedule 
A.
    \17\ In addition, a service fee of $0.00 per side applies to all 
order types that are eligible for the fee cap. The service fee would 
apply once a Member reaches the fee cap level and would apply to 
every contract side above the fee cap. A Member who does not reach 
the monthly fee cap is not charged the service fee. Once the fee cap 
is reached, the service fee shall apply to eligible Firm Proprietary 
orders in all Nasdaq ISE products. The service fee is not calculated 
in reaching the cap.
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    At this time, the Exchange proposes to increase the Crossing Fee 
Cap from $90,000 to $150,000. While the Crossing Fee Cap will increase 
under this proposal, the Exchange believes that Members will continue 
to be incentivized to bring Firm Proprietary Crossing Order flow to 
ISE.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with section 
6(b) of the Act,\18\ in general, and furthers the objectives of 
sections 6(b)(4) and 6(b)(5) of the Act,\19\ 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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    \18\ 15 U.S.C. 78f(b).
    \19\ 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'. . . .'' \20\
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    \20\ 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.'' \21\
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    \21\ 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 
sixteen 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

[[Page 67089]]

liquidity and market share relative to its competitors.
QCC Rebate
    The Exchange believes that the proposed QCC Rebate program is 
reasonable, equitable, and not unfairly discriminatory. The proposed 
changes are designed to incentivize market participants to direct more 
QCC and complex order flow to ISE, which the Exchange believes would 
enhance market quality to the benefit of all market participants. The 
Exchange believes the proposed QCC Rebate structure is reasonable 
because the proposed changes provide opportunities for Members to 
receive higher rebates for each QCC Agency Side than they currently 
receive under the QCC and Solicitation Rebate program in Options 7, 
Section 6.A, which may incentivize more QCC order flow to the Exchange. 
As discussed above, qualifying Members presently receive up to $0.06 in 
the second QCC and Solicitation Rebate volume tier, $0.08 in the third 
tier, $0.10 in the fourth tier, $0.11 in the fifth tier, and $0.13 in 
the sixth and highest tier (i.e., the $0.11 base rebate, the $0.01 note 
* incentive, and the $0.01 note & incentive). With the proposed 
changes, qualifying Members would receive $0.14 per contract (or $0.17 
per contract if they also achieve Priority Customer Complex Tier 2 or 
higher in a given month) for each QCC Agency Side when only one side of 
the QCC transaction is a Non-Priority Customer, and $0.22 per contract 
(or $0.25 per contract if they also achieve Priority Customer Complex 
Tier 2 or higher in a given month) when both sides of the QCC 
transaction are Non-Priority Customers. The Exchange will continue to 
not provide any rebates under this proposal when both sides of the QCC 
transaction are Priority Customers, as is the case today. The Exchange 
believes that this is reasonable given that Priority Customers are 
already incentivized by having no transaction fees for Crossing Orders, 
including QCC orders.\22\ The Exchange also notes that other competing 
exchanges offer alternative QCC rebates that depend on the capacity of 
the parties to the transaction.\23\
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    \22\ See Options 7, Sections 3 and 4.
    \23\ See BOX Exchange (``BOX'') Fee Schedule, Section IV.D.1. 
BOX offers tiered QCC rebates to Participants that entered the order 
into the BOX System when at least one party to the QCC transaction 
is a Broker-Dealer or Market Maker. When only one side of the QCC 
transaction is a Broker-Dealer or Market Maker, Rebate 1 will apply. 
When both parties to the QCC transaction are a Broker Dealer or 
Market Maker, Rebate 2 will apply. See also Cboe EDGX Options 
Exchange (``EDGX'') Fee Schedule, QCC Initiator/Solicitation Rebate 
Tiers. Like BOX, EDGX offers tiered rebates for QCC transactions 
when at least one side of the transaction is of Non-Customer, Non-
Professional capacity. When only one side of the transaction is of 
Non-Customer, Non-Professional capacity, Rebate 1 will apply. When 
both sides of the transaction are of Non-Customer, Non-Professional 
capacity, Rebate 2 will apply.
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    The Exchange also believes that the proposed additional $0.03 
incentive that will be provided to Members that achieve Priority 
Customer Complex Tier 2 or higher in a given month (in addition to 
qualifying for the QCC Rebate program) is reasonable because this 
incentive is intended to encourage Members to send more QCC order and 
complex order flow to the Exchange. As discussed above, the proposed 
incentive is similar to the existing & incentive in Options 7, Section 
6.A in that Members will need to achieve the same Priority Customer 
Complex Tier 2 or higher to be eligible for the incentive. Members, 
however, that qualify for the QCC Rebate Program will now receive a 
higher additional incentive under this proposal for each QCC Agency 
Side than they currently receive under the note & incentive in Section 
6.A. As such, more Members may seek to qualify for the proposed 
incentive by sending additional QCC order and complex order flow to 
ISE. All market participants benefit from increased order interaction 
when more order flow is available on the Exchange.
    The Exchange also believes that the proposed QCC Rebate program in 
Options 7, Section 6.B is equitable and not unfairly discriminatory 
because all Members will be eligible for the proposed rebates by 
sending QCC and complex order flow to the Exchange. Further, the 
Exchange believes that applying the proposed rebates where at least one 
party to the QCC transaction is a Non-Priority Customer is equitable 
and not unfairly discriminatory because Priority Customers do not 
receive any QCC incentives today under the QCC and Solicitation Rebate 
program in Options 7, Section 6.A when both sides of the QCC 
transaction are Priority Customers. As discussed above, Priority 
Customers are not assessed fees for QCC transactions today, and 
therefore do not need the added incentive of the proposed rebates. In 
addition, to the extent the proposed QCC Rebate program encourages 
Members to send more QCC and complex order flow to ISE, all market 
participants will benefit from the resulting additional liquidity and 
trading opportunities on ISE.
    The Exchange believes that the proposed changes in Options 7, 
Section 6.A are reasonable, equitable, and not unfairly discriminatory 
because all of the changes are intended to make clear that the Exchange 
will continue to provide the Section 6.A rebates for solicited orders 
executed in the Solicited Order Mechanism or Facilitation Mechanism 
(i.e., the Amended Solicited Orders) and that QCC orders will receive 
the proposed rebates in Section 6.B. In addition, the Exchange believes 
that it is reasonable, equitable, and not unfairly discriminatory to 
continue aggregating executed QCC volume with executed Amended 
Solicited Order volume towards the Section 6.A rebate tiers described 
above while only providing the Section 6.A rebates to the Amended 
Solicited Orders, as the Exchange will pay the new QCC Rebates in 
Section 6.B to QCC orders under this proposal. The Exchange also 
believes that this proposal will further encourage Members to bring 
additional QCC order flow to ISE in order to receive the Section 6.A 
rebates on their Amended Solicited Orders and Section 6.B rebates on 
their QCC orders, which, in turn, brings increased liquidity and 
additional opportunities for interaction with this order flow to the 
benefit of all market participants.
    Lastly, the Exchange believes that its proposal to add the 
definition of ``Non-Priority Customers'' in Options 7, Section 1 is 
reasonable, equitable, and not unfairly discriminatory because it will 
bring greater transparency to the Exchange's Pricing Schedule by 
codifying how this term is used today throughout the Exchange's Pricing 
Schedule, and how it will be used in the proposed QCC Rebate program.
Crossing Fee Cap
    The Exchange believes that its proposal to increase the Crossing 
Fee Cap from $90,000 to $150,000 is reasonable. The Crossing Fee Cap 
was established to reward Members for executing a higher volume of Firm 
Proprietary Crossing Orders on the Exchange by capping the associated 
fees. The Exchange believes that the increased fee cap will be set at a 
level that continues to appropriately reward Members for executing high 
volumes of such Crossing Orders. Despite the proposed increase, the 
Exchange believes that Members will continue to be incentivized to 
bring Firm Proprietary Crossing Order flow to ISE, as Members will 
still have the opportunity to pay no transaction fees for such orders 
beyond the $150,000 cap.
    The Exchange also believes that the proposed increase to the 
Crossing Fee Cap is equitable and not unfairly discriminatory because 
it will apply uniformly to all Members engaged in

[[Page 67090]]

Firm Proprietary trading in options classes traded on the Exchange. The 
Exchange does not believe it is unfairly discriminatory to offer the 
Crossing Fee Cap to Firm Proprietary transactions as differentiated 
pricing already exists on the Exchange's Pricing Schedule to encourage 
different segments of order flow. For instance, the Exchange generally 
provides Priority Customer orders more favorable pricing through lower 
or no transaction fees, including Priority Customer Crossing Orders 
that are presently assessed no fees, and through rebate opportunities 
like the Priority Customer rebate currently provided for adding 
liquidity in Non-Select Symbols.\24\ Professional Customer orders are 
presently charged a lower transaction fee for executed QCC orders and 
for orders executed in the Solicited Order Mechanism ($0.10 for 
Professional Customers versus $0.20 for all other Non-Priority 
Customers).\25\ Broker-Dealer and Firm Proprietary orders are 
incentivized in the Exchange's PIM and Facilitation Rebate program.\26\ 
Market Makers are offered rebates through the Exchange's Market Maker 
Plus program.\27\ The Exchange further believes there is nothing 
impermissible about offering the Crossing Fee Cap solely to Firm 
Proprietary transactions given that this practice is consistent with 
firm fee caps in place on other options exchanges.\28\ To the extent 
the amended Crossing Fee Cap continues to encourage additional Firm 
Proprietary Crossing Order flow to ISE, such order flow brings 
increased liquidity and additional opportunities for interaction with 
this order flow, which ultimately benefits all market participants.
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    \24\ See Options 7, Sections 3 and 4. Non-Select Symbols are 
options overlying all symbols that are not included in the Penny 
Interval Program.
    \25\ See Options 7, Section 3 (note 16) and Section 4 (note 14).
    \26\ See Options 7, Section 6.B.
    \27\ See Options 7, Section 3 (note 5).
    \28\ See, e.g., Nasdaq GEMX Options 7, Section 4.C and Nasdaq 
Phlx Options 7, Section 4.
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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 terms of intra-market competition, the Exchange does not believe 
that this proposal will place any category of market participant at a 
competitive disadvantage. As discussed above, any Member may qualify 
for the proposed QCC Rebate program (which will be higher than the 
current rebates being provided under Section 6.A) by sending QCC and 
complex order flow to the Exchange. While the Exchange will apply the 
proposed rebates to QCC transactions where at least one party is a Non-
Priority Customer, Priority Customers are not assessed fees for QCC 
transactions today, and therefore do not need the added incentive of 
the proposed rebates. Further, to the extent the Exchange's proposal 
incentivizes Members to bring additional QCC and complex order flow to 
ISE, the Exchange believes that the resulting additional volume and 
liquidity will benefit all market participants. The Exchange also does 
not believe that increasing the Crossing Fee Cap will impose an undue 
burden on intra-market competition because it will apply uniformly to 
all Members engaged in Firm Proprietary trading in options classes 
traded on the Exchange. To the extent the amended Crossing Fee Cap 
continues to provide an incentive for Members to bring additional Firm 
Proprietary Crossing Order flow to the Exchange, such order flow brings 
increased liquidity to the benefit of all market participants.
    In terms of inter-market competition, the Exchange notes that it 
operates in a highly competitive market in which market participants 
can readily favor competing venues if they deem fee levels at a 
particular venue to be excessive, or rebate opportunities available at 
other venues to be more favorable. In such an environment, the Exchange 
must continually adjust its fees to remain competitive with other 
exchanges. Because competitors are free to modify their own fees in 
response, and because market participants may readily adjust their 
order routing practices, the Exchange believes that the degree to which 
fee changes in this market may impose any burden on competition is 
extremely limited. In sum, if the changes proposed herein are 
unattractive to market participants, it is likely that the Exchange 
will lose market share as a result. Accordingly, the Exchange does not 
believe that the proposed changes will impair the ability of members or 
competing order execution venues to maintain their competitive standing 
in the financial markets.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to section 
19(b)(3)(A)(ii) of the Act.\29\ 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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    \29\ 15 U.S.C. 78s(b)(3)(A)(ii).
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IV. Solicitation of Comments

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

Electronic Comments

     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-2022-24 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-2022-24. 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,

[[Page 67091]]

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-2022-24 and should be 
submitted on or before November 28, 2022.
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    \30\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\30\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-24144 Filed 11-4-22; 8:45 am]
BILLING CODE 8011-01-P