Notice2022-24144
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
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
November 7, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 214 (Monday, November 7, 2022)</title>
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[Federal Register Volume 87, Number 214 (Monday, November 7, 2022)]
[Notices]
[Pages 67086-67091]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[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 <a href="https://listingcenter.nasdaq.com/rulebook/ise/rules">https://listingcenter.nasdaq.com/rulebook/ise/rules</a>, 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).
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Originating contract sides Rebate
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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]]
<bullet> 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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<bullet> 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
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#7e0c0b121b531d1113131b100a0d3e0d1b1d50191108"><span class="__cf_email__" data-cfemail="146661787139777b7979717a6067546771773a737b62">[email protected]</span></a>. Please include
File Number SR-ISE-2022-24 on the subject line.
Paper Comments
<bullet> 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 (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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
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</html>Indexed from Federal Register on November 7, 2022.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.