Notice2023-27914
Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Fees for Options on the Nasdaq 100 Index in the Exchange's Pricing Schedule at Options 7
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Published
December 20, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 243 (Wednesday, December 20, 2023)</title>
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[Federal Register Volume 88, Number 243 (Wednesday, December 20, 2023)]
[Notices]
[Pages 88206-88208]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-27914]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99171; File No. SR-ISE-2023-36]
Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the Fees
for Options on the Nasdaq 100 Index in the Exchange's Pricing Schedule
at Options 7
December 14, 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 December 8, 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 fees for Nasdaq 100 Index
options in the Exchange's Pricing Schedule at Options 7, Section 5A.
While these amendments are effective upon filing, the Exchange has
designated the proposed amendments to be operative on December 1, 2023.
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.
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 fees for
NDX \3\
[[Page 88207]]
in Options 7, Section 5A. The Exchange initially filed the proposed
pricing changes on November 30, 2023 (SR-ISE-2023-34). On December 8,
2023, the Exchange withdrew that filing and submitted this filing.
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\3\ For purposes of the Pricing Schedule, ``NDX'' means A.M. or
P.M. settled options on the full value of the Nasdaq 100[supreg]
Index. See Options 7, Section 1(c).
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Today, the Exchange assesses a transaction fee of $0.75 per
contract for all Non-Priority Customer \4\ regular NDX orders. Priority
Customers \5\ currently receive free executions in regular NDX orders.
In accordance with note 1 of Options 7, Section 5.A, the applicable
complex order fees for Non-Select Symbols \6\ in Options 7, Section 4
apply to all executions in complex NDX orders.\7\ As such, Priority
Customers currently receive free executions in complex NDX orders.\8\
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\4\ ``Non-Priority Customers'' include Market Makers, Non-Nasdaq
ISE Market Makers (FarMMs), Firm Proprietary/Broker-Dealers, and
Professional Customers.
\5\ 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).
\6\ ``Non-Select Symbols'' are options overlying all symbols
excluding Select Symbols. ``Select Symbols'' are options overlying
all symbols listed on the Nasdaq ISE that are in the Penny Interval
Program.
\7\ See generally Options 7, Section 4 (setting forth maker/
taker fees for Non-Select Symbols, including NDX, pursuant to which
Priority Customers are assessed no fees today). In addition, the
Exchange does not offer the tiered Priority Customer complex order
rebates in Section 4 for orders in NDX. See Options 7, Section 4,
note 4.
\8\ Id.
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The Exchange now proposes to begin assessing all Priority Customer
NDX executions (i.e., regular and complex) a $0.25 per contract
transaction fee. In connection with this change, the Exchange also
proposes to amend note 1 of Options 7, Section 5.A to exclude Priority
Customer complex NDX executions from the Section 4 complex fees, and to
make clear that Priority Customer complex NDX executions will now be
assessed a $0.25 per contract fee instead. As amended, note 1 will
provide that for all executions in complex NDX orders for Non-Priority
Customers, the applicable complex order fees for Non-Select Symbols in
Section 4 will apply. Further, for all executions in complex NDX orders
for Priority Customers, the fee will be $0.25 per contract. The
Exchange notes that the proposed $0.25 per contract fee amount is in
line with customer transaction fees assessed on other index
products.\9\ The Exchange also proposes to assess a surcharge of $0.25
per contract to all Priority Customer complex executions in NDX.\10\ As
such, Priority Customer complex executions in NDX will be assessed a
total of $0.50 per contract (i.e., the base $0.25 per contract fee plus
the $0.25 per contract surcharge). The Exchange notes that the proposed
surcharge amount is within the range of surcharges assessed for
customer transactions in other products at other options exchanges.\11\
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\9\ For example, Cboe Options (``Cboe'') currently assesses a
$0.25 per contract customer transaction fee for MXEA and MXEF
options, $0.35 per contract for OEX and XEO options, and $0.36 per
contract (if premium <$1.00) or $0.45 per contract (if premium >=
$1.00) for SPX and SPESG options. See Cboe Fees Schedule.
\10\ See proposed note 2 of Options 7, Section 5.A.
\11\ For example, Cboe currently assesses customers a $0.25 per
contract exotic surcharge and a $0.21 per contract execution
surcharge in SPX and SPESG options. See Cboe Fees Schedule. In
addition, the Exchange's affiliate, Nasdaq Phlx LLC (``Phlx'')
current assesses customers a $0.25 per contract complex surcharge
for executions in singly-listed U.S. dollar-settled foreign currency
options. See Phlx Options 7, Section 5.D.
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\12\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\13\ 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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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes it is reasonable to begin assessing a $0.25
per contract transaction fee to all Priority Customer executions (i.e.,
regular and complex) in NDX and a $0.25 per contract surcharge to
complex Priority Customer executions in NDX because the proposed
pricing reflects the proprietary nature of this product. Similar to
other proprietary products like options overlying the Nasdaq 100
Reduced Value Index (``NQX'') and the Nasdaq 100 Micro Index (``XND''),
the Exchange seeks to recoup the operational costs of listing
proprietary products.\14\ Also, pricing by symbol is a common practice
on many U.S. options exchanges as a means to incentivize order flow to
be sent to an exchange for execution in particular products. Other
options exchanges price by symbol.\15\ Further, the Exchange notes that
market participants are offered different ways to gain exposure to the
Nasdaq 100 Index, whether through the Exchange's proprietary products
like options overlying NDX, NQX, or XND, or separately through multi-
listed options overlying Invesco QQQ Trust (``QQQ'').\16\ Offering such
products provides market participants with a variety of choices in
selecting the product they desire to utilize in order to gain exposure
to the Nasdaq 100 Index. When exchanges are able to recoup costs
associated with offering proprietary products, it incentivizes growth
and competition for the innovation of additional products.
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\14\ By way of example, in analyzing an obvious error, the
Exchange would have additional data points available in establishing
a theoretical price for a multiply listed option as compared to a
proprietary product, which requires additional analysis and
administrative time to comply with Exchange rules to resolve an
obvious error.
\15\ See supra note 9.
\16\ QQQ is an exchange-traded fund based on the same Nasdaq 100
Index as NDX, NQX, and XND.
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The Exchange further believes that the proposed pricing described
above is reasonable because the proposal is designed to update fees for
the Exchange's services to reflect their current value--rather than
their value when the Exchange last updated NDX pricing five years ago
\17\--based on the Exchange's ability to deliver value to its customers
by offering proprietary products on its market like NDX.
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\17\ The Exchange has not amended NDX transaction fees since
2018, so the fees have remained at $0.75 per contract for Non-
Customers and $0.00 for Priority Customers during this time. See
Securities Exchange Act Release No. 83144 (May 1, 2018), 83 FR 20107
(May 7, 2018) (SR-ISE-2018-38).
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While the pricing for Priority Customer NDX orders is increasing
under this proposal, the Exchange believes that the proposal is
reasonable and would continue to incentivize market participants to
transact in Priority Customer NDX orders because Priority Customers
would continue to be charged at a lower rate for NDX than Non-Priority
Customers. As a result, the Exchange believes that the proposed pricing
is structured in a way that continues to encourage market participants,
especially Priority Customers, to transact in NDX on ISE. An increase
in Priority Customer order flow would benefit all market participants
through quality of order interaction and increased trading
opportunities. As noted above, the proposed fee and surcharge amounts
are in line with customer fees and surcharges assessed on other index
products at other options exchanges.\18\
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\18\ See supra note 9 and 11.
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The Exchange's proposal to assess a $0.25 per contract transaction
fee to all Priority Customer NDX orders and to assess a $0.25 per
contract surcharge to complex Priority Customer NDX orders is equitable
and not unfairly discriminatory it will apply uniformly to all
similarly situated market
[[Page 88208]]
participants. The Exchange believes it is equitable and not unfairly
discriminatory to continue charging Priority Customers NDX orders at a
generally lower rate than Non-Priority Customers NDX orders \19\ as the
Exchange has historically provided more favorable pricing to Priority
Customers in its Pricing Schedule.\20\ Priority Customer orders bring
valuable liquidity to the market by providing more trading
opportunities, which, in turn, 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 to the benefit of all market participants.
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\19\ As described above, regular Priority Customer NDX
executions will be assessed $0.25 per contract under this proposal,
and complex Priority Customer NDX executions will be assessed a
total of $0.50 per contract under this proposal (i.e., base fee plus
complex surcharge). Regular Non-Priority Customer NDX executions
will continue to be assessed $0.75 per contract. As it relates to
complex Non-Priority Customer NDX executions, the Exchange notes
that in certain instances, Non-Priority Customers may be assessed a
lower complex fee in Section 4 than the $0.50 complex fee proposed
for Priority Customers. Specifically, Non-Priority Customers could
be assessed the $0.20 per contract complex Maker Fee for Non-Select
Symbols (NDX is a Non-Select Symbol). However, the Non-Priority
Customer complex Taker Fee for Non-Select Symbols still remains at a
much higher level ($1.10) than the $0.50 complex fee proposed for
Priority Customer NDX executions. See Options 7, Section 4.
\20\ For example, Priority Customers presently receive free
executions in regular and complex orders, as discussed earlier in
this filing.
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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 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. As noted above, market participants are offered an
opportunity to transact in NDX, NQX, or XND, or separately execute
options overlying QQQ. Offering these products provides market
participants with a variety of choices in selecting the product they
desire to use to gain exposure to the Nasdaq 100 Index. Furthermore,
the proposed fee amounts are in line with customer transaction fees and
surcharges assessed on other products at another options exchange.\21\
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\21\ See supra notes 9 and 11.
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Further, the Exchange does not believe that its proposal to begin
assessing a $0.25 per contract transaction fee for all Priority
Customer NDX orders and $0.25 per contract surcharge for complex
Priority Customer NDX orders will impose an undue burden on intra-
market competition because Priority Customers will continue to be
assessed more favorable pricing than Non-Priority Customers for NDX
orders, which is in line with how the Exchange historically assessed
fees for these market participants. As discussed above, Priority
Customer order flow enhances liquidity on the Exchange for the benefit
of all market participants.
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 \22\ and Rule 19b-4(f)(2) \23\ 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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\22\ 15 U.S.C. 78s(b)(3)(A)(ii).
\23\ 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
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#a5d7d0c9c088c6cac8c8c0cbd1d6e5d6c0c68bc2cad3"><span class="__cf_email__" data-cfemail="d2a0a7beb7ffb1bdbfbfb7bca6a192a1b7b1fcb5bda4">[email protected]</span></a>. Please include
file number SR-ISE-2023-36 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-2023-36. 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="https://www.sec.gov/rules/sro.shtml">https://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,
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-2023-36 and should be
submitted on or before January 10, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
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\24\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-27914 Filed 12-19-23; 8:45 am]
BILLING CODE 8011-01-P
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