Notice2024-18786
Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Options 7, Section 3
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Published
August 22, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 163 (Thursday, August 22, 2024)</title>
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[Federal Register Volume 89, Number 163 (Thursday, August 22, 2024)]
[Notices]
[Pages 68007-68009]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-18786]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100753; File No. SR-ISE-2024-38]
Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Options 7,
Section 3
August 16, 2024.
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 August 9, 2024, 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
[[Page 68008]]
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.\3\
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\3\ On July 31, 2024, ISE filed SR-ISE-2024-37 and designated it
effective on August 1, 2024. On August 9, 2024, the Exchange
withdrew SR-ISE-2024-37 and filed this rule change.
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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
ISE proposes to amend the Exchange's Pricing Schedule at Options 7,
Section 3, Regular Order Fees and Rebates, to increase the Priority
Customer \4\ Select Symbol Taker Fee from $0.37 to $0.39 per contract.
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\4\ 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). Unless otherwise noted, when used in this Pricing
Schedule the term ``Priority Customer'' includes ``Retail'' as
defined below. See Options 7, Section 1(c).
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Today, the Exchange assesses a Select Symbol Maker Fee of $0.18 per
contract in regular orders to all Non-Priority Customers.\5\ Priority
Customers are not assessed a Select Symbol Maker Fee in regular orders.
Additionally, today, ISE assesses Market Makers \6\ a $0.45 per
contract Select Symbol Taker Fee in regular orders. Non-Nasdaq ISE
Market Makers (FarMMs),\7\ Firm Proprietary \8\/Broker Dealers,\9\ and
Professional Customers \10\ are assessed a $0.46 per contract Select
Symbol Taker Fee in regular orders. Priority Customers are assessed a
$0.37 per contract Select Symbol Taker Fee in regular orders.
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\5\ ``Non-Priority Customers'' include Market Makers, Non-Nasdaq
ISE Market Makers (FarMMs), Firm Proprietary/Broker-Dealers, and
Professional Customers. See Options 7, Section 1(c).
\6\ The term ``Market Makers'' refers to ``Competitive Market
Makers'' and ``Primary Market Makers'' collectively. See Options 1,
Section 1(a)(21).
\7\ 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. See Options 7, Section 1(c).
\8\ A ``Firm Proprietary'' order is an order submitted by a
member for its own proprietary account. See Options 7, Section 1(c).
\9\ A ``Broker-Dealer'' order is an order submitted by a member
for a broker-dealer account that is not its own proprietary account.
See Options 7, Section 1(c).
\10\ 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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At this time, the Exchange proposes to increase the Priority
Customer Select Symbol Taker Fee from $0.37 to $0.39 per contract in
regular orders. While the Exchange is increasing the Priority Customer
Select Symbol Taker Fee, it will remain the lowest Select Symbol Taker
Fee assessed by ISE as compared to Select Symbol Taker Fees assessed to
other market participants.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\11\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\12\ 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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\11\ 15 U.S.C. 78f(b).
\12\ 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'. . . .'' \13\
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\13\ 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.'' \14\
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\14\ 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.
The Exchange's proposal to increase the Priority Customer Select
Symbol Taker Fee from $0.37 to $0.39 per contract for regular orders is
reasonable because its taker fees remain competitive and lower than
other options exchanges.\15\ Further, while the Taker Fee will be
higher for Priority Customers, the Exchange believes that market
participants will continue to be incentivized to send Priority Customer
order flow to ISE because it will remain the lowest Select Symbol Taker
Fee
[[Page 68009]]
assessed by ISE as compared to Select Symbol Taker Fees assessed to
other market participants.\16\
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\15\ For example, Cboe C2 Exchange, Inc. (``C2'') assesses
Public Customers a $0.43 per contract fee for removing liquidity in
Penny Classes. See C2 Fee Schedule at: <a href="https://www.cboe.com/us/options/membership/fee_schedule/ctwo">https://www.cboe.com/us/options/membership/fee_schedule/ctwo</a>. In addition, MIAX Emerald, LLC
(``MIAX Emerald'') assesses Priority Customers a $0.50 per contract
taker fee in Penny Classes. See MIAX Emerald Fee Schedule at:
<a href="https://www.miaxglobal.com/sites/default/files/fee_schedule-files/MIAX_Emerald_Fee_Schedule_08052024.pdf">https://www.miaxglobal.com/sites/default/files/fee_schedule-files/MIAX_Emerald_Fee_Schedule_08052024.pdf</a>.
\16\ Today, ISE assesses Market Makers a $0.45 per contract
Select Symbol Taker Fee. ISE assesses Non-Nasdaq ISE Market Makers
(FarMMs), Firm Proprietary/Broker Dealers, and Professional
Customers a $.46 per contract Select Symbol Taker Fee in regular
orders.
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The Exchange's proposal to increase the Priority Customer Select
Symbol Taker Fee from $0.37 to $0.39 per contract for regular orders is
equitable and not discriminatory because Priority Customers would
continue to be assessed the lowest Select Symbol Taker Fee on ISE among
market participants. 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
(particularly in response to pricing) in turn facilitates tighter
spreads which may cause an additional corresponding increase in order
flow from other market participants. Attracting more liquidity from
Priority Customers will benefit all market participants that trade on
the ISE.
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. 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.
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. The Exchange's proposal to increase the
Priority Customer Select Symbol Taker Fee from $0.37 to $0.39 per
contract in regular orders does not impose an undue burden on
competition because Priority Customers would continue to be assessed
the lowest Select Symbol Taker Fee on ISE among market participants.
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 (particularly in
response to pricing) in turn facilitates tighter spreads which may
cause an additional corresponding increase in order flow from other
market participants. Attracting more liquidity from Priority Customers
will benefit all market participants that trade on the ISE.
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.\17\ 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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\17\ 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="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#85f7f0e9e0a8e6eae8e8e0ebf1f6c5f6e0e6abe2eaf3"><span class="__cf_email__" data-cfemail="2250574e470f414d4f4f474c5651625147410c454d54">[email protected]</span></a>. Please include
file number SR-ISE-2024-38 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-2024-38. 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-2024-38 and should be
submitted on or before September 12, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-18786 Filed 8-21-24; 8:45 am]
BILLING CODE 8011-01-P
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