Notice2024-21744
Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Codify the Definition of ISE Open/Close Trade Profile
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
September 24, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 185 (Tuesday, September 24, 2024)</title>
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[Federal Register Volume 89, Number 185 (Tuesday, September 24, 2024)]
[Notices]
[Pages 77913-77919]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-21744]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101096; File No. SR-ISE-2024-46]
Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Codify the
Definition of ISE Open/Close Trade Profile
September 18, 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 September 6, 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 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 codify the definition of ISE Open/Close
Trade Profile in the ISE rulebook. This filing also incorporates
previously proposed fee changes that: (i) adjusted fees for ISE Open/
Close End of Day and Intraday Trade Profile; (ii) reduced fees for 36
months of historical data for current customers; and (iii) allowed
unlimited external distribution of ISE Open/Close End of Day and
Intraday Trade Profile for a fixed monthly fee.
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 codify the definition
of ISE Open/Close Trade Profile in the ISE rulebook. This filing also
incorporates previously proposed fee changes that: (i) adjusted fees
for ISE Open/Close End of Day and Intraday Trade Profile; (ii) reduced
fees for 36 months of historical data for current customers; and (iii)
allowed unlimited external distribution of ISE Open/Close End of Day
and Intraday Trade Profile for a fixed monthly fee.\3\
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\3\ The previously introduced fee proposal was initially filed
on July 1, 2024, as SR-ISE-2024-25. On July 15, 2024, that filing
was withdrawn and refiled as SR-ISE-2024-32. On July 29, 2024, that
filing was withdrawn and refiled as SR-ISE-2024-36. On August 12,
2024, that proposal was withdrawn and replaced with SR-ISE-2024-40
to incorporate those fees into a filing that codifies the definition
of ISE Open/Close Trade Profile. On August 23, 2024, SR-ISE-2024-40
was withdrawn and replaced with SR-ISE-2024-43 to provide additional
information. On September 6, 2024, SR-ISE-2024-43 was withdrawn and
replaced with the instant filing to provide further information.
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ISE Open/Close Trade Profile
ISE currently sells a market data offering comprised of the entire
opening and closing trade data of ISE-listed options of both customers
and firms, called the ISE Open/Close Trade Profile.\4\ This product is
designed to provide data to subscribers regarding investor sentiment
and trading activity.
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\4\ See Securities Exchange Act Release No. 77907 (May 25,
2016), 81 FR 35079 (June 1, 2016) (SR-ISE-2016-14) (adopting a flat
fee for the Complete Set of historical data); Securities Exchange
Act Release No. 76501 (November 20, 2015), 80 FR 74181 (November 27,
2015) (SR-ISE-2015-40) (offering a one month free trial to new
customers); Securities Exchange Act Release No. 67955 (October 1,
2012), 77 FR 61037 (October 5, 2012) (SR-ISE-2012-76) (adopting
reduced fees for historical data for academic institutions);
Securities Exchange Act Release No. 61317 (January 8, 2010), 75 FR
2915 (January 19, 2010) (SR-ISE-2009-103) (establishing the current
fees for the end of day and intra-day products); Securities Exchange
Act Release No. 60859 (October 21, 2009), 74 FR 55610 (October 28,
2009) (SR-ISE-2009-64) (adjusting fees for academic institutions);
Securities Exchange Act Release No. 60654 (September 11, 2009), 74
FR 47848 (September 17, 2009) (SR-ISE-2009-64) (adjusting fees for
academic institutions); Securities Exchange Act Release No. 56957
(December 13, 2007), 72 FR 71988 (December 19, 2007) (SR-ISE-2007-
115) (establishing the sale of historical data); Securities Exchange
Act Release No. 56254 (August 15, 2007), 72 FR 47104 (August 22,
2007) (SR-ISE-2007-70) (initial offering of ISE Open/Close Trade
Profile).
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The ISE Open/Close Trade Profile provides aggregate quantity and
volume information for trades on the Exchange for all series \5\ during
a trading session. Information is provided in the following categories:
(i) total exchange volume for Intra-Day information and total exchange
and industry volume for End of Day information for each reported
series; (ii) open interest for the series; (iii) aggregate quantity of
trades and aggregate trade volume effected to open a position,
characterized by origin type (Priority Customer,\6\ Broker-Dealer,\7\
Firm Proprietary,\8\ and Professional Customer \9\), and for Priority
Customers and Professional Customers, further subdivided by trade size
buckets; and (iv) aggregate quantity of trades and aggregate trade
volume effected to close a position, characterized by origin type
(Priority Customer, Broker-Dealer, Firm Proprietary, and Professional
Customer), and for Priority Customers and Professional Customers,
further subdivided by trade size buckets.
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\5\ Every options series trades as a distinct symbol; the terms
``series'' and ``symbol'' are therefore synonyms.
\6\ 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). See Options 7, Section 1(c).
\7\ 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)
\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 ``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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ISE Open/Close Trade Profile End of Day also provides opening buy,
closing buy, opening sell and closing sell information, which includes
underlying close, option close, and moneyness.
End of Day information is available the next business day. Intra-
Day information is updated at 10-minute intervals over the course of
the trading day. Historical information is available upon request.
The ISE Open/Close Trade Profile provides proprietary Exchange
trade data and does not include any intraday trade data from any other
exchange.\10\ The information provided, both in End of Day and Intraday
formats, is not a real-time data feed.
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\10\ The End of Day report includes a field that presents Total
Industry Volume for the Series.
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[[Page 77914]]
ISE Open/Close Trade Profile is a completely voluntary product in
that the Exchange is not required by any rule or regulation to make
this data available and potential subscribers may purchase it only if
they voluntarily choose to do so.
This information is available to all market participants, including
both members and non-members, for all series and symbols in End of Day,
Intra-Day, and historical files (upon request).
The information provided is designed to provide the ability to
analyze option trade and volume data and create and test trading models
and analytical strategies, as well as build customized sentiment
indicators.
The End of Day file is updated during an overnight process with
additional fields \11\ and is available the following morning.
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\11\ The additional fields are: First Trade Price, Last Trade
Price, Underlying Close, Moneyness, Total Exchange volume, and Total
Industry Volume for the Series.
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The Intraday product is captured in ``snapshots'' taken every 10
minutes throughout the trading day, available to subscribers within 2
minutes of the conclusion of each period. Subscribers receive the first
calculation at 9:42 a.m. ET, representing data captured from 9:30 a.m.
to 9:39 a.m., and the second calculation at 9:52 a.m., representing
data from both the most recent snapshot and previous snapshots,
continuing over the course of the trading day.
The current subscription rate for both members and non-members for
ISE Trade Profile Open/Close End of Day is $750 per month. The current
fee for ISE Open/Close Trade Profile Intraday is $2,000 per month. An
annual subscription for end of day and Intraday Trade Profile is $2,500
per month. These fees have not changed since 2010.\12\
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\12\ See Securities Exchange Act Release No. 61317 (January 8,
2010), 75 FR 2915 (January 19, 2010) (SR-ISE-2009-103) (establishing
the current fees for the end of day and intra-day products).
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ISE also sells historical ISE Open/Close Trade Profile data about
the past activity of all option series traded on the Exchange for each
trading session conducted during a prior calendar month selected by the
subscriber. This data is intended to enhance a purchaser's ability to
analyze option trade and volume data, evaluate historical trends in the
trading activity of a particular option series, and create and test
trading models and analytical strategies. Historical Trade Profile
provides the same fields of information as the End of Day and Intraday
files, respectively. This market data offering is comprised of the
entire opening and closing trade data of both customers and firms
starting in January 2006 for End of Day and October 2009 for
Intraday.\13\ Ad-hoc subscribers can purchase this data for any number
of months through the current month.
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\13\ The current ISE rulebook states that historical End of Day
information is available starting in May 2005. The Exchange is
updating this information to correct the starting date to January
2006.
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Trade Profile is designed to enhance the ability of customers to
understand market sentiment on the Exchange and to create and test
trading models and analytical strategies useful in both options and
equities markets. It is not necessary to execute a trade, but it
supplies the customer with information about underlying market trends
designed to improve the quality of that customer's investment
decisions. Customers can, and often do, elect to forego this
information.
Products similar to Trade Profile have been available on multiple
exchanges for many years and are well-established in the market. Such
products are available from Nasdaq Phlx LLC (``Phlx''),\14\ Nasdaq
Options Market (``NOM''),\15\ Nasdaq GEMX LLC (``GEMX''),\16\ Cboe
Options Exchange,\17\ NYSE American Options,\18\ NYSE Arca Options,\19\
BOX Options Market LLC,\20\ MIAX Pearl Options Exchange,\21\ and
others. In general, the relative value of these products depends on the
volume of transactions included; the greater the volume of
transactions, the greater the value of the data. The current purchasers
of Trade Profile are investment banks, market makers, asset managers
and other buy-side investors.
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\14\ See Securities Exchange Act Release No. 62887 (September
10, 2010), 75 FR 57092 (September 17, 2010) (SR-Phlx-2010-121)
(introducing PHOTO on September 1, 2010),
\15\ See Nasdaq Stock Market Rules, Options 7, Section 4 (Nasdaq
Options Market Data Distributor Fees).
\16\ See Nasdaq GEMX Rules, Options 7, Sections 7(D) (Nasdaq
GEMX Open/Close End of Day Trade Profile) and 7(E) (Nasdaq GEMX
Open/Close Intra-day Trade Profile)
\17\ See, e.g., Securities Exchange Act Release No. 94913 (May
13, 2022), 87 FR 30534 (May 19, 2022) (SR-Cboe-2022-023) (describing
End of Day and Intra-day Open-Close Data as a summary of trading
activity on the exchange at the option level by origin, side of the
market, price and transaction type).
\18\ See, e.g., Securities Exchange Act Release No. 93803
(December 16, 2021, 86 FR 72647 (December 22, 2021) (SR-NYSEAMER-
2021-46) (describing the NYSE Options Open-Close Volume Summary as a
volume summary of trading activity on the exchange at the option
level by origin, side of the market, contract volume and transaction
type).
\19\ See, e.g., Securities Exchange Act Release No. 93132
(September 27, 2021), 86 FR 54499 (October 1, 2021) (SR-NYSEArca-
2021-82) (describing the NYSE Options Open-Close Volume Summary as a
volume summary of trading activity on the exchange at the option
level by origin, side of the market, contract volume and transaction
type).
\20\ See, e.g., Securities Exchange Act Release No. 97174 (March
21, 2023), 88 FR 18201 (March 27, 2023) (SR-BOX-2023-09) (describing
the BOX exchange Open-Close Data report as providing volume by
origin, buying/selling, and opening/closing criteria).
\21\ See, e.g., Securities Exchange Act Release No. 91964 (May
21, 2021), 86 FR 28667 (May 27, 2021) (SR-PEARL-2021-24)
(introducing the Open-Close Report).
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Proposed Changes
Definition of ISE Open/Close Trade Profile
The Exchange proposes to codify the definition of ISE Open/Close
Trade Profile. Nothing in this codification is intended to change the
product in any way, but rather is intended to describe the product
exactly as it exists. Specifically, the Exchange proposes the following
definition:
ISE Open/Close Trade Profile provides aggregate quantity and
volume information for trades on the Exchange for all series during
a trading session. Information is provided in the following
categories: (i) total exchange volume for Intra-Day information and
total exchange and industry volume for End of Day information for
each reported series; (ii) open interest for the series; (iii)
aggregate quantity of trades and aggregate trade volume effected to
open a position, characterized by origin type (Priority Customer,
Broker-Dealer, Firm Proprietary, and Professional Customer), and for
Priority Customers and Professional Customers, further subdivided by
trade size buckets; and (iv) aggregate quantity of trades and
aggregate trade volume effected to close a position, characterized
by origin type (Priority Customer, Broker-Dealer, Firm Proprietary,
and Professional Customer), and for Priority Customers and
Professional Customers, further subdivided by trade size buckets.
ISE Open/Close Trade Profile End of Day will also provide
opening buy, closing buy, opening sell and closing sell information,
which shall include option first trade price, underlying close,
option close, and moneyness.
End of Day information will be available the next business day.
Intra-Day information is updated at 10-minute intervals over the
course of the trading day. Historical information will be available
upon request.
The purpose of the proposed change is to add clarity and
specificity to the ISE rulebook.
Previously Introduced Fee Changes
Fee Changes for End of Day and Intraday Products
The Exchange proposes to increase the fee for the End of Day
product from $750 to $850, and the Intraday Product from $2,000 to
$2,500. The discounted rate of $2,500 per month for both end of day and
intraday information will be increased to $3,100 to reflect the new
fees while preserving the $250 discount.
In addition, the Exchange proposes to insert a comma after the
phrase ``or the
[[Page 77915]]
Intraday Product for the current month'' into the definition of Current
Distributor. The revised sentence will read as follows:
A ``Current Distributor'' is any firm that purchases either the
End of Day Product for the current month, or the Intraday Product
for the current month, in the same month that the 36 months of
historical End of Day or Intraday data is ordered.
The change is designed to clarify that the phrase ``the same month
that the 36 months of historical End of Day or Intraday data is
ordered'' applies to both firms that purchase End of Day data in the
current month and firms that purchase Intraday data for the current
month. The clarification will not change how the fee is charged.
Discount for Historical Data
The Exchange proposes to alter discounts for historical end of day
and intraday data for Current Distributors.\22\ Specifically, the
Exchange proposes to offer the most recent 36 months of end of day data
for $7,200, and the most recent 36 months intraday data for $12,000.
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\22\ The Exchange proposes to define ``Current Distributor'' as
any firm that purchases either the End of Day Product for the
current month, or the Intraday Product for the current month in the
same month that the 36 months of historical End of Day or Intraday
data is ordered.
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Ad-hoc requests for historical end of day data are currently $600
per request per month. A complete set of historical end of day data is
$27,500 per request. For intraday data, there is a sliding scale of
charges: $1,000 per request per month; $2,000 per request per quarter;
and $8,000 per request per year.
The proposed rates are a substantial discount from current fees.
With respect to end of day data, ad hoc requests are $600 per request
per month. Three years of such data would cost $21,600. The proposed
rate of $7,200 is far below this level. With respect to intraday
information, the current rates are $1,000 per request per month, $2,000
per request per quarter, and $8,000 per request per year. Using the
lowest rate of $8,000 per request per year, the most recent 36 months
of intraday information would cost $24,000. The proposed rate of
$12,000 for the most recent 36 months of intraday data is a substantial
discount from the current rate.
For customers that request more than three years of information,
end of day historical information can still be purchased for $600 per
request per month, and intraday information can be purchased at $1,000
per request per month. The discount for a complete set of historical
end of day data is $27,500 per request is being removed because the
Exchange has found that the most recent three years of data is
sufficient for most customer needs. Many customers use historical data
to test their strategies and models, and our discussions with current
and former customers and experience indicate that 36 months of data is
sufficient for most customer needs, and is an effective baseline for
review.
The historical data will continue to provide the same categories of
information available for current subscribers under the new proposal.
Eligibility for the discount will depend on the type of current
subscription. A current purchaser of End of Day data would be eligible
for the historical End of Day product at the reduced rate. A current
purchaser of the Intraday product would similarly be able to purchase
the historical Intraday product at the reduced rate. A purchaser of
both the current End of Day and Intraday products would be entitled to
purchase both types of history at the reduced rate.
The 36-month period will be based on the date of purchase of the 36
months of data by a Current Distributor. For example, a customer that
buys the End of Day product for the first time in July 2024 would also
be able to purchase historical End of Day data for the period July 2021
through July 2024 (inclusive) at the discounted rate. Similarly, a
customer with an existing End of Day subscription in July 2024 would be
able to purchase the historical End of Day data from July 2021 through
July 2024 at the discounted rate. The same reasoning would apply to
Intraday customers.\23\
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\23\ A customer may use the proposed historical data discount
more than once. For example, a Current Distributor that purchases 36
months of historical data at a discount, but later terminates that
subscription, would be eligible to purchase another 36 months of
historical data (based on the date of purchase) upon renewing that
subscription. (Current Distributors that never terminate would have
no need for a second purchase, as they would already possess the
most recent months of historical data.).
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The fees for historical data are linked to the current product
because effective historical testing requires a comparison of similar
licenses. Effective testing of the End of Day product, for example,
requires End of Day historical data, and the same would hold true for
Intraday data.
Historical data for Intraday information is currently offered in
three tiers, depending on the time period requested: $1,000 per request
per month, $2,000 per request per quarter, and $8,000 per request per
year. The Exchange receives almost no requests for information on a
quarterly or yearly basis. If a potential customer were interested in
quarterly or yearly data, the Exchange believes that such a customer
would be able to obtain more data at a lower cost using the proposed
36-month discount. As such, the Exchange expects that removal of the
quarterly and yearly pricing tiers will have no material impact on
customers. The monthly tier will remain for customers who wish to
purchase data outside of the 36-month window.
The Exchange proposes to remove the fee of $2,000 per request per
quarter and $8,000 per request per year as no longer useful in light of
the much lower discount being proposed for 36 months of historical
data.
Historical data is useful in analyzing option trade and volume
data, evaluating historical trends in the trading activity of a
particular option series, and creating and testing trading models and
analytical strategies, and is often purchased concurrently with a new
subscription to ISE Open/Close Trade Profile. Many customers use
historical data to test their strategies and models, and our
discussions with current and past customers and experience indicate
that 36 months of data is sufficient for most customer needs, and is an
effective baseline for review.
External Distribution of Derived Data
The Exchange proposes to offer a license for the unlimited external
distribution of Derived Data from ISE Trade Profile for $4,500 per
month. Derived Data is ``any information generated in whole or in part
from Exchange Information \24\ such that the information generated
cannot be reverse engineered to recreate Exchange Information, or be
used to create other data that is recognizable as a reasonable
substitute for such Exchange Information.''
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\24\ ``Exchange Information'' is any data or information that
has been collected, validated, processed and/or recorded by the
Exchange and made available for transmission relating to: (i)
Eligible securities or other financial instruments, markets,
products, vehicles, indicators, or devices; (ii) activities of the
Exchange; or (iii) other information or data from the Exchange.
Information includes, but is not limited to, any element of
information used or processed in such a way that Exchange
Information or a substitute for such Information can be identified,
recalculated or re-engineered from the processed information.
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Fees for external distribution of Derived Data from ISE Trade
Profile are in addition to fees for the End of Day product or the
Intraday product, or both, as applicable.
This is a new license to be offered by the Exchange; external
distribution of
[[Page 77916]]
Derived Data is not currently permitted. The proposal, based on a
similar license offered by the Phlx Exchange,\25\ will allow the
external distribution of analytic products derived from ISE Trade
Profile to the general investing public. A similar product is also
being proposed for the Nasdaq Options Market and the GEMX Exchange.
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\25\ See Securities Exchange Act Release No. 93293 (October 12,
2021), 86 FR 57716 (October 18, 2021) (SR-Phlx-2021-58).
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Experience with the Phlx Exchange indicates that this license
provides an effective mechanism for market data vendors to identify,
develop, and sell derived market data products, such as sentiment
indicators, harnessing the power of the competitive marketplace to
promote innovation. The Exchange expects that this product will have
the greatest utility for the general investing public.
2. Statutory Basis
The Exchange believes that its proposal to codify the definition of
ISE Open/Close Trade Profile is consistent with Section 6(b) of the
Act,\26\ in general, and furthers the objectives of Section 6(b)(5) of
the Act,\27\ in particular, in that it is designed to promote just and
equitable principles of trade, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general to protect investors and the public interest.
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\26\ 15 U.S.C. 78f(b).
\27\ 15 U.S.C. 78f(b)(5).
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Adding the definition of ISE Open/Close Trade Profile will provide
additional clarity and specificity to the ISE rulebook. Nothing in this
codification is intended to change the product or the way it functions,
but rather is intended to describe the product exactly as it exists
today. Providing additional clarity about an exchange product will help
investors make better informed decisions about ISE Open/Close Trade
Profile, and therefore will help protect investors and promote the
public interest.
Similarly, clarifying the definition of Current Distributor will
also add clarity and specificity to the rulebook without changing the
underlying fees. This additional clarity will help investors make
better informed decisions about ISE Open/Close Trade Profile, and
thereby help protect investors and promote the public interest.
The Exchange also believes that its proposal to change fees is
consistent with Section 6(b) of the Act,\28\ in general, and furthers
the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\29\ 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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\28\ 15 U.S.C. 78f(b).
\29\ 15 U.S.C. 78f(b)(4) and (5).
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Equitable Allocation of Reasonable Dues, Fees and Other Charges
The proposed changes are an equitable allocation of reasonable
dues, fees and other charges because: (i) the trade profile products
offered by multiple exchanges are substitutes, and customers are free
to choose which product they purchase; and (ii) the proposed fees are
comparable to the fees charged by other exchanges, and customers are
free to purchase other products if the Exchange has mistaken the value
of its product.
Substitution
As noted above, products similar to Trade Profile have been
available on multiple exchanges for many years and are well-established
in the market. Such products are available from Phlx,\30\ ISE,\31\
GEMX,\32\ Cboe,\33\ NYSE American,\34\ NYSE Arca,\35\ BOX,\36\ MIAX
Pearl,\37\ and others.
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\30\ See Securities Exchange Act Release No. 62887 (September
10, 2010), 75 FR 57092 (September 17, 2010) (SR-Phlx-2010-121)
(introducing PHOTO on September 1, 2010),
\31\ See Nasdaq ISE Rules, Options 7, Section 10(A) and (B)
(Nasdaq ISE Open/Close Trade Profile End of Day; Nasdaq ISE Open/
Close Trade Profile Intra-day).
\32\ See Nasdaq GEMX Rules, Options 7, Sections 7(D) (Nasdaq
GEMX Open/Close End of Day Trade Profile) and 7(E) (Nasdaq GEMX
Open/Close Intra-day Trade Profile)
\33\ See, e.g., Securities Exchange Act Release No. 94913 (May
13, 2022), 87 FR 30534 (May 19, 2022) (SR-Cboe-2022-023) (describing
End of Day and Intra-day Open-Close Data as a summary of trading
activity on the exchange at the option level by origin, side of the
market, price and transaction type).
\34\ See, e.g., Securities Exchange Act Release No. 93803
(December 16, 2021, 86 FR 72647 (December 22, 2021) (SR-NYSEAMER-
2021-46) (describing the NYSE Options Open-Close Volume Summary as a
volume summary of trading activity on the exchange at the option
level by origin, side of the market, contract volume and transaction
type).
\35\ See, e.g., Securities Exchange Act Release No. 93132
(September 27, 2021), 86 FR 54499 (October 1, 2021) (SR-NYSEArca-
2021-82) (describing the NYSE Options Open-Close Volume Summary as a
volume summary of trading activity on the exchange at the option
level by origin, side of the market, contract volume and transaction
type).
\36\ See, e.g., Securities Exchange Act Release No. 97174 (March
21, 2023), 88 FR 18201 (March 27, 2023) (SR-BOX-2023-09) (describing
the BOX exchange Open-Close Data report as providing volume by
origin, buying/selling, and opening/closing criteria).
\37\ See, e.g., Securities Exchange Act Release No. 91964 (May
21, 2021), 86 FR 28667 (May 27, 2021) (SR-PEARL-2021-24)
(introducing the Open-Close Report).
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Trade outline products offer the same categories of data through
end of day or intraday reports. The information provided by one
exchange is generally similar to that provided by other exchanges
because order flow can move from one exchange to another, and market
sentiment trends that appear on one exchange are likely to be similar
to the sentiment trends on other exchanges. The key differentiator in
the quality of the data depends on the volume of transactions on a
given exchange; the greater the volume of transactions, the greater the
value of the data. Customers can choose not to purchase the trade
outline product of one exchange and substitute it for that of another
exchange.
Customers can also choose not to purchase a trade outline product
at all. Trade outline products are designed to help investors
understand underlying market trends to improve the quality of
investment decisions, but is not necessary to execute a trade.
Customers can, and do, choose to forego the information from Trade
Profile or any of its competitor products when making a trade.
Nasdaq and its affiliates have observed that customers purchase
sufficient data to provide a view of the market, but not more, as the
value of data from each additional exchange yields diminishing returns.
As a result, all exchanges are limited in what they will be able to
charge for a trade outline product.
As the Commission and courts \38\ have recognized, ``[i]f
competitive forces are operative, the self-interest of the exchanges
themselves will work powerfully to constrain unreasonable or
[[Page 77917]]
unfair behavior.'' \39\ Accordingly, ``the existence of significant
competition provides a substantial basis for finding that the terms of
an exchange's fee proposal are equitable, fair, reasonable, and not
unreasonably or unfairly discriminatory.'' \40\ 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.'' \41\ Trade Profile is in direct competition with multiple
exchanges that offer similar products in end of day and intraday
formats.\42\
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\38\ The decision of the United States Court of Appeals for the
District of Columbia Circuit in NetCoalition v. SEC, 615 F.3d 525
(D.C. Cir. 2010) upheld the Commission's reliance upon competitive
markets to set reasonable and equitably allocated fees for market
data. ``In fact, the legislative history indicates that the Congress
intended that the market system evolve through the interplay of
competitive forces as unnecessary regulatory restrictions are
removed and that the SEC wield its regulatory power in those
situations where competition may not be sufficient, such as in the
creation of a consolidated transactional reporting system.''
NetCoalition I at 535 (quoting H.R. Rep. No. 94-229, at 92 (1975),
as reprinted in 1975 U.S.C.C.A.N. 321, 323) (internal quotation
marks omitted). The court agreed with the Commission's conclusion
that ``Congress intended that competitive forces should dictate the
services and practices that constitute the U.S. national market
system for trading equity securities.'' Id. (quoting Securities
Exchange Act Release No. 59039 (December 2, 2008), 73 FR 74770,
74771(December 9, 2008) (SR-NYSEArca-2006-21)).
\39\ See Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770 (December 9, 2008) (SR-NYSEArca-2006-21).
\40\ See id.
\41\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
\42\ These substitute products include NOTO, ISE Trade Profile,
GEMX Trade Profile data; open-close data from Cboe C1, C2, BZX, and
EDGX; and Open Close Reports from MIAX Options, Pearl, and Emerald.
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The license to allow the external distribution of Derived Data,
like the purchase of the end of day and intraday licenses, is also
subject to competition. Any exchange that wishes to allow distribution
of a Derived Data product based on options trading information would be
able to do so with an immediately effective fee filing similar to this
proposal.
Moreover, as explained above, the proposal is designed to promote
the dissemination of a variety of analytical insights--generally used
only by investment banks, market makers, asset managers and other buy-
side investors--to the general investing public by creating an
incentive for market data vendors to identify, develop, and sell such
indicators. As such, the proposal will spur competition among not only
exchanges, but vendors as well.
The discounted fees for historical data and the $250 discount for
the purchase of both end of day and intraday data together, like the
purchase of the end of day, intraday and Derived Data licenses, is also
subject to competition. Any exchange that wishes to provide discounts
for historical data or the joint usage of end of day and intraday
information would be able to do so with an immediately effective fee
filing in response.
Comparability of Proposed Fees
The proposed fees are comparable to the fees charged by similarly
situated exchanges.
As explained above, the value of Trade Profile is determined in
part by the number of underlying transactions reflected in the data.
ISE has a market share comparable to NYSE American, MIAX, and MIAX
Pearl at approximately 6% to 7% in the second quarter of 2024.\43\ For
intraday products, NYSE American charges $2,000,\44\ MIAX charges
$2,000,\45\ and MIAX Pearl charges $2,000.\46\ The proposed fees of
$2,500 for ISE are above this because ISE believes that the other
exchanges are not accurately reflecting the value of the data. CBOE C1,
at a slightly larger market share of approximately 9%,\47\ charges
$3,000 for intraday data,\48\ and we believe the proposed fee of $2,500
is more in line with the overall market for trade outline information
than the $2,000 charged by other exchanges.
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\43\ See <a href="http://NasdaqTrader.com">NasdaqTrader.com</a>, ``Options Market Statistics,''
available at <a href="https://www.nasdaqtrader.com/Trader.aspx?id=OptionsVolumeSummary">https://www.nasdaqtrader.com/Trader.aspx?id=OptionsVolumeSummary</a>.
\44\ See NYSE American, ``NYSE American Options Proprietary
Market Data Fees as of November 1, 2023,'' available at <a href="https://www.nyse.com/publicdocs/nyse/data/NYSE_American_Options_Market_Data_Fee_Schedule.pdf">https://www.nyse.com/publicdocs/nyse/data/NYSE_American_Options_Market_Data_Fee_Schedule.pdf</a>
\45\ See MIAX Options Exchange, ``Fee Schedule as of April 23,
2024,'' available at <a href="https://www.miaxglobal.com/sites/default/files/fee_schedule-files/MIAX_Options_Fee_Schedule_04232024.pdf">https://www.miaxglobal.com/sites/default/files/fee_schedule-files/MIAX_Options_Fee_Schedule_04232024.pdf</a>
\46\ See MIAX Pearl Options Exchange, ``Fee Schedule as of April
15, 2024,'' available at <a href="https://www.miaxglobal.com/sites/default/files/fee_schedule-files/MIAX_Pearl_Options_Fee_Schedule_04152024.pdf">https://www.miaxglobal.com/sites/default/files/fee_schedule-files/MIAX_Pearl_Options_Fee_Schedule_04152024.pdf</a>
\47\ See <a href="http://NasdaqTrader.com">NasdaqTrader.com</a>, ``Options Market Statistics,''
available at <a href="https://www.nasdaqtrader.com/Trader.aspx?id=OptionsVolumeSummary">https://www.nasdaqtrader.com/Trader.aspx?id=OptionsVolumeSummary</a>.
\48\ See Cboe DataShop, ``Cboe Open-Close Volume Summary,''
available at <a href="https://datashop.cboe.com/cboe-options-open-close-volume-summary">https://datashop.cboe.com/cboe-options-open-close-volume-summary</a>.
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For end of day data, NYSE American charges $750,\49\ MIAX charges
$600,\50\ and MIAX Pearl charges $600.\51\ The proposed fees of $850
are higher than this range, but the Exchange believes that its
competitors are underestimating the value of the product.
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\49\ See NYSE American, ``NYSE American Options Proprietary
Market Data Fees as of November 1, 2023,'' available at <a href="https://www.nyse.com/publicdocs/nyse/data/NYSE_American_Options_Market_Data_Fee_Schedule.pdf">https://www.nyse.com/publicdocs/nyse/data/NYSE_American_Options_Market_Data_Fee_Schedule.pdf</a>.
\50\ See MIAX Options Exchange, ``Fee Schedule as of April 23,
2024,'' available at <a href="https://www.miaxglobal.com/sites/default/files/fee_schedule-files/MIAX_Options_Fee_Schedule_04232024.pdf">https://www.miaxglobal.com/sites/default/files/fee_schedule-files/MIAX_Options_Fee_Schedule_04232024.pdf</a>.
\51\ See MIAX Pearl Options Exchange, ``Fee Schedule as of April
15, 2024,'' available at <a href="https://www.miaxglobal.com/sites/default/files/fee_schedule-files/MIAX_Pearl_Options_Fee_Schedule_04152024.pdf">https://www.miaxglobal.com/sites/default/files/fee_schedule-files/MIAX_Pearl_Options_Fee_Schedule_04152024.pdf</a>.
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Nasdaq is not aware of another exchange that provides a similar
discount for historical data other than its own affiliates. The Phlx
exchange, which is affiliated with Nasdaq, offers the most recent 36
months of historical End of Day data to Current Distributors for
$6,000, and the most recent 36 months of Intraday data for $12,000.
Nasdaq believes that the proposed ISE fees are reasonable in comparison
to Phlx because, although Phlx has a somewhat larger market share
(approximately 9% for Phlx vs. about 7% for ``ISE), the historical Phlx
data is somewhat undervalued. As such, ISE's proposed fees of $7,200
for 36 months of ISE's historical End of Day data and $12,000 for 36
months of ISE's Intraday data are reasonable.
If the Exchange is wrong in these assessments, it will lose sales
as a result.
As noted above, clarifying the definition of Current Distributor
will not change fees, and therefore will not impact the equitable
allocation of reasonable dues, fees and other charges.
The Proposal Does Not Permit Unfair Discrimination
Nothing in the proposal treats any category of market participant
any differently from any other category of market participant. On the
contrary, the proposal expands distribution of Trade Profile beyond
investment banks, market makers, asset managers and other buy-side
investors to market data vendors and the general investing public.
Allowing the distribution of Derived Data to the general investing
public will broaden the availability of such information while not
treating any current recipient of the product differently in any way.
The new fee structure, which modifies fees to reflect current market
value and offers historical data at a discount, applies equally to all
current and potential distributors. Trade Profile is available to all
market participants, including members and non-members, and all market
participants receive the same information in the Trade Profile data
feed.
With respect to the specific fee changes, it is reasonable and not
unfair discrimination to charge an external distributor of Derived Data
a $4,500 licensing fee. Vendors will ordinarily charge a fee to their
downstream customers for this service, and, even if the vendor is not
charging a specific fee for this particular service, Derived Data
products from the Exchange will be part of a suite of offerings that
generally
[[Page 77918]]
promote sales. External distribution is fundamentally different than
internal use, in that the former generates revenue from external sales
while the latter does not. It is not unfair discrimination to charge a
licensing fee for a product that generates downstream revenue.
Nor is it unfair discrimination to allow the redistribution of
Derived Data, but not the underlying information, to the general
investing public. As explained above, neither exchanges nor vendors
ordinarily allow redistribution of analytic products--such products are
typically designed solely for the use of direct customers, not for
redistribution to the customers of customers in the manner of a data
feed. Allowing the redistribution of Derived Data provides an incentive
for vendors to innovate with new compelling and varied analytic
products for the general investing public that will provide access to
market sentiment insights currently available only to sophisticated
investors. This proposal is therefore not unfair discrimination, but
rather allows for more equitable access to market sentiment information
for the general investing public.
It is also not unfair discrimination to provide a discount for 36
months of historical data to Current Distributors, but not former
distributors or firms that have never purchased the product. Any firm
would be able to become a Current Distributor at any time by
subscribing to Trade Profile, and would be able to cancel the
subscription at any time after receiving the 36 months of historical
data for the proposed discounted fee. More specifically, a firm that is
not a Current Distributor may obtain access to the 36 months of
historical data at a discount by becoming a Current Distributor for a
limited time and then terminating the subscription.
It is not unfair discrimination to limit the historical data
discount to Current Distributors. Historical information is generally
used by Current Distributors to test their strategies and trading
models, and Current Distributors are therefore in the best position to
benefit from the historical data. Outside of the 36 month period, all
firms will have the opportunity to purchase historical data on an ad
hoc basis.
For all of these reasons, the proposal does not permit unfair
discrimination.
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 intermarket
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 and with
alternative trading systems that have been exempted from compliance
with the statutory standards applicable to 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.
Adding the definition of ISE Open/Close Trade Profile will promote
competition by helping investors make better informed decisions about
ISE Open/Close Trade Profile. Nothing about the addition of a
definition will impact inter-market competition or intra-market
competition negatively.
Intermarket Competition
Nothing in the proposal burdens inter-market competition (the
competition among self-regulatory organizations).
As discussed above, ISE Open/Close Trade Profile is subject to
direct competition from other options exchanges that offer substitutes.
Any of these exchanges can replicate this proposal in full or in part,
and nothing in the proposal would interfere with the ability of any
exchange to do so.
Intra-Market Competition
Nothing in the proposal burdens intra-market competition (the
competition among consumers of exchange data). Trade Profile is
available to any customer under the same fee schedule as any other
customer, and any market participant that wishes to purchase these
products can do so on a non-discriminatory basis. Indeed, the proposal
will foster competition by expanding dissemination of data to vendors
and the general investing public, and by encouraging more market
participants to use Trade Profile data to help inform their investments
strategies and analytic models.
Offering the 36 months of historical data to Current Distributors,
but not former distributors or firms that have never purchased the
product, will not burden competition because non-subscribers are free
to purchase a current subscription. Moreover, a firm that is not a
Current Distributor may become a Current Distributor and then cancel
the product after receiving the historical discount. As such, firms
that are not Current Distributors will have an opportunity to pay the
same fees for the most recent 36 months of historical data as Current
Distributors. Outside of the 36 month period, all firms will have the
opportunity to purchase historical data on an ad hoc basis.
Adding language to clarify the definition of Current Distributor
will not change fees, and will promote competition by better informing
investors.
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
Because the foregoing proposed rule change does not: (i)
significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days after the date of the filing, or such
shorter time as the Commission may designate if consistent with the
protection of investors and the public interest, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \52\ and Rule 19b-
4(f)(6) \53\ thereunder.
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\52\ 15 U.S.C. 78s(b)(3)(A).
\53\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \54\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\55\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposed
rule change may become operative upon filing. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposed
rule change may become operative upon filing. The Exchange states that
adding
[[Page 77919]]
the definition of ISE Open/Close Trade Profile will provide additional
clarity and specificity to the ISE rulebook, and nothing in the
clarification changes the product or the way it functions, but rather
describes the product exactly as it exists today. The Exchange also
states that the fees included in this filing have been in effect since
July 1, 2024, and waiver of the operative delay will allow application
of those fees to continue uninterrupted. For these reasons, the
Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest.
Therefore, the Commission hereby waives the operative delay and
designates the proposal operative upon filing.\56\
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\54\ 17 CFR 240.19b-4(f)(6).
\55\ 17 CFR 240.19b-4(f)(6)(iii).
\56\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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 necessary or
appropriate in the public interest, for the protection of investors, or
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.
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#2654534a430b45494b4b434852556655434508414950"><span class="__cf_email__" data-cfemail="780a0d141d551b1715151d160c0b380b1d1b561f170e">[email protected]</span></a>. Please include
file number SR-ISE-2024-46 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-2024-46. 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-2024-46 and should be
submitted on or before October 15, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\57\
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\57\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-21744 Filed 9-23-24; 8:45 am]
BILLING CODE 8011-01-P
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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.