[Federal Register Volume 83, Number 160 (Friday, August 17, 2018)]
[Notices]
[Pages 41124-41126]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-17738]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83830; File No. SR-ISE-2018-66]


Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the 
Exchange's Schedule of Fees Relating to Crossing Orders and Responses 
to Crossing Orders in Index Options on the Nasdaq 100 Reduced Value 
Index

August 13, 2018.
    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 1, 2018, Nasdaq ISE, LLC (``ISE'' or ``Exchange'') filed with 
the Securities and Exchange Commission (``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 Exchange's Schedule of Fees to 
provide further explanation on how the Exchange charges Crossing Orders 
and Responses to Crossing Orders in index options on the Nasdaq 100 
Reduced Value Index (``NQX'').
    The text of the proposed rule change is available on the Exchange's 
website at http://ise.cchwallstreet.com/, 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 Exchange recently adopted transaction fees and rebates for 
adding or removing liquidity from ISE (i.e., maker/taker fees and 
rebates) in NQX options, which apply to executions in both the regular 
and complex order book, according to the following schedule: \3\
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    \3\ See Securities Exchange Act Release No. 83639 (July 16, 
2018) (SR-ISE-2018-61).

------------------------------------------------------------------------
                                            Maker  fee/     Taker  fee/
           Market participant                 rebate          rebate
------------------------------------------------------------------------
Market Maker............................         ($0.25)           $0.00
Market Maker (for orders sent by                  (0.25)            0.00
 Electronic Access Members).............
Non-Nasdaq ISE Market Maker (FarMM).....            0.25            0.25
Firm Proprietary/Broker-Dealer..........            0.25            0.25
Professional Customer...................            0.25            0.25
Priority Customer.......................            0.00            0.00
------------------------------------------------------------------------

    In SR-ISE-2018-61, the Exchange stated that the above pricing would 
apply to all executions in NQX, including Non-Priority Customer \4\ 
Crossing Orders \5\ in NQX. The Exchange now proposes to clarify that 
the taker fee applies to Crossing Orders (i.e., both the originating 
and contra side of the order) in NQX as well as responses to such 
orders by noting the following in Section III.B: ``Fee will also apply 
to the originating and contra side of Crossing Orders, and to Responses 
to Crossing Orders.'' \6\
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    \4\ ``Non-Priority Customers'' include Market Makers, Non-Nasdaq 
ISE Market Makers, Firm Proprietary/Broker-Dealers, and Professional 
Customers.
    \5\ A ``Crossing Order'' is an order executed in the Exchange's 
Facilitation Mechanism, Solicited Order Mechanism, Price Improvement 
Mechanism (PIM) or submitted as a Qualified Contingent Cross order. 
For purposes of the fee schedule, orders executed in the Block Order 
Mechanism are also considered Crossing Orders.
    \6\ ``Responses to Crossing Order'' is any contra-side interest 
submitted after the commencement of an auction in the Exchange's 
Facilitation Mechanism, Solicited Order Mechanism, Block Order 
Mechanism or PIM.
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    The Exchange does not seek to amend the manner in which Crossing 
Orders in NQX and responses thereto are currently charged, rather the 
Exchange

[[Page 41125]]

seeks to more clearly state in its Schedule of Fees that taker pricing 
applies for such orders. While the Exchange is not aware of any member 
confusion with respect to this fee, the Exchange believes this 
specificity will help preclude any potential confusion in how its fees 
will apply.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\7\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\8\ 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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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed language relating to the 
application of taker fees to Crossing Orders and Responses to Crossing 
Orders in NQX is reasonable because the proposed rule text will bring 
greater transparency to the manner in which the Exchange charges NQX 
orders submitted in ISE's various crossing mechanisms. As discussed 
above, the Exchange charges members the applicable taker fee to both 
the originating and contra side of Crossing Orders in NQX as well 
charging the NQX taker pricing for Responses to Crossing Orders. The 
Exchange believes it is reasonable and appropriate to charge taker and 
not maker pricing for these orders because the Exchange seeks to 
encourage market making activity in NQX by providing the $0.25 per 
contract maker rebate to Market Maker orders that post liquidity in the 
Exchange's new proprietary product during the initial months of 
trading. Furthermore, the manner in which the Exchange applies the NQX 
taker fees in Section III.B is not changing with this proposal, and the 
proposed changes are intended to bring greater clarity to ISE's 
Schedule of Fees, to the benefit of all market participants.
    The Exchange's proposal to add the clarifying language is also 
equitable and not unfairly discriminatory because the Exchange will 
continue to apply the taker fees for Crossing Orders and Responses to 
Crossing Orders in NQX in a uniform manner for all similarly situated 
participants. The Exchange also believes that it is equitable and not 
unfairly discriminatory to assess no taker fees to Market Maker 
Crossing Orders and Responses to Crossing Orders in NQX as compared to 
other Non-Priority Customers, who are currently assessed the $0.25 per 
contract taker fee for such orders. Market Makers, unlike other market 
participants, take on a number of obligations, including quoting 
obligations, that other market participants do not have. Further, the 
Exchange believes that it is equitable and not unfairly discriminatory 
to assess no transaction fees to Priority Customer \9\ Crossing Orders 
and Responses to Crossing Orders in NQX because Priority Customer order 
flow enhances liquidity on the Exchange for the benefit of all market 
participants. Priority Customer liquidity provides more trading 
opportunities, which 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 from other market participants.
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    \9\ 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 Rule 
100(a)(37A).
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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. As discussed above, the 
proposal is intended to eliminate ambiguity from the Schedule of Fees 
by further explaining how ISE charges the originating and contra side 
of Crossing Orders in NQX as well as Responses to Crossing Orders in 
NQX. The proposal does not amend the current manner in which the 
Exchange assesses fees for Crossing Orders and Responses to Crossing 
Orders in NQX, and the Exchange will continue to assess the applicable 
taker fees in Section III.B for such NQX orders in a uniform manner to 
all market participants. For the foregoing reasons, the Exchange 
believes that the proposed changes do not impose an undue burden on 
competition.

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 \10\ and Rule 19b-4(f)(2) \11\ 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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    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \11\ 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

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-ISE-2018-66 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-ISE-2018-66. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public

[[Page 41126]]

Reference Room, 100 F Street NE, Washington, DC 20549, on official 
business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of 
the filing also will be available for inspection and copying at the 
principal office of the Exchange. All comments received will be posted 
without change. Persons submitting comments are cautioned that we do 
not redact or edit personal identifying information from comment 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-ISE-
2018-66 and should be submitted on or before September 7, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2018-17738 Filed 8-16-18; 8:45 am]
 BILLING CODE 8011-01-P