[Federal Register Volume 85, Number 15 (Thursday, January 23, 2020)]
[Notices]
[Pages 4045-4049]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-01040]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87998; File No. SR-ISE-2020-01]


Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the 
Exchange's Pricing Schedule at Options 7

January 16, 2020.
    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 January 2, 2020, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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, as described further below.
    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 purpose of the proposed rule change is to amend the Exchange's 
Pricing Schedule at Options 7. Each change is described below.
Priority Customer Complex Legging Rebate
    Currently, the Exchange provides rebates to Priority Customer \3\ 
complex orders that trade with non-Priority Customer complex orders in 
the complex order book or trade with quotes and orders on the regular 
order book. This program is designed to encourage Members to bring 
complex volume to the Exchange, including incentivizing Members to 
bring Priority Customer complex orders specifically to earn the 
associated rebates. Rebates are tiered based on a percentage of total 
industry volume.\4\ There are currently nine Priority Customer Complex 
Tiers as follows: \5\
---------------------------------------------------------------------------

    \3\ 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)(36).
    \4\ The Priority Customer Complex Tiers are based on total 
Affiliated Member or Affiliated Entity complex order volume 
(excluding Crossing Orders and Responses to Crossing Orders) 
calculated as a percentage of total national volume cleared at The 
Options Clearing Corporation in the Customer range in equity and ETF 
options for that month (hereinafter, ``Complex Order Volume 
Percentage''). All complex order volume executed on the Exchange, 
including volume executed by Affiliated Members, is included in the 
volume calculation, except for volume executed as Crossing Orders 
and Responses to Crossing Orders. Affiliated Entities may also 
aggregate their complex order volume for purposes of calculating 
Priority Customer rebates. The Appointed OFP would receive the 
rebate associated with the qualifying volume tier based on 
aggregated volume.
    \5\ The rebate for the highest tier volume achieved is applied 
retroactively to all eligible Priority Customer complex volume once 
the threshold has been reached. Members will not receive rebates for 
net zero complex orders. For purposes of determining which complex 
orders qualify as ``net zero'' the Exchange will count all complex 
orders that leg into the regular order book and are executed at a 
net price per contract that is within a range of $0.01 credit and 
$0.01 debit.

----------------------------------------------------------------------------------------------------------------
                                                                                    Rebate for    Rebate for non-
       Priority customer complex tier          Complex order volume percentage    select symbols  select symbols
                                                                                        \6\             \7\
----------------------------------------------------------------------------------------------------------------
Tier 1.....................................  0.000-0.200........................         ($0.25)         ($0.40)
Tier 2.....................................  Above 0.200-0.400..................          (0.30)          (0.55)
Tier 3.....................................  Above 0.400-0.600..................          (0.35)          (0.70)
Tier 4.....................................  Above 0.600-0.750..................          (0.40)          (0.75)
Tier 5.....................................  Above 0.750-1.000..................          (0.45)          (0.80)

[[Page 4046]]

 
Tier 6.....................................  Above 1.000-1.500..................          (0.46)          (0.80)
Tier 7.....................................  Above 1.500-2.000..................          (0.48)          (0.80)
Tier 8.....................................  Above 2.000-3.250..................          (0.50)          (0.85)
Tier 9.....................................  Above 3.250........................          (0.50)          (0.85)
----------------------------------------------------------------------------------------------------------------

    Going forward, the Exchange proposes to eliminate these rebates for 
Priority Customer complex orders that trade with quotes and orders on 
the regular order book if any leg of the order is fifty contracts or 
more. The Exchange will continue to provide the rebate if the largest 
leg of such order is under fifty contracts. Rebates for Priority 
Customer complex orders that trade with non-Priority Customer orders in 
the complex order book will also remain unchanged with this proposal, 
and the Exchange will continue to provide such rebates to qualifying 
Members, regardless of size.
---------------------------------------------------------------------------

    \6\ ``Select Symbols'' are options overlying all symbols listed 
on the Nasdaq ISE that are in the Penny Pilot Program.
    \7\ ``Non-Select Symbols'' are options overlying all symbols 
excluding Select Symbols. For Non-Select Symbols, no Priority 
Customer complex order rebates are paid for orders in NDX, NQX, and 
MNX.
---------------------------------------------------------------------------

    The proposed changes are designed to limit Members from entering 
larger sized complex orders (i.e., 50 or more contracts for the largest 
leg) to recover Priority Customer complex order rebates, and to reduce 
disincentives for Market Makers \8\ to provide liquidity on the 
Exchange. Recently, the Exchange has observed that several market 
participants have been entering larger sized Priority Customer complex 
orders with a leg of fifty or more contracts to earn a rebate. When 
these complex orders do not find a counterparty in the complex order 
book, they may leg into the regular order book where they are typically 
executed by Market Makers on the individual legs who pay a fee to trade 
with this order flow.\9\ As a result, the Market Maker's ability to 
provide liquidity on the Exchange is adversely affected as they are 
charged to trade against these larger complex orders when they leg into 
the regular market and execute against their quotes.
---------------------------------------------------------------------------

    \8\ The term ``Market Makers'' refers to ``Competitive Market 
Makers'' and ``Primary Market Makers'' collectively. See Options 1, 
Section 1(a)(21).
    \9\ For example, a Market Maker providing liquidity on the 
individual leg would typically pay a maker fee of only $0.10 per 
contract for trading with orders originating from the regular order 
book, or in the case of Market Makers that achieve Market Maker Plus 
status, would earn certain maker rebates instead of paying the $0.10 
per contract maker fee. See Options 7, Section 3, note 5. When 
trading against a Priority Customer complex order that legs in from 
the complex order book, however, that same Market Maker is instead 
charged a maker fee of $0.15 per contract. See Options 7, Section 3, 
note 11.
---------------------------------------------------------------------------

    The Exchange believes that it is in the interest of a fair and 
orderly market to provide appropriate incentives for Market Makers to 
maintain quality markets. As a result, the Exchange has instituted 
pricing programs that are aimed at incentivizing Market Makers to 
provide liquidity, including, for example, the Market Maker Plus 
program, which rewards Market Makers for routinely quoting at the 
national best bid or offer.\10\ By eliminating the rebate for larger 
sized Priority Customer complex orders that leg into the regular order 
book, the Exchange seeks to bolster liquidity by incentivizing Market 
Makers to post tighter and more liquid markets on ISE, to the benefit 
of all market participants. At the same time, smaller, more typically 
``retail'' sized Priority Customer complex orders with less than fifty 
contracts for the largest leg that trade with interest on the regular 
order book, and Priority Customer complex orders of any size trading 
with non-Priority Customer orders in the complex order book, will 
continue to receive rebates based on the Priority Customer Complex Tier 
achieved, thereby continuing to incentivize Members to bring complex 
order flow to the Exchange to earn the rebate on their Priority 
Customer complex volume.
---------------------------------------------------------------------------

    \10\ See Options 7, Section 3, note 5.
---------------------------------------------------------------------------

    In addition, the Exchange proposes to eliminate the $0.05 per 
contract surcharge it currently imposes on Priority Customer complex 
orders in SPY that leg into the regular order book, which is applied in 
addition to the applicable Priority Customer complex order rebate.\11\ 
This SPY surcharge was originally adopted to offset the costs of 
providing the Priority Customer complex order rebates. With the changes 
described above to eliminate the rebates for larger-sized Priority 
Customer complex orders that leg into the regular order book, the 
Exchange believes that it is appropriate to revisit this surcharge, and 
now proposes to eliminate this fee. By no longer assessing this 
surcharge, the Exchange seeks to fortify Member participation in the 
Priority Customer complex order rebate program and incentivize 
increased complex order volume on the Exchange.
---------------------------------------------------------------------------

    \11\ For example, if a Member qualifies for Priority Customer 
Complex Tier 1, the Member's Priority Customer complex orders in SPY 
that leg into the regular order book for non-net zero activity will 
earn $0.20 per contract (i.e., $0.25 per contract rebate for Select 
Symbols minus the $0.05 per contract SPY surcharge).
---------------------------------------------------------------------------

Priority Customer Complex Rebate Tiers
    As discussed above, the Exchange currently provides rebates to 
Priority Customer complex orders based on nine volume tiers. In 
particular, a Member must execute a Complex Order Volume Percentage of 
above 1% to 1.5% to qualify for the $0.46 per contract Priority 
Customer Complex Tier 6 rebate. In addition, a Member must execute a 
Complex Order Volume Percentage of above 3.25% to qualify for the $0.50 
per contract Priority Customer Complex Tier 9 rebate. Going forward, 
the Exchange proposes to increase the Tier 6 rebate from $0.46 to $0.47 
per contract, with no changes to the corresponding Complex Order Volume 
Percentage. The Exchange also proposes to reduce the Tier 9 Complex 
Order Volume Percentage requirement from above 3.25% to above 2.75% and 
increase the corresponding rebate from $0.50 to $0.52 per contract. 
There will also be a corresponding change to Tier 8 to reduce the upper 
limit of the Complex Order Volume Percentage from 3.25% to 2.75%.
    The Exchange notes that all Members may elect to qualify for the 
Priority Customer complex rebates by submitting complex order flow to 
the Exchange and earn a rebate on their Priority Customer complex 
volume. Accordingly, the proposed changes are designed to increase the 
amount of complex order flow Members bring to the Exchange, 
particularly Priority Customer complex volume, and further encourage 
them to contribute to a deeper, more liquid market to the benefit of 
all market participants.
PIM Response Fees
    Today, for regular orders in Select Symbols and Non-Select Symbols, 
the Exchange charges all market participant orders a fee for Responses 
to Price Improvement Mechanism (``PIM'') orders that is $0.25 per 
contract. For

[[Page 4047]]

complex orders in both Select and Non-Select Symbols, the PIM Response 
fee is likewise $0.25 per contract for all market participant orders. 
The Exchange now proposes to increase the aforementioned fees to $0.35 
per contract for all market participant orders.
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.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

The Proposal Is Reasonable
    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 
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 \14\ (``NetCoalition''), the D.C. Circuit stated, ``[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'. . . .'' \15\
---------------------------------------------------------------------------

    \14\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
    \15\ Id. at 539 (quoting Securities Exchange Act Release No. 
59039 (December 2, 2008), 73 FR 74770, 74782-83 (December 9, 2008) 
(SR-NYSEArca-2006-21)).
---------------------------------------------------------------------------

    Numerous indicia demonstrate the competitive nature of this market. 
For example, clear substitutes to the Exchange exist in the market for 
options transaction services. The Exchange is only one of sixteen 
options exchanges to which market participants may direct their order 
flow. Within this environment, market participants can freely and often 
do shift their order flow among the Exchange and competing venues in 
response to changes in their respective pricing schedules. Within the 
foregoing context, the proposal represents a reasonable attempt by the 
Exchange to attract additional order flow to the Exchange and increase 
its market share relative to its competitors.
    Overall, the Exchange believes that the Priority Customer complex 
rebate program, as modified, is reasonable because the program is 
optional and all Members can choose to participate or not. In addition, 
the Exchange believes that it is reasonable to eliminate the rebate for 
Priority Customer complex orders with any leg of 50 or more contracts 
where such order legs into the regular order book. As explained above, 
Priority Customer complex orders, including these larger orders that 
access liquidity on the regular order book, are currently paid 
significant rebates by the Exchange, which are funded in part by 
charging higher fees to the market participants who trade against these 
orders. As discussed above, when these larger complex orders do not 
find a counterparty in the complex order book, they may leg into the 
regular order book where they are typically executed by Market Makers 
on the individual legs who pay a fee to trade with this order flow.
    Market Makers may be impeded in providing liquidity when doing so 
may result in trading against these large Priority Customer complex 
orders that leg into the regular market. The Exchange believes that it 
is important that Market Makers be properly incentivized to maintain 
quality markets, and is therefore proposing to take steps to reduce the 
incentives for market participants to enter larger sized Priority 
Customer complex orders that leg into the regular market to access 
liquidity, and to limit this rebate to smaller sized orders that leg 
in. By continuing to provide this rebate to smaller Priority Customer 
complex orders that trade with interest on the regular order book, and 
Priority Customer complex orders of any size that trade with non-
Priority Customer orders on the complex order book, the Exchange 
believes that the rebate program will remain attractive and continue to 
attract complex order flow, which liquidity will benefit all market 
participants, including Market Makers, who may trade with this volume. 
The Exchange believes that the proposed threshold of under fifty 
contracts per leg is set at an appropriate level that would allow 
Market Makers to more easily manage and react to these smaller, more 
typically retail sized orders that leg in to trade against their quotes 
in the regular order book.\16\ The Exchange notes that fifty contracts 
is the threshold for ``block-sized orders'' entered through the 
Exchange's Block Order Mechanism and Facilitation Mechanism, and 
normally denotes the cutoff between orders of retail and institutional 
size on ISE.\17\ With the proposed changes, the Exchange believes that 
Market Makers will be aided in their role of providing liquidity and 
maintaining quality markets to the benefit of all market participants 
that trade on the Exchange.
---------------------------------------------------------------------------

    \16\ The Exchange notes that Cboe Options (``Cboe'') has a 
similar concept of limiting certain fee incentives in its Fees 
Schedule for smaller sized customer orders. See, e.g., Cboe Fees 
Schedule, fn. 9 (waiving transaction fees for customer orders 
removing liquidity that are of 99 contracts or less in ETF and ETN 
options).
    \17\ See Options 3, Section 11(a) and (b) for a description of 
the Block Order Mechanism and the Facilitation Mechanism.
---------------------------------------------------------------------------

    The Exchange also believes that it is reasonable to eliminate the 
SPY surcharge for Priority Customer complex orders that leg into the 
regular order book. With the changes described above to eliminate 
rebates for larger Priority Customer complex orders that leg into the 
regular order book, the Exchange believes that it is appropriate to 
also discontinue the SPY surcharge applied to legged in complex orders. 
In addition, the Exchange believes that eliminating this surcharge will 
increase incentives for Members to bring additional complex order flow 
to the Exchange, which increased liquidity will benefit all market 
participants that trade on the Exchange.
    Furthermore, the Exchange believes that the proposed changes to the 
Priority Customer complex order rebate program to lower the various 
Complex Order Volume Percentage thresholds and increase rebates in the 
manner described above represent a reasonable attempt by the Exchange 
to fortify participation in the Priority Customer complex order rebate 
program. In particular, the Exchange's proposal to increase the rebate 
for Priority Customer Complex Tier 6 from $0.46 per contract to $0.47 
per contract is intended to encourage Members to submit additional 
amounts of complex order volume to obtain the higher rebate on their 
Priority Customer complex orders. The Exchange believes that the higher 
rebate will further incentivize Members to bring additional complex 
order flow, including Priority Customer complex order flow, to the 
Exchange. Similarly, the Exchange's proposal to lower the volume 
requirements for Priority Customer Complex Tiers 8 and 9, and increase 
the Tier 9 rebate is reasonable because this change is designed to make

[[Page 4048]]

it easier for Members to achieve these tiers to earn the higher rebate. 
The proposed changes are designed to make the rebates more achievable 
and attractive to existing and potential program participants. As noted 
above, the Priority Customer complex rebate program is optional and 
available to all Members that choose to send complex order flow to the 
Exchange to earn a rebate on their Priority Customer complex volume. To 
the extent the program, as modified, continue to attract complex volume 
to the Exchange, the Exchange believes that the proposed changes would 
improve the Exchange's overall competitiveness and strengthen its 
market quality for all market participants.
    The Exchange believes that it is reasonable to increase the regular 
and complex PIM Response fees from $0.25 to $0.35 per contract for all 
market participant orders. With the proposed changes, the PIM Response 
fees will remain significantly lower than those charged for other 
Responses to Crossing Order \18\ on ISE.\19\ Accordingly, the Exchange 
believes that the proposed fees will remain attractive to market 
participants and continue to encourage them to respond to PIM auctions, 
thereby increasing price improvement opportunities for PIM orders.
---------------------------------------------------------------------------

    \18\ ``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.
    \19\ For regular orders, the Exchange charges all market 
participants a $0.50 per contract Response fee for all other 
Crossing Orders. For complex orders, this Response fee is $0.50 per 
contract in Select Symbols for all market participants and in Non-
Select Symbols, $0.91 per contract (Market Makers) and $0.96 per 
contract (all other market participants). See Options 7, Sections 3 
and 4.
---------------------------------------------------------------------------

The Proposal Is an Equitable Allocation of Fees and Rebates
    The Exchange believes that its proposal is an equitable allocation 
of its fees and rebates among its market participants.
    The Exchange believes that its proposal to eliminate the rebate for 
Priority Customer complex orders with any leg of 50 or more contracts 
where such order legs into the regular order book is an equitable 
allocation of the Priority Customer complex rebates. As discussed 
above, this change is designed to limit market participants from 
entering larger Priority Customer complex orders for the purpose of 
earning the rebate, thereby reducing the cost of these trades to the 
Exchange and its Members, and incentivizing Market Makers to maintain 
quality markets on the Exchange. All Members may continue to qualify 
for these rebates, provided that their Priority Customer complex orders 
that trade with interest on the regular market remain under a certain 
size.
    The Exchange believes that its proposal to discontinue the SPY 
surcharge for Priority Customer complex orders that leg into the 
regular order book is an equitable allocation of fees. With the 
proposed change, no market participant will be assessed the SPY 
surcharge on their Priority Customer complex orders that execute with 
interest on the regular market.
    Furthermore, the proposed changes to the Priority Customer complex 
order rebate program to lower the volume threshold requirements and 
increase the rebates in the manner described above are equitable 
because any Member who brings complex order flow to the Exchange may 
qualify for the rebates. The Exchange believes that the proposed 
changes to Tier 6 and higher are an equitable allocation of rebates 
because the Exchange seeks to further incentivize all Members to bring 
a significant amount of complex volume to the Exchange in order to earn 
the highest range of Priority Customer complex rebates offered under 
this program. The Exchange anticipates all Members that currently 
qualify for these rebates will continue to do so under this proposal. 
To the extent the proposed changes encourage additional Members to 
strive for the modified tiers and thus attract more complex volume to 
the Exchange, this increased order flow would improve the overall 
quality and attractiveness of the Exchange. The Exchange notes that all 
market participants stand to benefit from increased liquidity as such 
increase promotes market depth, facilitates tighter spreads and 
enhances price discovery. Accordingly, the Exchange believes that the 
changes to Tier 6 and higher, as discussed above, are reasonably 
designed to provide further incentives for all Members interested in 
meeting the tier criteria to submit additional Priority Customer 
complex volume to achieve the higher rebates.
    The Exchange believes that its proposal to increase the regular and 
complex PIM Response fees is equitable because the proposed increase 
will apply to all market participant orders. As discussed above, all 
market participant orders are currently charged a $0.25 per contract 
PIM Response fee, and will uniformly be charged $0.35 per contract 
under this proposal.
The Proposal Is Not Unfairly Discriminatory
    The Exchange believes that the proposed changes are not unfairly 
discriminatory. As it relates to the proposal to discontinue the 
Priority Customer complex rebate for larger sized orders (i.e., with a 
leg of 50 or more contracts) that leg into the regular order book, this 
change is intended to improve market quality by discouraging market 
participants from entering large sized Priority Customer complex orders 
for the purpose of earning the rebate, thereby reducing the cost of 
these trades to the Exchange and its Members, and incentivizing Market 
Makers to maintain quality markets on the Exchange. The Exchange does 
not believe that it is unfairly discriminatory to continue to offer 
rebates to firms that do not hit the proposed fifty contract threshold 
as all market participants may modify their behavior by entering 
smaller sized complex orders to earn the rebate, and such smaller, more 
retail sized orders would allow Market Makers to more easily manage and 
react to these orders that trade against their quotes on the regular 
order book. In addition, all Priority Customer complex orders that 
trade with non-Priority Customer orders in the complex market will 
continue to receive the rebates. The Exchange does not believe that it 
is unfairly discriminatory to provide rebates only to Priority Customer 
complex orders as this type of order flow enhances liquidity on the 
Exchange for the benefit of all market participants by providing more 
trading opportunities, which in turn attracts Market Makers and other 
market participants that may trade with this order flow. As noted 
above, any Member may choose to qualify for the Priority Customer 
complex rebates by sending the requisite volume of complex orders to 
earn the rebate on their Priority Customer complex orders. Thus the 
proposed changes will apply uniformly to all Members that bring complex 
order flow to the Exchange.
    In addition, the Exchange believes that it is not unfairly 
discriminatory to eliminate the SPY surcharge for Priority Customer 
complex orders that leg into the regular order book. As discussed 
above, no market participant will be assessed the SPY surcharge on 
their Priority Customer complex orders that execute with interest on 
the regular market under the Exchange's proposal. Accordingly, the 
proposed change will apply uniformly to all market participants.
    The Exchange also believes that the proposed changes to Priority 
Customer

[[Page 4049]]

Complex Tier 6 and higher are not unfairly discriminatory. Any Member 
may choose to qualify for the rebate program by sending complex order 
flow to the Exchange. By encouraging all Members to bring significant 
amounts of complex order flow (i.e., to qualify for the higher tiers) 
in order to earn a rebate on their Priority Customer complex orders, 
the Exchange seeks to provide more trading opportunities for all market 
participants, promote price discovery, and improve the overall market 
quality of the Exchange.
    Lastly, the Exchange does not believe that the proposed increase in 
PIM Response fees is unfairly discriminatory because they will apply 
uniformly to all market participant orders that respond to PIM 
auctions. As discussed above, the Exchange believes that the proposed 
fees will remain attractive to market participants as they are lower 
than the Response fees for other Crossing Orders, and will continue to 
encourage market participants to respond to PIM auctions, thereby 
increasing price improvement opportunities for PIM orders.

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.
Intramarket Competition
    The Exchange does not believe that its proposal will place any 
category of Exchange participant at a competitive disadvantage. All of 
the proposed changes are designed to attract additional liquidity to 
the Exchange. The Exchange believes that the proposed enhancements to 
the Priority Customer complex rebate program and proposed PIM Response 
fees will continue to incentivize market participants to direct 
liquidity to the Exchange. As noted above, all market participants will 
benefit from any increase in market activity that the proposal 
effectuates. The proposed fees and rebates will apply uniformly to all 
similarly situated participants as discussed above, and as such, the 
proposed changes will not impose an undue burden on competition among 
Exchange participants.
Intermarket Competition
    The Exchange 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.
    Moreover, as noted above, price competition between exchanges is 
fierce, with liquidity and market share moving freely between exchanges 
in reaction to fee and rebate changes. In sum, if the changes proposed 
herein are unattractive to market participants, it is likely that the 
Exchange will lose market share as a result. Accordingly, the Exchange 
does not believe that the proposed changes will impair the ability of 
members or competing order execution venues to maintain their 
competitive standing in the financial markets.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act,\20\ and Rule 19b-4(f)(2) \21\ 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.
---------------------------------------------------------------------------

    \20\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \21\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

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-2020-01 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-2020-01. 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 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-2020-01 and should be submitted on 
or before February 13, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
---------------------------------------------------------------------------

    \22\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-01040 Filed 1-22-20; 8:45 am]
BILLING CODE 8011-01-P