[Federal Register Volume 87, Number 181 (Tuesday, September 20, 2022)]
[Notices]
[Pages 57548-57550]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-20273]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-95771; File No. SR-ISE-2022-19]
Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Its Port-
Related Fees at Options 7, Section 7
September 14, 2022.
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 1, 2022, Nasdaq ISE, LLC (``ISE'' or ``Exchange'') filed
with the Securities and Exchange Commission (``SEC'' or ``Commission'')
the proposed rule change as described in Items I, II, and III, below,
which Items have been prepared by the Exchange. The 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 port-related fees at
Options 7, Section 7, as described further below. The text of the
proposed rule change is available on the Exchange's website at https://listingcenter.nasdaq.com/rulebook/ise/rules, 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 Options 7,
Section 7 to (i) prorate port fees for the first month of service, (ii)
clarify that port fees for cancelled services will continue to be
charged for the remainder of month, (iii) clarify that Disaster
Recovery Port Fees are not charged for market data ports listed in
Options 7, Section 7C(iii), and (iv) clarify that Nasdaq Testing
Facility (``NTF'') ports are provided at no cost.
Currently, the Exchange does not prorate port connectivity fees.
Thus, participants are assessed a full month's fee if they direct the
Exchange to make the subscribed connectivity live on any day of the
month, including the last day
[[Page 57549]]
thereof. Participants are also assessed a full month's port fee if they
cancel service during the month.
The Exchange proposes to provide prorated port fees for the first
month of service for new requests. By prorating the first month's fees,
the Exchange would charge participants port fees only for the days in
which the participants are connected to the Exchange during the first
month of service. The Exchange proposes to continue the current
practice of charging port fees for the remainder of the month upon
cancellation. If a participant starts and cancels service in the same
month, the participant would not be billed for those days prior to the
service start date but would be billed for the remainder of the month,
including after the service is cancelled.\3\
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\3\ For example, if a participant orders a port on September 4,
2022 and cancels the port on September 16, 2022, the participant
would be charged the prorated port fee for September 5, 2022 through
September 30, 2022.
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The Exchange believes it is important for participants to have the
option to establish new connections to the Exchange at any time during
the month without being hampered by a full month charge irrespective of
when during the month service begins. Moreover, other exchanges also
charge new ports on a prorated basis for the first month of service.\4\
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\4\ See, e.g., Cboe BZX U.S. Equities Exchange Fee Schedule,
available at https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/; New York Stock Exchange Price List 2022,
available at https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf.
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The Exchange also proposes to make clarifying changes to Options 7,
Section 7C(iv). First, the Exchange proposes to clarify that Disaster
Recovery Port Fees are not charged for the ports listed in Options 7,
Section 7C(iii). The market data ports in Options 7, Section 7C(iii)
are provided at no cost and the Exchange does not charge a Disaster
Recovery Port Fee for these ports. Second, the Exchange proposes to
clarify the Exchange's existing practice that NTF Ports are provided at
no cost. The NTF provides subscribers with a virtual System test
environment that closely approximates the production environment on
which they may test their automated systems that integrate with the
Exchange. For example, the NTF provides subscribers a virtual System
environment for testing upcoming releases and product enhancements, as
well as testing firm software prior to implementation. The Exchange
proposes adding express language in the Rules to provide increased
clarity to market participants.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\5\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,\6\ 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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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange's proposed changes to its port fee schedule are
reasonable in several respects. As a threshold matter, the Exchange is
subject to significant competitive forces in the market for options and
equity securities transaction services that constrain its pricing
determinations in that market. 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.'' \7\
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\7\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70
FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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The Exchange believes that it is reasonable to prorate port fees
for the first month of connectivity. As discussed above, the Exchange
believes it is important for participants to have the flexibility to
establish new connections to the Exchange at any time during the month
without being hampered by a full month charge. For example, the
Exchange believes it is reasonable to charge a user who begins a
subscription on the last day of the month to be charged only for use of
a port for that day. As noted above, other exchanges already charge
their customers for new ports on a prorated basis for the first month
of service.\8\ The proposed language describing the Exchange's practice
to bill for the remainder of the month upon cancellation is intended
only to clarify the existing practice and limit any confusion.
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\8\ Supra note 4.
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The Exchange believes that the proposal is also equitable and not
unfairly discriminatory because the proposed change to prorate port
fees for the first month of service and continue to charge for the
remainder of the month upon cancellation will apply uniformly to all
similarly situated participants. Removing the requirement to pay a full
month's port fee if a user joins any day other than the first of the
month is user-friendly and provides users incentive to subscribe at
their convenience. The Exchange believes that prorating the fees for
the first month of a user's subscription will ensure that the fees are
more equitable to a user's utilization of the products. All users will
benefit from the proration of the first month of their subscription.
The Exchange also believes that it is just and equitable, and in
the interests of market participants, for the Exchange to (i) clarify
the Exchange's existing practice to provide NTF ports at no cost in
Options 7, Section 7C(iv), codifying existing practice where it is not
expressly stated in the Rule, and (ii) clarify the Exchange's existing
practice not to charge a Disaster Recovery Port Fee for ports listed in
Options 7, Section 7C(iii). The Exchange believes that market
participants will benefit from increased clarity, which will help limit
any potential confusion in the future.
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 participants at a competitive disadvantage. The
proposed change to prorate port fees for the first month of service
will apply uniformly to all similarly situated participants. All users
will receive the benefit of a proration for the first month of port
connectivity, which will enable users to save money that they otherwise
would incur under the Exchange's current rules that do not provide for
proration. The proposed language describing the Exchange's practice to
bill for the remainder of the month upon cancellation, as well as the
proposed changes to Options 7, Section 7C(iv) to clarify that the
Exchange does not charge a Disaster Recovery Port Fee for ports listed
in Options 7, Section 7C(iii) and to clarify that NTF ports are
provided at no cost, merely codify and clarify existing practices of
the Exchange.
[[Page 57550]]
Intermarket Competition
The Exchange believes that the proposed change to its port fee
schedule to provide proration for the first month of port connectivity
will not impose a burden on competition because the Exchange's
execution services are completely voluntary and subject to extensive
competition both from the other live exchanges and from off-exchange
venues, which include alternative trading systems that trade national
market system stock. Moreover, as noted above, other exchanges
currently charge new ports on a prorated basis for the first month of
service.\9\ The proposed changes will help ensure that the Exchange's
billing practices are commensurate with competitors.
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\9\ Supra note 4.
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The proposed change to the Exchange's port fee schedule is
reflective of this competition because, as a threshold issue, the
Exchange is a relatively small market so its ability to burden
intermarket competition is limited. In this regard, even the largest
U.S. equities exchange by volume only has 17-18% market share, which in
most markets could hardly be categorized as having enough market power
to burden competition. Accordingly, the Exchange does not believe that
the proposed change will impair the ability of members, participants,
or competing order execution venues to maintain their competitive
standing in the financial markets.
The proposed changes to clarify that the Exchange does not charge a
Disaster Recovery Port Fee for ports listed in Options 7, Section
7C(iii) and to clarify that NTF ports are provided at no cost are
designed to expressly state existing practices without changing their
operation and, therefore, the Exchange believes that the proposed
changes will not impose a 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) of the Act \10\ and paragraph (f) of Rule 19b-4 \11\
thereunder.
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(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: (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.
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-2022-19 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-2022-19. 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-2022-19 and should be submitted on
or before October 11, 2022.
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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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-20273 Filed 9-19-22; 8:45 am]
BILLING CODE 8011-01-P