[Federal Register Volume 89, Number 163 (Thursday, August 22, 2024)]
[Notices]
[Pages 68007-68009]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-18786]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100753; File No. SR-ISE-2024-38]


Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Options 7, 
Section 3

August 16, 2024.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on August 9, 2024, Nasdaq ISE, LLC (``ISE'' or ``Exchange'') filed with 
the Securities and Exchange Commission (``SEC'' or ``Commission'') the 
proposed rule change as described in Items I, II, and III, below, which 
Items have been prepared by the Exchange. The

[[Page 68008]]

Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the Exchange's Pricing Schedule at 
Options 7.\3\
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    \3\ On July 31, 2024, ISE filed SR-ISE-2024-37 and designated it 
effective on August 1, 2024. On August 9, 2024, the Exchange 
withdrew SR-ISE-2024-37 and filed this rule change.
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    The text of the proposed rule change is available on the Exchange's 
website at 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
    ISE proposes to amend the Exchange's Pricing Schedule at Options 7, 
Section 3, Regular Order Fees and Rebates, to increase the Priority 
Customer \4\ Select Symbol Taker Fee from $0.37 to $0.39 per contract.
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    \4\ A ``Priority Customer'' is a person or entity that is not a 
broker/dealer in securities, and does not place more than 390 orders 
in listed options per day on average during a calendar month for its 
own beneficial account(s), as defined in Nasdaq ISE Options 1, 
Section 1(a)(37). Unless otherwise noted, when used in this Pricing 
Schedule the term ``Priority Customer'' includes ``Retail'' as 
defined below. See Options 7, Section 1(c).
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    Today, the Exchange assesses a Select Symbol Maker Fee of $0.18 per 
contract in regular orders to all Non-Priority Customers.\5\ Priority 
Customers are not assessed a Select Symbol Maker Fee in regular orders. 
Additionally, today, ISE assesses Market Makers \6\ a $0.45 per 
contract Select Symbol Taker Fee in regular orders. Non-Nasdaq ISE 
Market Makers (FarMMs),\7\ Firm Proprietary \8\/Broker Dealers,\9\ and 
Professional Customers \10\ are assessed a $0.46 per contract Select 
Symbol Taker Fee in regular orders. Priority Customers are assessed a 
$0.37 per contract Select Symbol Taker Fee in regular orders.
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    \5\ ``Non-Priority Customers'' include Market Makers, Non-Nasdaq 
ISE Market Makers (FarMMs), Firm Proprietary/Broker-Dealers, and 
Professional Customers. See Options 7, Section 1(c).
    \6\ The term ``Market Makers'' refers to ``Competitive Market 
Makers'' and ``Primary Market Makers'' collectively. See Options 1, 
Section 1(a)(21).
    \7\ A ``Non-Nasdaq ISE Market Maker'' is a market maker as 
defined in Section 3(a)(38) of the Securities Exchange Act of 1934, 
as amended, registered in the same options class on another options 
exchange. See Options 7, Section 1(c).
    \8\ A ``Firm Proprietary'' order is an order submitted by a 
member for its own proprietary account. See Options 7, Section 1(c).
    \9\ A ``Broker-Dealer'' order is an order submitted by a member 
for a broker-dealer account that is not its own proprietary account. 
See Options 7, Section 1(c).
    \10\ A ``Professional Customer'' is a person or entity that is 
not a broker/dealer and is not a Priority Customer. See Options 7, 
Section 1(c).
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    At this time, the Exchange proposes to increase the Priority 
Customer Select Symbol Taker Fee from $0.37 to $0.39 per contract in 
regular orders. While the Exchange is increasing the Priority Customer 
Select Symbol Taker Fee, it will remain the lowest Select Symbol Taker 
Fee assessed by ISE as compared to Select Symbol Taker Fees assessed to 
other market participants.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\11\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\12\ in particular, in that it 
provides for the equitable allocation of reasonable dues, fees, and 
other charges among members and issuers and other persons using any 
facility, and is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange's proposed changes to its Pricing Schedule are 
reasonable in several respects. As a threshold matter, the Exchange is 
subject to significant competitive forces in the market for options 
securities transaction services that constrain its pricing 
determinations in that market. The fact that this market is competitive 
has long been recognized by the courts. In NetCoalition v. Securities 
and Exchange Commission, the D.C. Circuit stated as follows: ``[n]o one 
disputes that competition for order flow is `fierce.' . . . As the SEC 
explained, `[i]n the U.S. national market system, buyers and sellers of 
securities, and the broker-dealers that act as their order-routing 
agents, have a wide range of choices of where to route orders for 
execution'; [and] `no exchange can afford to take its market share 
percentages for granted' because `no exchange possesses a monopoly, 
regulatory or otherwise, in the execution of order flow from broker 
dealers'. . . .'' \13\
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    \13\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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    The Commission and the courts have repeatedly expressed their 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. In Regulation 
NMS, while adopting a series of steps to improve the current market 
model, the Commission highlighted the importance of market forces in 
determining prices and SRO revenues and, also, recognized that current 
regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' \14\
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    \14\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    Numerous indicia demonstrate the competitive nature of this market. 
For example, clear substitutes to the Exchange exist in the market for 
options security transaction services. The Exchange is only one of 
seventeen options exchanges to which market participants may direct 
their order flow. Within this environment, market participants can 
freely and often do shift their order flow among the Exchange and 
competing venues in response to changes in their respective pricing 
schedules. As such, the proposal represents a reasonable attempt by the 
Exchange to increase its liquidity and market share relative to its 
competitors.
    The Exchange's proposal to increase the Priority Customer Select 
Symbol Taker Fee from $0.37 to $0.39 per contract for regular orders is 
reasonable because its taker fees remain competitive and lower than 
other options exchanges.\15\ Further, while the Taker Fee will be 
higher for Priority Customers, the Exchange believes that market 
participants will continue to be incentivized to send Priority Customer 
order flow to ISE because it will remain the lowest Select Symbol Taker 
Fee

[[Page 68009]]

assessed by ISE as compared to Select Symbol Taker Fees assessed to 
other market participants.\16\
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    \15\ For example, Cboe C2 Exchange, Inc. (``C2'') assesses 
Public Customers a $0.43 per contract fee for removing liquidity in 
Penny Classes. See C2 Fee Schedule at: https://www.cboe.com/us/options/membership/fee_schedule/ctwo. In addition, MIAX Emerald, LLC 
(``MIAX Emerald'') assesses Priority Customers a $0.50 per contract 
taker fee in Penny Classes. See MIAX Emerald Fee Schedule at: 
https://www.miaxglobal.com/sites/default/files/fee_schedule-files/MIAX_Emerald_Fee_Schedule_08052024.pdf.
    \16\ Today, ISE assesses Market Makers a $0.45 per contract 
Select Symbol Taker Fee. ISE assesses Non-Nasdaq ISE Market Makers 
(FarMMs), Firm Proprietary/Broker Dealers, and Professional 
Customers a $.46 per contract Select Symbol Taker Fee in regular 
orders.
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    The Exchange's proposal to increase the Priority Customer Select 
Symbol Taker Fee from $0.37 to $0.39 per contract for regular orders is 
equitable and not discriminatory because Priority Customers would 
continue to be assessed the lowest Select Symbol Taker Fee on ISE among 
market participants. Priority Customer liquidity benefits all market 
participants by providing more trading opportunities which attracts 
market makers. An increase in the activity of these market participants 
(particularly in response to pricing) in turn facilitates tighter 
spreads which may cause an additional corresponding increase in order 
flow from other market participants. Attracting more liquidity from 
Priority Customers will benefit all market participants that trade on 
the ISE.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.
    In terms of inter-market competition, the Exchange notes that it 
operates in a highly competitive market in which market participants 
can readily favor competing venues if they deem fee levels at a 
particular venue to be excessive, or rebate opportunities available at 
other venues to be more favorable. In such an environment, the Exchange 
must continually adjust its fees to remain competitive with other 
exchanges. Because competitors are free to modify their own fees in 
response, and because market participants may readily adjust their 
order routing practices, the Exchange believes that the degree to which 
fee changes in this market may impose any burden on competition is 
extremely limited. In sum, if the changes proposed herein are 
unattractive to market participants, it is likely that the Exchange 
will lose market share as a result. Accordingly, the Exchange does not 
believe that the proposed changes will impair the ability of members or 
competing order execution venues to maintain their competitive standing 
in the financial markets.
    In terms of intra-market competition, the Exchange does not believe 
that this proposal will place any category of market participant at a 
competitive disadvantage. The Exchange's proposal to increase the 
Priority Customer Select Symbol Taker Fee from $0.37 to $0.39 per 
contract in regular orders does not impose an undue burden on 
competition because Priority Customers would continue to be assessed 
the lowest Select Symbol Taker Fee on ISE among market participants. 
Priority Customer liquidity benefits all market participants by 
providing more trading opportunities which attracts market makers. An 
increase in the activity of these market participants (particularly in 
response to pricing) in turn facilitates tighter spreads which may 
cause an additional corresponding increase in order flow from other 
market participants. Attracting more liquidity from Priority Customers 
will benefit all market participants that trade on the ISE.

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

    No written comments were either solicited or received.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\17\ At any time within 60 days of the 
filing of the proposed rule change, the Commission summarily may 
temporarily suspend such rule change if it appears to the Commission 
that such action is: (i) necessary or appropriate in the public 
interest; (ii) for the protection of investors; or (iii) otherwise in 
furtherance of the purposes of the Act. If the Commission takes such 
action, the Commission shall institute proceedings to determine whether 
the proposed rule should be approved or disapproved.
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    \17\ 15 U.S.C. 78s(b)(3)(A)(ii).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-ISE-2024-38 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-2024-38. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://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 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-ISE-2024-38 and should be 
submitted on or before September 12, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-18786 Filed 8-21-24; 8:45 am]
BILLING CODE 8011-01-P