[Federal Register Volume 87, Number 167 (Tuesday, August 30, 2022)]
[Notices]
[Pages 53025-53030]
[FR Doc No: 2022-18587]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95590; File No. SR-ISE-2022-16]

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

August 24, 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 August 9, 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 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 Pricing Schedule at
Options 7, as described further below.\3\
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    \3\ The Exchange originally filed SR-ISE-2022-15 on August 1,
2022. On August 9, 2022, the Exchange withdrew SR-ISE-2022-15 and
submitted 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
    The purpose of the proposed rule change is to amend the Exchange's
Pricing Schedule at Options 7. Each change is described below.
Price Improvement Auctions, Options 7, Sections 3 and 6
    Currently, for Regular Orders \4\ in Select \5\ and Non-Select
Symbols,\6\ the Exchange assesses all non-Priority Customer market
participants a Fee for PIM \7\ Orders of $0.10 per contract.\8\
Additionally, today, for Regular Orders in Select Symbols, the Exchange
assesses all market participants a Fee for Responses to PIM Orders of
$0.50 per contract. Finally, today, for Regular Orders in Non-Select
Symbols, the Exchange assesses all market participants a Fee for
Responses to PIM Orders of $1.10 per contract.\9\
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    \4\ A ``Regular Order'' is an order that consists of only a
single option series and is not submitted with a stock leg.
    \5\ ``Select Symbols'' are options overlying all symbols listed
on the Nasdaq ISE that are in the Penny Interval Program. See
Options 7, Section 1(c).
    \6\ ``Non-Select Symbols'' are options overlying all symbols
excluding Select Symbols. See Options 7, Section 1(c).
    \7\ PIM is the Exchange's Price Improvement Auction as described
in Options 3, Section 13. A PIM is comprised of the order the
Electronic Access Member represents as agent (the ``Agency Order'')
and a counter-side order for the full size of the Agency Order (the
``Counter-Side Order''). Responses, including the Counter-Side
Order, and Improvement Orders may be entered during the exposure
period. See Options 3, Section 13.
    \8\ Priority Customers are not assessed a Fee for PIM Orders.
Also, Fees for PIM Orders apply to the originating and contra order.
Further, other than for Priority Customer orders, this fee is $0.05
per contract for orders executed by Members that execute an ADV of
7,500 or more contracts in the PIM in a given month. Members that
execute an ADV of 12,500 or more contracts in the PIM are charged
$0.02 per contract. The discounted fees are applied retroactively to
all eligible PIM volume in that month once the threshold has been
reached. See notes 2 and 13 within the Pricing Schedule at Options
7, Section 3.
    \9\ PIM pricing is specified in Options 7, Section 3, Regular
Order Fees and Rebates.
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    Similar to break-up rebates for the Exchange's Facilitation
Mechanism and Solicited Order Mechanism,\10\ the Exchange proposes to
pay Electronic Access Members \11\ that utilize PIM to execute more
than 0.75% of Priority Customer \12\ volume of Regular Orders,
calculated as a percentage of Customer Total Consolidated Volume
(``TCV'') per day in a given month, a PIM Break-Up Rebate of $0.25 per
contract for Select Symbols and $0.60 per contract for Non-Select
Symbols for Priority Customer Orders under 100 contracts that are
submitted to PIM and do not trade with their contra order except when
those contracts trade against unrelated quotes or orders.\13\
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    \10\ See Options 3, Section 11(b) and (d).
    \11\ The term ``Electronic Access Member'' or ``EAM'' means a
Member that is approved to exercise trading privileges associated
with EAM Rights. See General 1, Section 1(a)(6).
    \12\ 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).
    \13\ The applicable fee would be applied to any contracts for
which a rebate is provided.
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    The Exchange seeks to incentivize Electronic Access Members to
submit a greater amount of smaller, more typically sized Priority
Customer orders into PIM for price improvement with the proposed
pricing. The Exchange believes the 100 contract threshold represents
such small-sized orders.
    Today, the Exchange offers a PIM Rebate within Options 7, Section
6, Other Options Fees and Rebates. Specifically, Options 7, Section 6B
pays a rebate to Electronic Access Members utilizing either the
Facilitation Mechanism or PIM for unsolicited Crossing Orders, whereby
the contra-side party of the Crossing Order (1) is either Firm
Proprietary or Broker-Dealer and (2) has total affiliated Average Daily
Volume (``ADV'') of 250,000 or more contracts. Electronic Access
Members that qualify for this rebate are eligible to earn the following
rebates during a given month:

------------------------------------------------------------------------
                  Originating contract sides                     Rebate
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0 to 199,999.................................................    ($0.02)
200,000 or more..............................................     (0.03)
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    Once a Member reaches or exceeds the volume threshold to qualify
for a $0.03 per originating contract side rebate during a given month,
then the Member will receive the $0.03 per contract rebate for all of
its originating contract sides that qualify for the PIM and
Facilitation Rebate during that month, including for the Member's first

qualifying 0-199,999 originating contract sides. Further, Electronic
Access Members that qualify for the PIM rebates on their unsolicited
Crossing Orders \14\ may also earn additional rebates.\15\
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    \14\ 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 this Pricing Schedule, orders executed in the
Block Order Mechanism are also considered Crossing Orders. See
Options 7, Section 1(c).
    \15\ Members that achieve combined Qualified Contingent Cross
(``QCC'') and Solicitation Originating Contracts Sides of more than
1,000,000 during a given month can earn an additional rebate of
($0.01) per originating contract side on their unsolicited Crossing
Orders that qualify for the PIM and Facilitation Rebate program.
Also, Members that achieve Priority Customer Complex Order ADV of
between 100,000-224,999 contracts can earn an additional rebate of
($0.01) per originating contract side on all of their unsolicited
Crossing Orders that qualify for the PIM and Facilitation Rebate
program; however, this additional rebate will be ($0.02) per
originating contract on all unsolicited Crossing Orders that qualify
for the PIM and Facilitation Rebate Program to the extent that
Members achieve Priority Customer Complex Order ADV of 225,000 or
more contracts. See Options 7, Section 6B.
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    At this time, the Exchange proposes to offer another rebate to
Electronic Access Members that utilize PIM to execute more than 0.75%
of Priority Customer volume in Regular Orders, calculated as a
percentage of Customer TCV per day in a given month. The Exchange
proposes to pay these Electronic Access Members a rebate of $0.11 per
contract for Priority Customer Regular Orders under 100 contracts that
are submitted to PIM. The rebate would be paid to the Agency Order as
that term is defined within Options 3, Section 13. Eligible volume from
Affiliated Members \16\ would be aggregated in calculating the
percentage. Additionally, the Exchange proposes to pay this rebate in
lieu of other PIM rebates within Options 7, Section 6B, provided this
rebate is higher than other rebates within Options 7, Section 6B. In
the event a Crossing Transaction consists of two Priority Customer
Orders, the Exchange would not pay this rebate.
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    \16\ An ``Affiliated Member'' is a Member that shares at least
75% common ownership with a particular Member as reflected on the
Member's Form BD, Schedule A. See Options 7, Section 1(c).
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    As noted above, the Exchange seeks to incentivize Electronic Access
Members to submit a greater amount of smaller sized Priority Customer
orders into PIM for price improvement with the proposed pricing and,
therefore, is proposing to pay the proposed rebate on orders under 100
contracts.
    The Exchange notes that all Electronic Access Members may
participate in a PIM.\17\ Accordingly, the proposed rebates are
designed to incentivize Electronic Access Members to submit a greater
amount of Regular Orders executed in PIM to the Exchange, particularly
Priority Customer PIM volume.
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    \17\ Any solicited Counter-Side Orders submitted by an
Electronic Access Member to trade against Agency Orders may not be
for the account of a Nasdaq ISE Market Maker assigned to the options
class. See Supplementary Material .06 to Options 3, Section 13.
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Priority Customer Complex Order Rebates, Options 7, Section 4
    Currently, the Exchange provides rebates to Priority Customer
complex orders based on the volume that a Member traded as provided for
within Options 7, Section 4, Complex Order Fees and Rebates.
Specifically, the Exchange calculates Total Affiliated Member or
Affiliated Entity \18\ Complex Order Volume (excluding Crossing Orders
and Responses to Crossing Order) as a percentage of Customer TCV to
determine the rebate amount.\19\ The Exchange pays Priority Customer
complex orders rebates based on a ten-tier pricing model. The rebates
for Select Symbols and Non-Select Symbols are paid to Members based on
the percentage of Customer TCV executed in a particular symbol. The
current rebate tiers are as follows:
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    \18\ An ``Affiliated Entity'' is a relationship between an
Appointed Market Maker and an Appointed OFP for purposes of
qualifying for certain pricing specified in the Schedule of Fees.
Market Makers and OFPs are required to send an email to the Exchange
to appoint their counterpart, at least 3 business days prior to the
last day of the month to qualify for the next month. The Exchange
will acknowledge receipt of the emails and specify the date the
Affiliated Entity is eligible for applicable pricing, as specified
in the Pricing Schedule. Each Affiliated Entity relationship will
commence on the 1st of a month and may not be terminated prior to
the end of any month. An Affiliated Entity relationship will
automatically renew each month until or unless either party
terminates earlier in writing by sending an email to the Exchange at
least 3 business days prior to the last day of the month to
terminate for the next month. Affiliated Members may not qualify as
a counterparty comprising an Affiliated Entity. Each Member may
qualify for only one (1) Affiliated Entity relationship at any given
time. See Options 7, Section 1(c).
    \19\ 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 do not receive rebates for
net zero complex orders. For purposes of determining which complex
orders qualify as ``net zero'' the Exchange counts all complex
orders that leg in to 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.
    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 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. See notes 7, 13 and 16 within the Pricing Schedule at
Options 7, Section 4.

                                            Priority Customer Rebates
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                                          Total affiliated member or affiliated
                                         entity complex order volume (excluding
 Priority customer complex tier \(7)\       crossing orders and responses to        Rebate for    Rebate for non-
             \(13)\ \(16)\                  crossing orders) calculated as a          select      select symbols
                                              percentage of customer total         symbols \(1)\    \(1)\ \(4)\
                                                   consolidated volume
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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%-0.450%.....................          (0.35)          (0.70)
Tier 4................................  Above 0.450%-0.750%.....................          (0.40)          (0.75)
Tier 5................................  Above 0.750%-1.000%.....................          (0.45)          (0.80)
Tier 6................................  Above 1.000%-1.350%.....................          (0.47)          (0.80)
Tier 7................................  Above 1.350%-2.000%.....................          (0.48)          (0.80)
Tier 8................................  Above 2.000%-2.750%.....................          (0.52)          (0.85)
Tier 9................................  Above 2.750%-4.500%.....................          (0.52)          (0.86)
Tier 10...............................  Above 4.500%............................          (0.53)          (0.88)
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    The Exchange offers the Priority Customer complex order rebates 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.

    The Exchange proposes to amend the volume requirement for Priority
Customer complex order Tier 7 from the current level of ``above 1.350%-
2.00%'' to ``above 1.350%-1.750%.'' The Exchange also proposes to
adjust Priority Customer complex order Tier 8 from the current level of
``above 2.000%-2.750%'' to ``above 1.750%-2.750%.'' \20\ By lowering
the qualification for Priority Customer complex order Tier 8, which
offers a higher rebate of $0.52 per contract for Select Symbols as
compared to $0.48 per contract for Priority Customer complex order Tier
7 and a higher rebate of $0.85 per contract for Non-Select Symbols as
compared to $0.80 per contract for Priority Customer complex order Tier
7, the Exchange seeks to incentivize Members to continue to bring
Priority Customer complex orders specifically to earn the higher
Priority Customer complex order Tier 8 associated rebates.
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    \20\ Currently no Member qualifies for Priority Customer complex
order Tier 8.
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    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.
Technical Amendments
    The Exchange proposes to make technical amendments to Options 7,
Section 6B to remove the words ``Price Improvement Mechanism'' and the
parenthesis around the word ``PIM'' because this term is already
defined within the term ``Crossing Order'' at Options 7, Section 1(c).
    The Exchange proposes to capitalize the work ``affiliated'' in
Options 7, Section 6B because the term ``Affiliated Member'' is defined
within Options 7, Section 1(c).
    The Exchange proposes to remove the phrase ``provided there is at
least 75% common ownership between the Members as reflected on each
Member's Form BD, Schedule A'' because the term ``Affiliated Member''
is defined in Options 7, Section 1(c) as a Member that shares at least
75% common ownership with a particular Member as reflected on the
Member's Form BD, Schedule A.
    Finally, the Exchange proposes to remove the extra period at the
end of Options 7, Section 6B.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\21\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\22\ 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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    \21\ 15 U.S.C. 78f(b).
    \22\ 15 U.S.C. 78f(b)(4) and (5).
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The Proposal Is Reasonable
    The 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 \23\
(``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' . . . .'' \24\
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    \23\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
    \24\ 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)).
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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 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.
Price Improvement Auctions, Options 7, Sections 3 and 6
    The Exchange's proposal to pay Priority Customer PIM Break-Up
Rebates of $0.25 per contract for Select Symbols and $0.60 per contract
for Non-Select Symbols to Electronic Access Members that utilize PIM to
execute more than 0.75% of Priority Customer volume in Regular Orders,
which would be calculated as a percentage of Customer TCV per day in a
given month, for orders under 100 contracts is reasonable because it is
designed to incentivize additional participation in PIM by encouraging
market participants to send additional order flow to the Exchange in
order to benefit from the increased rebates. In particular, the
Exchange believes that this proposal will incentivize Electronic Access
Members to submit a greater amount of smaller Priority Customer orders
into PIM for price improvement with the proposed pricing. The Exchange
believes it is reasonable to pay the rebate for orders of 100 contracts
or less because the Exchange seeks to incentivize small-sized orders to
be solicited for entry into PIM for price improvement.
    The Exchange's proposal to pay Priority Customer PIM Break-Up
Rebates of $0.25 per contract for Select Symbols and $0.60 per contract
for Non-Select Symbols to Members that utilize PIM to execute more than
0.75% of Priority Customer volume in Regular Orders, which would be
calculated as a percentage of Customer TCV per day in a given month,
for orders under 100 contracts is equitable and not unfairly
discriminatory because any Electronic Access Member may participate in
a PIM.\25\ While only Electronic Access Members may initiate a PIM,
Market Makers may respond to a PIM. While this incentive is
specifically targeted towards Priority Customer orders, the Exchange
does not believe that this is unfairly discriminatory. Of note, today,
Priority Customers pay no Fees for PIM Orders. 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. Also, the 100 contracts
threshold would be uniformly applied in paying the rebate.
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    \25\ Any solicited Counter-Side Orders submitted by an
Electronic Access Member to trade against Agency Orders may not be
for the account of a Nasdaq ISE Market Maker assigned to the options
class. See Supplementary Material .06 to Options 3, Section 13.
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    The Exchange's proposal to offer another rebate for PIM executions
to Electronic Access Members that utilize PIM to execute more than
0.75% of Priority Customer volume in Regular Orders, calculated as a
percentage of Customer TCV per day in a given month, for Priority
Customer Regular Orders executed in PIM under 100 contracts is
reasonable because it is designed to incentivize additional
participation in PIM by encouraging market participants to send
additional order flow to the Exchange in order to benefit from the
increased rebates. In particular, the Exchange believes that this
additional rebate will incentivize Electronic Access Members to submit
a greater amount of smaller-sized orders to be solicited for entry into
PIM for price improvement. Aggregating volume from Affiliated Members
in calculating the percentage will allow Electronic Access Members to
obtain greater rebates and, thereby, should attract additional Priority
Customer order flow to the Exchange. Not paying the $0.11 per contract
rebate in the event a Crossing Transaction consists of two Priority
Customer Orders is reasonable because Priority Customers pay no fees
for PIM.
    The Exchange's proposal to offer another rebate for PIM executions
to Electronic Access Members that utilize PIM to execute more than
0.75% of Priority Customer volume in Regular Orders, calculated as a
percentage of Customer TCV per day in a given month, for Priority
Customer Regular Orders executed in PIM under 100 contracts is
equitable and not unfairly discriminatory because any Electronic Access
Member may enter orders into PIM.\26\ While only Electronic Access
Members may initiate a PIM, the Exchange notes that Market Makers may
respond to a PIM. While this incentive is specifically targeted towards
Priority Customer orders, the Exchange does not believe that this is
unfairly discriminatory. Of note, today, Priority Customers pay no Fees
for PIM Orders. 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. Also, the 100 contracts threshold would be uniformly applied
in paying the rebate. All Electronic Access Members may aggregate
volume from Affiliated Members to receive the rebate. It is not novel
to limit a rebate by contract size. For example, ISE currently pays a
reduced complex order rebate in Select Symbols where the largest leg of
the Complex Order is under fifty (50) contracts and trades with quotes
and orders on the Regular Order book.\27\ Additionally, Cboe Exchange,
Inc. (``Cboe'') has a similar concept of limiting certain fee
incentives in its Fees Schedule for smaller sized customer orders.\28\
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    \26\ Any solicited Counter-Side Orders submitted by an
Electronic Access Member to trade against Agency Orders may not be
for the account of a Nasdaq ISE Market Maker assigned to the options
class. See Supplementary Material .06 to Options 3, Section 13.
    \27\ ISE's rebate is paid per contract per leg if the order
trades with non-Priority Customer orders in the Complex Order Book.
This rebate is reduced by $0.15 per contract in Select Symbols where
the largest leg of the Complex Order is under fifty (50) contracts
and trades with quotes and orders on the Regular Order book.
Further, no Priority Customer Complex Order rebates are provided in
Select Symbols if any leg of the order that trades with interest on
the Regular Order book is fifty (50) contracts or more. Also, no
Priority Customer Complex Order rebates are provided in Non-Select
Symbols if any leg of the order trades with interest on the Regular
Order book, irrespective of order size. See note 1 of ISE Options 7,
Section 4.
    \28\ See Cboe Fees Schedule at footnote 9. Cboe waives
transaction fees for customer orders removing liquidity that are of
99 contracts or less in ETF and ETN options.
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Priority Customer Complex Order Rebates, Options 7, Section 4
    The Exchange's proposal to amend the volume requirement for
Priority Customer complex order Tier 7 from the current level of
``above 1.350%-2.00%'' to ``above 1.350%-1.750%'' and amend Priority
Customer complex order Tier 8 from the current level of ``above 2.000%-
2.750%'' to ``above 1.750%-2.750%'' is reasonable because by lowering
the qualification for Priority Customer complex order Tier 8, which
offers a higher rebate of $0.52 per contract for Select Symbols as
compared to $0.48 per contract for Priority Customer complex order Tier
7 and a higher rebate of $0.85 per contract for Non-Select Symbols as
compared to $0.80 per contract for Priority Customer complex order Tier
7, the Exchange seeks to incentivize Members to continue to bring
Priority Customer complex orders specifically to earn the higher
Priority Customer complex order Tier 8 associated rebates.\29\ The
ability to earn a higher rebate as a result of the lower volume
requirement is intended to further incentivize Members to bring
additional complex order flow, including Priority Customer complex
order flow, to the Exchange. The proposed changes are designed to make
the rebates more achievable and attractive to existing and potential
market participants. 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, continues 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.
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    \29\ Currently no Member qualifies for Priority Customer complex
order Tier 8.
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    The Exchange's proposal to amend the volume requirement for
Priority Customer complex order Tier 7 from the current level of
``above 1.350%-2.00%'' to ``above 1.350%-1.750%'' and amend Priority
Customer complex order Tier 8 from the current level of ``above 2.000%-
2.750%'' to ``above 1.750%-2.750%'' is equitable and not unfairly
discriminatory because any Member who brings complex order flow to the
Exchange may qualify for the rebates. The Exchange believes that the
proposed changes to Priority Customer complex order Tiers 7 and 8 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 by the Exchange. Accordingly,
the Exchange believes that the changes to Priority Customer complex
order Tiers 7 and 8 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. Further, 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.
Technical Amendments
    The technical amendments proposed herein are non-substantive
because these amendments remove redundant defined terms, capitalize a
defined term, and correct a grammatical error.

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.
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 because other options exchanges offer similar
price improvement auctions as well as break-up rebates and customer
complex order rebates.
    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.
Intramarket Competition
    The proposal is designed to attract additional liquidity to ISE.
Specifically, amending the Priority Customer complex order rebates and
adopting two new PIM rebates will incentivize market participants to
direct liquidity to the Exchange. All market participants will benefit
from any increase in market activity that the proposal effectuates.
Price Improvement Auctions, Options 7, Sections 3 and 6
    The Exchange's proposal to pay Priority Customer PIM Break-Up
Rebates within Options 7, Section 3, and offer another rebate for PIM
executions within Options 7, Section 6B, do not impose an undue burden
on competition because any Electronic Access Member may enter orders
into PIM.\30\ While only Electronic Access Members may initiate a PIM,
the Exchange does not believe that this creates an undue burden on
competition because Market Makers may respond to a PIM. While this
incentive is specifically targeted towards Priority Customer orders,
the Exchange does not believe that this is unfairly discriminatory.
Today, Priority Customers pay no fees for PIM Orders. 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.
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    \30\ Any solicited Counter-Side Orders submitted by an
Electronic Access Member to trade against Agency Orders may not be
for the account of a Nasdaq ISE Market Maker assigned to the options
class. See Supplementary Material .06 to Options 3, Section 13.
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Priority Customer Complex Order Rebates, Options 7, Section 4
    The Exchange's proposal to amend the volume requirement for
Priority Customer complex order Tier 7 from the current level of
``above 1.350%-2.00%'' to ``above 1.350%-1.750%'' and amend Priority
Customer complex order Tier 8 from the current level of ``above 2.000%-
2.750%'' to ``above 1.750%-2.750%'' does not impose an undue burden on
competition because it will not place any category of Exchange
participant at a competitive disadvantage. Any Member who brings
complex order flow to the Exchange may qualify for the rebates. 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 by the
Exchange. Further, any Member may choose to qualify for the rebate
program by sending complex order flow to the Exchange.
Technical Amendments
    The technical amendments proposed herein are non-substantive
because these amendments remove redundant defined terms, capitalize a
defined term, and correct a grammatical error.

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 \31\ and Rule 19b-4(f)(2) \32\ 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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    \31\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \32\ 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-2022-16 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-2022-16. 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-2022-16 and should be
submitted on or before September 20, 2022.
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    \33\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\33\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-18587 Filed 8-29-22; 8:45 am]
BILLING CODE 8011-01-P