Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Assess Fees for OTTO Port, CTI Port, FIX Port, FIX Drop Port and Disaster Recovery Port Connectivity
Citation: "83 FR 4086"
Document Number: "Release No. 34-82568; File No. SR-ISE-2018-07"
Page Number: "4086"
"Notices"
January 23, 2018.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 ("Act"), /1/ and Rule 19b-4 thereunder, /2/ notice is hereby given that on
FOOTNOTE 1 15 U.S.C. 78s(b)(1). END FOOTNOTE
FOOTNOTE 2 17 CFR 240.19b-4. END FOOTNOTE
I.
The Exchange proposes to amend the Schedule of Fees to assess fees for OTTO Port, CTI Port, FIX Port, FIX Drop Port and Disaster Recovery Port connectivity. The text of the proposed rule change is available on the Exchange's website at www.ise.com, at the principal office of the Exchange, and at the
II.
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.
1. Purpose
The purpose of the proposed rule change is to amend the Schedule of Fees /3/ to assess fees for OTTO /4/ Port, CTI /5/ Port, FIX /6/ Port, FIX Drop /7/ Port and Disaster Recovery Port /8/ connectivity. The Exchange has completed the migration of the Exchange's trading system to the Nasdaq INET architecture. /9/ This migration included the adoption of new connectivity, including OTTO, CTI, FIX, FIX Drop, and Disaster Recovery Ports, which are the same as connectivity options currently used to connect to the Exchange's affiliate options markets, including
FOOTNOTE 3 The Exchange initially filed the proposed pricing changes on
FOOTNOTE 4 OTTO is an interface that allows market participants to connect and send orders, auction orders and auction responses into ISE. Data includes the following: (1) Options Auction Notifications (e.g., Flash, PIM, Solicitation and Facilitation or other information); (2) Options Symbol Directory Messages; (3) System Event Messages (e.g., start of messages, start of system hours, start of quoting, start of opening); (5) Option Trading Action Messages (e.g., halts, resumes); (6) Execution Messages; (7) Order Messages (order messages, risk protection triggers or purge notifications). END FOOTNOTE
FOOTNOTE 5 CTI is a real-time clearing trade update is a message that is sent to a member after an execution has occurred and contains trade details. The message containing the trade details is also simultaneously sent to
FOOTNOTE 6 FIX is an interface that allows market participants to connect and send orders and auction orders into ISE. Data includes the following: (1) Options Symbol Directory Messages; (2) System Event Messages (e.g., start of messages, start of system hours, start of quoting, start of opening); (3) Option Trading Action Messages (e.g., halts, resumes); (4) Execution Messages; (5) Order Messages (order messages, risk protection triggers or purge notifications). END FOOTNOTE
FOOTNOTE 7 FIX Drop is a real-time order and execution update is a message that is sent to a member after an order been received/modified or an execution has occurred and contains trade details. The information includes, among other things, the following: (1) Executions; (2) cancellations; (3) modifications to an existing order; (4) busts or post-trade corrections. END FOOTNOTE
FOOTNOTE 8 Disaster Recovery Ports provide connectivity to the Exchange's disaster recovery data center in
FOOTNOTE 9 See Securities Exchange Act Release No. 80432 (
FOOTNOTE 10 See Nasdaq Option Rules, Chapter XV Options Pricing, Sec. 3 Nasdaq Options Market--Ports and other Services; BX Option Rules, Chapter XV Options Pricing, Sec. 3 BX Options Market--Ports and other Services; Nasdaq GEMX Schedule of Fees Section IV.E.3; and Phlx Pricing Schedule, VII. Other Member Fees,
FOOTNOTE 11 See Securities Exchange Release No. 81095 (
The Exchange is proposing to amend the Nasdaq ISE Schedule of Fees Section V.D. to assess a fee of
FOOTNOTE 12 A mnemonic is a unique identifier assigned to a member consisting of a four character code. A member may be assigned multiple mnemonics, which are used to segregate a member's order flow based on its business and regulatory needs. Every mnemonic must be affiliated with an account number held by the member. Account numbers are numeric codes used to identify members and the default clearing information through which all order flow affiliated with that account number will clear. A member may be assigned multiple account numbers. END FOOTNOTE
FOOTNOTE 13 An account number may have multiple mnemonics affiliated with it. See id. END FOOTNOTE
FOOTNOTE 14 See Nasdaq GEMX Schedule of Fees Section IV.E.3. END FOOTNOTE
FOOTNOTE 15 Supra note 12. END FOOTNOTE
FOOTNOTE 16 See, e.g., Nasdaq Options Rules, Chapter XV Options Pricing, Section 3(b) (billing per port, per month, per mnemonic). END FOOTNOTE
FOOTNOTE 17 The Exchange notes that service bureaus, some of which are not members of the Exchange, may subscribe to the connectivity under the rule on behalf of a member. The member retains responsibility for the port and is billed directly for the connectivity. All members that use a service bureau must first execute an agreement with the Exchange and the service bureau that establishes the relationship between the member, service bureau and Exchange. END FOOTNOTE
FOOTNOTE 18 GEMX applies a fee cap of
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section 6(b) of the Act, /19/ in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act, /20/ 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.
FOOTNOTE 19 15 U.S.C. 78f(b). END FOOTNOTE
FOOTNOTE 20 15 U.S.C. 78f(b)(4) and (5). END FOOTNOTE
The Exchange believes that the proposed fees are reasonable because they are similar to the fees assessed by other exchanges. As noted above, Nasdaq, BX, GEMX and Phlx provide some or all of the same connectivity options as is provided by ISE. For example, GEMX assesses
FOOTNOTE 21 The GEMX Disaster Recovery Ports fee may result in a higher charge per member than the proposed ISE Disaster Recovery Ports fee because it is assessed by account number. Thus, the greater number of accounts assigned to such a port would result in a greater overall fee, whereas it would have no effect on the fee assessed for such ports under the proposed ISE fee. END FOOTNOTE
FOOTNOTE 22 See Rule 7015(g)(2). END FOOTNOTE
FOOTNOTE 23 The fee cap also applies to CTI, FIX, FIX Drop and Disaster Recovery Ports. GEMX applies its
FOOTNOTE 24 The Exchange notes that BX does not have OTTO Ports. See BX Option Rules, Chapter XV Options Pricing, Sec. 3 BX Options Market--Ports and other Services. END FOOTNOTE
The Exchange believes that the proposed fees are an equitable allocation and are not unfairly discriminatory because the Exchange must ultimately assess fees to cover the costs associated with offering the connectivity. The Exchange notes that members have historically paid fees for Exchange connectivity and, in adopting the connectivity for which the Exchange is proposing to assess a fee, it noted that it was not adopting a fee at that time to avoid being double charged for connectivity to the old Exchange architecture and the new Nasdaq INET architecture. Now that members no longer have connectivity to the old Exchange architecture, and therefore are not assessed connectivity fees, the Exchange is now proposing to assess fees for connectivity to the new Nasdaq INET architecture of the Exchange. The Exchange notes that the proposed fees are equal to or less than the comparable fees assessed by Nasdaq, BX, Phlx, and GEMX. The Exchange believes that applying different measures (i.e., account number or mnemonic) for assessing fees is an equitable allocation and is not unfairly discriminatory because members choose how many account numbers and mnemonics they have and members subscribing to the ports covered by the rule may associate as many account numbers and mnemonics they choose. Thus, members have control over their fee liability. Moreover, the Exchange must make an independent assessment of what the appropriate measure is for assessing fees based on factors such as the number of members and the costs associated with offering connectivity. In this case, the Exchange has also considered the fees historically paid by its membership for connectivity in determining what the fees should be for new connectivity. The Exchange believes that the fees are reflective of these considerations because, by using different measures in assessing the port fees together with the proposed fee cap, the Exchange attempted to make the new fees as similar to the historical fees paid by subscribers as possible. As a consequence, the proposed change is the least impactful overall to members. For these reasons, the Exchange believes that the proposed fees are an equitable allocation and are not unfairly discriminatory.
B.
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 and with alternative trading systems that have been exempted from compliance with the statutory standards applicable to exchanges. Because competitors are free to modify their own fees in response, and because market participants may connect to third parties instead of directly connecting to the Exchange, the Exchange believes that the degree to which fee changes in this market may impose any burden on competition is extremely limited.
In this instance, the proposed changes to the charges assessed for connectivity to the Exchange are consistent with the fees assessed by other exchanges for the same or similar connectivity. The Exchange must assess fees to cover the costs incurred in providing connectivity and members had been assessed fees for Exchange connectivity prior to the sunset of the old Exchange architecture. The Exchange considered the historical fees paid by subscribers to the Exchange's connectivity and set the proposed fees at a level that it determined would be as similar to the historical fees paid by members for similar connectivity. As a consequence, competition will not be burdened by the proposed fees. In sum, if the changes proposed herein are unattractive to market participants, it is likely that the Exchange will see a decrease in subscribership to ports and possibly 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.
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. /25/ 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.
FOOTNOTE 25 15 U.S.C. 78s(b)(3)(A)(ii). END FOOTNOTE
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
Electronic Comments
* Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
* Send an email to [email protected]. Please include File Number SR-ISE-2018-07 on the subject line.
Paper Comments
* Send paper comments in triplicate to Secretary,
All submissions should refer to File Number SR-ISE-2018-07. 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
For the Commission, by the
FOOTNOTE 26 17 CFR 200.30-3(a)(12). END FOOTNOTE
Assistant Secretary.
[FR Doc. 2018-01535 Filed 1-26-18;
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