
[Federal Register Volume 84, Number 26 (Thursday, February 7, 2019)]
[Notices]
[Pages 2611-2616]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-01382]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85025; File No. SR-ISE-2018-102]


Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Amend the 
Exchange's Provisions for Excluding a Day From its Pricing Tier 
Calculations

February 1, 2019.
    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 December 21, 2018, Nasdaq ISE, LLC (``ISE'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``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 provisions for 
excluding a day from its pricing tier calculations.
    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 
provisions for excluding a day from its pricing tier calculations. 
First, the Exchange is standardizing its practice for removing a day 
from volume calculations in its Pricing Schedule with its affiliated 
options market, Nasdaq PHLX LLC (``Phlx'').\3\ Second, the Exchange is 
making similar changes to its rule for removing a day from Market Maker 
Plus tiers. Each change is discussed below.
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    \3\ See Phlx Pricing Schedule, Options 7, Section 1(b). The 
Exchange's other affiliated options markets, Nasdaq GEMX, Nasdaq 
MRX, Nasdaq BX, and The Nasdaq Options Market will also file similar 
rule change proposals to conform to Phlx's rule.
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Background

    To avoid penalizing members when aberrant low volume days result 
from systems or other issues at the Exchange, or where the Exchange 
closes early for holiday observance, the Exchange currently has 
language in its Pricing Schedule allowing it to exclude certain days 
from its average daily volume

[[Page 2612]]

(``ADV'') calculations. Currently, Section 1 of the Exchange's Pricing 
Schedule provides that any day that the market is not open for the 
entire trading day or the Exchange instructs members in writing to 
route their orders to other markets may be excluded from the ADV 
calculation; provided that the Exchange will only remove the day for 
members that would have a lower ADV with the day included. The proviso 
language in Section 1 (hereinafter, the ``better of rule'') ensures 
that members would only have the day removed when doing so is 
beneficial for the member. As such, the Exchange only applies the 
better of rule to ADV calculations, and not for other volume-based 
pricing where members would not benefit from having the day excluded 
(e.g., straight volume accumulations).
    In addition, the Exchange operates a Market Maker Plus program that 
provides tiered rebates to Market Makers in Select Symbols based on 
time spent quoting at the National Best Bid or National Best Offer 
(``NBBO''). Market Maker Plus is designed to reward Market Makers that 
make quality markets. As provided in Section 3, note 5, Market Makers 
are evaluated each trading day for the percentage of time spent on the 
NBBO for qualifying series that expire in two successive thirty 
calendar day periods beginning on that trading day.\4\ A Market Maker 
Plus is a Market Maker who is on the NBBO a specified percentage of the 
time on average for the month based on daily performance in the 
qualifying series for each of the two successive periods described 
above.\5\ Similar to the treatment described above for ADV 
calculations, the Exchange is also allowed to exclude any day that the 
market is not open for the entire trading day or the Exchange instructs 
members in writing to route their orders to other markets from its 
Market Maker Plus tier calculations; provided that the Exchange will 
only remove the day for members that would have a lower time at the 
NBBO for the specified series with the day included. Unlike ADV 
calculations, however, the Exchange does not use this authority to 
exclude days where the Exchange closes early for holiday observance 
because the Exchange desires to incentivize Market Makers to continue 
making quality markets where the Exchange is not experiencing an 
unanticipated event and merely closes early for holiday observance.
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    \4\ Qualifying series are series trading between $0.03 and $3.00 
(for options whose underlying stock's previous trading day's last 
sale price was less than or equal to $100) and between $0.10 and 
$3.00 (for options whose underlying stock's previous trading day's 
last sale price was greater than $100) in premium. If a Market Maker 
would qualify for a different Market Maker Plus tier in each of the 
two successive periods described above, then the lower of the two 
Market Maker Plus tier rebates shall apply to all contracts.
    \5\ Market Makers may enter quotes in a symbol using one or more 
unique, exchange assigned identifiers--i.e., badge/suffix 
combinations. Market Maker Plus status is calculated independently 
based on quotes entered in a symbol for each of the Market Maker's 
badge/suffix combinations, and the highest tier achieved for any 
badge/suffix combination quoting that symbol applies to executions 
across all badge/suffix combinations that the member uses to trade 
in that symbol. A Market Maker's worst quoting day each month for 
each of the two successive periods described above, on a per symbol 
basis, will be excluded in calculating whether a Market Maker 
qualifies for this rebate.
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Proposal
    In Options 7, Section 1, the Exchange proposes to renumber the 
first paragraph as subsection (a) with the title ``Removal of Days for 
Purposes of Pricing Tiers,'' and renumber the second paragraph in 
Section 1 (relating to fee disputes) as subsection (b). The Exchange 
also proposes to adopt language in subsection (a) to replace current 
rule text for excluding days with language that is substantially 
similar to language currently in place on Phlx,\6\ and have this 
language apply to volume tier calculations.\7\ Specifically, as 
proposed:
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    \6\ See note 3 above.
    \7\ As discussed further below, Market Maker Plus tiers, which 
are based on quoting (time spent at the NBBO) and not on executed 
volume, will continue to be set forth separately in Section 3 of the 
Exchange's Pricing Schedule. Phlx does not have a similar quoting-
based program, and all of its pricing tiers are volume-based 
calculations.
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    (1)(A) Any day that the Exchange announces in advance that it will 
not be open for trading will be excluded from the options tier 
calculations set forth in its Pricing Schedule; and (B) any day with a 
scheduled early market close (``Scheduled Early Close'') may be 
excluded from the options volume tier calculations only pursuant to 
paragraph (3) below.
    (2) The Exchange may exclude the following days (``Unanticipated 
Events'') from the options volume tier calculations only pursuant to 
paragraph (3) below, specifically any day that: (A) The market is not 
open for the entire trading day, (B) the Exchange instructs members in 
writing to route their orders to other markets, (C) the Exchange is 
inaccessible to members during the 30-minute period before the opening 
of trade due to an Exchange system disruption, or (D) the Exchange's 
system experiences a disruption that lasts for more than 60 minutes 
during regular trading hours.
    (3) If a day is to be excluded as a result of paragraph (1)(B) or 
(2) above, the Exchange will exclude the day from any member's monthly 
options volume tier calculations as follows:
    (A) The Exchange may exclude from the ADV calculation any Scheduled 
Early Close or Unanticipated Event; or
    (B) the Exchange may exclude from any other applicable options 
volume tier calculation provided for in its Pricing Schedule (together 
with (3)(A), ``Volume Tier Calculations'') any Scheduled Early Close or 
Unanticipated Event.

provided, in each case, that the Exchange will only remove the day for 
members that would have a lower Volume Tier Calculation with the day 
included.
    The proposed language would: (i) Expand upon the existing scenarios 
where the Exchange may remove a day to adopt two additional situations 
related to Exchange systems disruptions, (ii) categorize the potential 
excluded days into days that are known in advance (i.e., days in 
proposed paragraph (1), including Scheduled Early Closes) and days that 
are not (i.e., Unanticipated Events in proposed paragraph (2)), (iii) 
clarify how the potential excluded days proposed above would be removed 
from the ADV and other applicable volume based tier calculations in the 
Pricing Schedule, and (iv) generally add more detail to clarify the 
application of the better of rule.
    In connection with the changes to Section 1(a), the Exchange 
proposes in Section 3, note 5 to similarly expand the scope of the 
current rule for excluding days from the Market Maker Plus tier 
calculation such that the Exchange would be allowed to exclude the two 
additional Exchange systems disruption-related scenarios described 
above. Specifically, the current language would be replaced with the 
following: ``The Exchange may exclude from any member's monthly Market 
Maker Plus tier calculation any Unanticipated Event; provided that the 
Exchange will only remove the day for members that would have a lower 
time at the NBBO for the specified series with the day included.'' The 
proposed language for Market Maker Plus would continue to not exclude 
days where the Exchange closes early for holiday observance, which 
would now be categorized as a Scheduled Early Close under this 
proposal.
    As it relates to Unanticipated Events, the Exchange will inform all 
members if any such day will be excluded from its Volume Tier 
Calculations and Market Maker Plus tier calculations through a

[[Page 2613]]

system status message disseminated to all members. The Exchange notes 
that it is not proposing to amend the thresholds a member must achieve 
to become eligible for, or the dollar amount associated with, the 
tiered rebates or fees.
Exchange Systems Disruptions
    The Exchange proposes to adopt two additional scenarios as 
``Unanticipated Events'' that the Exchange may determine to exclude 
from its Volume Tier Calculations. First, the Exchange proposes to 
exclude days where the Exchange is inaccessible to members during the 
30-minute period before the opening of trade (i.e., between 9:00 a.m. 
to 9:30 a.m. Eastern Time) due to an Exchange system disruption, even 
if the Exchange does not instruct members to route away to other 
markets. As discussed above, the Exchange's current ability to remove 
days is limited to days where the market is not open for the entire 
trading day, and where the Exchange instructs members to route away to 
other markets. This allows the Exchange to exclude days, for example, 
where the Exchange honors a market-wide trading halt declared by 
another market, closes early for holiday observance, or instructs 
members to route away to other markets because of a systems issue in 
the morning, which ultimately does not carry over into the trading day. 
The Exchange notes, however, that it may not always instruct members to 
route away. For instance, the Exchange may be inaccessible to members 
in the morning due to a systems disruption but the Exchange resolves 
the issue shortly before 9:30 a.m. and as a result, the Exchange does 
not instruct members to route away. In such cases, the Exchange is not 
permitted to exclude the day from its ADV calculations. The Exchange 
generally experiences a high volume of member participation within the 
30-minute window leading up to the opening of trade from members who 
submit eligible interest \8\ be included in the Exchange's opening 
process. As a result, days where members are precluded from submitting 
eligible interest during this 30-minute time period due to an Exchange 
systems disruption, even if the issue is ultimately resolved by the 
Exchange before the market opens (and members therefore are not 
instructed to route away), are likely to have lower member 
participation. Including such days in calculations of ADV will 
therefore make it more difficult for members to achieve particular 
pricing tiers for that month. Accordingly, excluding such days will 
diminish the likelihood of a cost increase occurring because a member 
is not able to reach a pricing tier on that date that it would reach on 
other trading days during the month. Phlx currently has identical 
language allowing it to remove such days from its volume based 
tiers.\9\
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    \8\ Eligible interest includes quotes and orders. See Rule 
701(b).
    \9\ See note 3 above at paragraph 2(C).
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    Second, the Exchange proposes to exclude days where there is an 
Exchange system disruption that lasts for more than 60 minutes during 
regular trading hours (i.e., 9:30 a.m. to 4:00 p.m. Eastern Time), even 
if such disruption would not be categorized as a complete outage of the 
Exchange's system. Such a disruption may occur where a certain options 
series traded on the Exchange is unavailable for trading due to an 
Exchange systems issue, or where the Exchange may be able to perform 
certain functions with respect to accepting and processing orders, but 
may have a failure to another significant process, such as routing to 
other market centers, that would lead members who rely on such 
processes to avoid using the Exchange until the Exchange's entire 
system was operational. The Exchange believes that certain system 
disruptions that are not complete system outages could preclude some 
members from sending order flow to the Exchange. The Exchange notes 
that this proposal is consistent with the rules of Phlx and other 
options exchanges.\10\
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    \10\ See note 3 above at paragraph 2(D). See also BATS [sic] BZX 
Options Exchange Fee Schedule (defining an ``Exchange System 
Disruption'' as any day that the exchange's system experiences a 
disruption that lasts for more than 60 minutes during regular 
trading hours); and NYSE Arca Options Fee Schedule (defining an 
``Exchange System Disruption'' as a disruption affects an Exchange 
system that lasts for more than 60 minutes during regular trading 
hours).
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    The Exchange believes that the two scenarios proposed above are 
reasonable and equitable because the intent of the current rule has 
always been to avoid penalizing members that might otherwise qualify 
for certain tiered pricing but that because of aberrant low volume days 
resulting, for instance, from Exchange systems disruptions, did not 
participate on the Exchange to the extent they might have otherwise 
participated.
    In addition, to avoid penalizing members that step up and trade on 
a day with artificially low volume, the Exchange currently only removes 
days for members that would have a lower ADV calculation with the day 
included (i.e., the better of rule). The Exchange believes that 
applying the better of rule to the proposed system disruption-related 
scenarios would be similarly helpful as it would ensure that members 
that continue to execute a large volume of contracts on such days are 
not inadvertently disadvantaged when the Exchange removes a systems 
disruption-related day from its calculations of ADV. This is consistent 
with the treatment of such days on Phlx.\11\
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    \11\ See note 3 above at paragraph 3.
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Categories of Excluded Days
    Similar to Phlx, the Exchange seeks to restructure the existing 
rule by separating out the different scenarios between days that are 
known in paragraph (1) and days that are not in paragraph (2), and 
define the latter as Unanticipated Events.
    For planned days, the Exchange proposes to further distinguish 
between days that the Exchange announces in advance that it will not be 
open for trading in paragraph (1)(A) (e.g., Thanksgiving), and 
Scheduled Early Closes in paragraph (1)(B) (e.g., the trading day after 
Thanksgiving). The Exchange notes that it currently considers Scheduled 
Early Closes as a subset of days that the market is not open for the 
entire trading day. The Exchange believes it would be more clear to 
distinguish Scheduled Early Closes in paragraph (1) as a day that is 
planned for in advance, and separately consider days that are not open 
for the entire trading day as Unanticipated Events in paragraph (2)(A). 
As proposed, (2)(A) would continue to cover unplanned days where the 
Exchange declares a trading halt in all securities or honors a market-
wide trading halt declared by another market. The other scenarios that 
will be categorized as Unanticipated Events in paragraph (2) are the 
two systems-related disruptions proposed above, and days that the 
Exchange instructs members in writing to route their orders to other 
markets, which is an existing scenario covered under the current rule 
as described above.
Exclusion of Days by Volume Tier Calculation
    The Exchange proposes to further amend the existing rule to align 
with the Phlx rule by specifying how the days in paragraphs (1) and (2) 
will be excluded from its Volume Tier Calculations. As it relates to 
days where the Exchange announces in advance that it will not be open 
for trading, the Exchange notes that it will exclude those days from 
all options tier calculations set forth in its

[[Page 2614]]

Pricing Schedule.\12\ This is also the case today since no trading 
activity occurs on those days, and the Exchange is only clarifying its 
current practice within the proposed rule text in paragraph (1)(A).
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    \12\ See id. at paragraph (1)(A) for similar language on Phlx.
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    As discussed above, the Exchange currently removes Scheduled Early 
Closes as provided in paragraph (1)(B), and the Unanticipated Events in 
paragraphs (2)(A) and (2)(B), from its calculations of ADV only for 
members that would have a lower ADV with the day included. The Exchange 
is not changing how it currently excludes these days from the ADV 
calculations. And as further discussed above, the Exchange is proposing 
to adopt the same principle-based approach for excluding the two 
Unanticipated Events related to Exchange system disruptions as provided 
in paragraphs (2)(C) and (2)(D). Accordingly, the proposed language in 
paragraph (3)(A) will clarify for the ADV calculation that the Exchange 
may exclude any Scheduled Early Close or Unanticipated Event, subject 
to the better of rule.\13\
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    \13\ See id. at paragraph (3)(A) for similar language on Phlx.
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    Similar to Phlx, the proposal also adds a ``catch-all'' provision 
in paragraph (3)(B) that would apply to other applicable Volume Tier 
Calculations that are set forth in its Pricing Schedule, but are not 
specified within paragraph (3)(A) (i.e., not an ADV calculation).\14\ 
This catch-all provision will provide the Exchange with flexibility to 
apply the better of rule going forward to all pricing programs 
administered by the Exchange that are based on volume calculations. The 
Exchange believes that adopting a similar principle-based approach for 
its options volume calculations would ensure that days are removed from 
such calculations only if doing so would be beneficial for the member. 
Accordingly, the proposed language will not apply to straight volume 
accumulations, as is the case today, and the Exchange will continue to 
not exclude days from such calculations as members do not benefit when 
volume executed on an excluded day is removed from straight volume 
accumulations.
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    \14\ See id. at paragraph (3)(C) for similar language on Phlx.
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Clarifying Changes
    The Exchange proposes to add further details similar to Phlx's rule 
to bring greater transparency as to how the Exchange will apply the 
better of rule when removing days from its Volume Tier Calculations. In 
particular, the Exchange proposes to make clear that it will only 
remove days pursuant to the better of rule by specifying in paragraphs 
(1)(B) and (2) that such days may be excluded from the Volume Tier 
Calculations only pursuant to paragraph (3).\15\ Paragraph (3) will 
then provide that if a day is to be excluded as a result of paragraph 
(1)(B) or (2), the Exchange will be required to exclude the day from 
any member's monthly options volume tier calculations as detailed 
within paragraph (3).\16\ With the proposed changes, the Exchange seeks 
to clarify that it will exclude days from any member's Volume Tier 
Calculations in a uniform manner to ensure that days are removed only 
in situations where the member benefits. The Exchange will look at each 
potential excluded day in a month and determine for every member their 
ADV or other applicable volume calculation based on their trading 
volume on that day. If any member would have a lower Volume Tier 
Calculation with the particular day included, the Exchange will exclude 
that day for that member. This is how the Exchange applies the better 
of rule today for ADV calculations. As such, the proposed changes are 
intended to make clear that the Exchange will apply the better of rule 
in a uniform manner for all members, and that there is no arbitrary 
selection of ``winners'' or ``losers'' when the Exchange excludes days. 
In addition, the Exchange proposes to make two technical changes within 
the better of rule; first, to clarify that the rule applies in each 
case of the tier calculations specified in paragraph (3), and second, 
to use the defined term Volume Tier Calculations instead of ADV to 
reflect the changes proposed herein.
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    \15\ See id. at paragraphs (1)(B) and (2) for similar language 
on Phlx.
    \16\ See id. at paragraph (3) for similar language on Phlx.
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Market Maker Plus
    In light of the foregoing proposal in Section 1(a), the Exchange 
proposes in Section 3, note 5 to make corresponding changes to the 
current rule for excluding days from the Market Maker Plus tier 
calculation. Specifically, the proposed rule text will expand upon the 
existing scenarios to encompass the two systems-related disruptions 
proposed above such that the Exchange would be permitted to exclude 
these Unanticipated Events from its calculations of Market Maker Plus 
tiers. As is the case today, the Exchange would only be permitted to 
remove such days in situations where the member benefits. Similar to 
the treatment described above for the Volume Tier Calculations, the 
Exchange likewise believes that it is appropriate to remove the two 
proposed systems-related disruptions from the Market Maker Plus 
calculation to avoid penalizing Market Makers on days that the Exchange 
is experiencing an unforeseen issue. Unlike the proposed rule for 
Volume Tier Calculations, however, the proposed rule for Market Maker 
Plus tier calculations will continue to include known events, such as 
days where the Exchange closes early for holiday observance, in the 
Market Maker Plus calculation to continue incentivizing Market Makers 
to make quality markets on such days. As is true of the existing 
scenarios that may be excluded today, the Exchange believes that 
permitting the exclusion for the two Exchange systems disruption-
related scenarios will provide flexibility to Market Makers in 
anticipating where to send order flow. The Exchange desires to 
incentivize Market Makers to send order flow to ISE to meet their tier 
requirements in this manner, and further believes that it is 
appropriate to incentivize Market Makers to continue making quality 
markets where the Exchange is not experiencing an unforeseen issue and 
merely closes early for a known event for which they can plan in 
advance.
    Finally, the proposed language will specify that Unanticipated 
Events may be excluded from any member's monthly Market Maker Plus tier 
calculation for the same reasons discussed above for Volume Tier 
Calculations. The Exchange similarly seeks to make clear that it will 
apply the better of rule in a uniform manner for all members who 
qualify for Market Maker Plus, and that there is no arbitrary selection 
of ``winners'' or ``losers'' when days are excluded from a member's 
calculation of Market Maker Plus tiers.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\17\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\18\ 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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    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed rule change is reasonable 
and equitable as it provides a new

[[Page 2615]]

framework for removing days from the Exchange's volume calculations 
that the Exchange believes is beneficial to members and consistent with 
similar provisions already in place on Phlx, except for the differences 
discussed above to account for Market Maker Plus. The proposed rule 
change would permit the Exchange to remove a day from its pricing tiers 
in more circumstances, and ensures that the Exchange will only do so in 
circumstances where beneficial for the member because the member would 
have a lower volume calculation or lower time at the NBBO with the day 
included.
    The Exchange believes it is reasonable and equitable to exclude a 
day from its Volume Tier Calculations when the Exchange's system 
experiences a disruption during the 30-minute period prior to the 
opening of trade that renders the Exchange inaccessible to members as 
this preserves the Exchange's intent behind adopting tiered pricing. 
Without this change, members that are precluded from submitting 
eligible interest during the 30-minute window before the opening of 
trade may be negatively impacted, even if the Exchange resolves the 
issue before the market opens and as a result, does not instruct 
members to route away. The proposed change to exclude such days will 
diminish the likelihood of a cost increase occurring because a member 
is not able to reach a pricing tier on that date that it would reach on 
other trading days during the month.
    Similarly, excluding a day where the Exchange's system experiences 
a disruption that lasts for more than 60 minutes intra-day is 
reasonable and equitable because the proposal seeks to avoid penalizing 
members that might otherwise qualify for certain tiered pricing but 
that, because of an Exchange systems disruption, did not participate on 
the Exchange to the extent they might have otherwise participated. The 
Exchange believes that certain systems disruptions could preclude some 
members from sending order flow to the Exchange even if such issue is 
not actually a complete systems outage.
    In addition, the Exchange believes that it is reasonable and 
equitable to apply the better of rule to both systems disruption-
related scenarios. Without these changes, members that step up and 
trade significant volume on excluded trading days may be negatively 
impacted, resulting in an effective cost increase for those members. 
The proposal would align the Exchange's approach to how it applies this 
rule today for days where the market is not open for the entire trading 
day or where the Exchange instructs members to route away.
    Furthermore, the Exchange believes that categorizing the potential 
excluded days is reasonable and equitable because it will bring greater 
transparency to the application of its rule. Specifically, the Exchange 
is distinguishing between planned and unplanned days in paragraphs (1) 
and (2), defining the latter as Unanticipated Events, and stipulating 
how the Exchange will exclude such days pursuant to this rule. 
Categorizing days in this manner will clarify the application of its 
rule in light of the Exchange's proposal to expand the rule to adopt 
additional days that may be excluded from its tier calculations. 
Providing in paragraph (1)(A) that the Exchange will always exclude 
from its tier calculations days that it announces in advance it will 
not be open for trading will clarify current practice. Furthermore, the 
Exchange believes that the proposed changes to specify how days in 
paragraphs (1) and (2) may be excluded from its tier calculations will 
bring greater transparency by delineating the various circumstances in 
which the better of rule will apply. Providing in paragraph (3) that 
the Exchange may exclude any Scheduled Early Close or Unanticipated 
Event from the ADV and other Volume Tier Calculations, subject to the 
better of rule, will make clear that the Exchange will take a 
consistent approach when excluding days for purposes of its volume 
based pricing tiers. In addition, having a catch-all in paragraph 
(3)(B) so that the better of rule applies to other options volume 
calculations than ADV to allow the Exchange to apply the rule going 
forward to all pricing programs based on volume calculations will 
further protect members. The Exchange notes that aberrant low volume 
days resulting from, for instance, an Unanticipated Event, impacts all 
volume calculations, and allowing the Exchange to exclude such days 
from any Volume Tier Calculation if the member would have a lower 
calculation with the day included will further protect members from 
being inadvertently penalized.
    Furthermore, the proposed changes specifying that the days in 
paragraphs (1)(B) and (2) may be excluded only pursuant to paragraph 
(3), and requiring the Exchange to exclude such days pursuant to the 
specifications in paragraph (3) will likewise make clear that the 
Exchange will take a consistent approach with respect to excluding days 
from its Volume Tier Calculations. As discussed above, these 
modifications will clarify that the Exchange will apply the better of 
rule in a uniform manner to all members, and that there is no arbitrary 
selection of ``winners'' or ``losers.'' The Exchange also believes that 
the two technical changes proposed in the better of rule to reflect the 
changes proposed herein will likewise bring greater clarity to its 
rule. Furthermore, the Exchange believes that the proposed language for 
Volume Tier Calculations is not unfairly discriminatory because it 
applies equally to all members and volume calculations.
    The Exchange also believes that the proposed language for Market 
Maker Plus is reasonable and equitable since it would allow the 
Exchange to remove a day from its Market Maker Plus tier calculations 
in similar circumstances as the Exchange proposes for its Volume Tier 
Calculations, and only when beneficial for the Market Maker. The 
Exchange believes that the proposed language is appropriate as it 
avoids penalizing Market Makers on days where the Exchange is 
experiencing a systems disruption. Without this change, Market Makers 
that are wary of participation on the Exchange following such issues 
could fall into a lower Market Maker Plus tier, resulting in an 
effective cost increase for those members. As discussed above, the 
proposed language will continue to include known events, such as days 
where the Exchange closes early for holiday observance, in the Market 
Maker Plus calculation. The Exchange desires to incentivize Market 
Makers to send order flow to ISE to meet their tier requirements, and 
further believes that it is appropriate to incentivize Market Makers to 
continue making quality markets where the Exchange is not experiencing 
an issue and merely closes early for a known event. While Market Makers 
can plan for known events, they are unable to plan for events such as 
the proposed Exchange systems disruption-related scenarios, which may 
preclude Market Maker participation for that day. The Exchange 
therefore believes that permitting the exclusion for these 
Unanticipated Events will provide flexibility to Market Makers in 
anticipating where to send order flow. The Exchange further believes 
that the proposed changes to specify that Unanticipated Events may be 
excluded from any member's monthly Market Maker Plus tier calculation 
will bring greater transparency to the Exchange's rules by making clear 
that the Exchange will apply the better of rule in a uniform manner for 
all Market Makers, and that there is no arbitrary selection of 
``winners'' or ``losers'' when days are

[[Page 2616]]

excluded from a member's calculation of Market Maker Plus tiers.
    Finally, the Exchange believes that the proposed language for 
Market Maker Plus tier calculations is not unfairly discriminatory as 
all Market Makers have the ability to qualify for Market Maker Plus by 
making quality markets on the Exchange, and can therefore benefit from 
the proposed changes.

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. The proposed rule change is 
designed to protect members from the possibility of a cost increase by 
excluding days when overall member participation might be significantly 
lower than a typical trading day. The Exchange believes that the 
proposed modifications to its tier calculations are pro-competitive and 
will result in lower total costs to end users, a positive outcome of 
competitive markets. Furthermore, other options exchanges have adopted 
rules that are substantially similar to the Exchange's proposal.\19\
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    \19\ See notes 3 and 10 above.
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    The Exchange operates in a highly competitive market in which 
market participants can readily direct their order flow to competing 
venues. In such an environment, the Exchange must continually review, 
and consider adjusting, its fees and rebates to remain competitive with 
other exchanges. For the reasons described above, the Exchange believes 
that the proposed fee changes reflect this competitive environment.

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\ 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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    \20\ 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 (http://www.sec.gov/rules/sro.shtml); or

     Send an email to rule-comments@sec.gov. Please include 
File Number SR-ISE-2018-102 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-2018-102. 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-2018-102 and should be submitted on 
or before February 22, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-01382 Filed 2-6-19; 8:45 am]
 BILLING CODE 8011-01-P


