Self-Regulatory Organizations; International Securities Exchange, LLC; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To Amend Rule 804(g), 11305-11307 [2016-04637]
Download as PDF
Federal Register / Vol. 81, No. 42 / Thursday, March 3, 2016 / Notices
Stratton Real Estate Fund, Inc. [811–
02240]
Summary: Applicant seeks an order
declaring that it has ceased to be an
investment company. Applicant
transferred its assets to Sterling Capital
Stratton Real Estate Fund and, on
November 13, 2015, made a final
distribution to its shareholders based on
net asset value. Total expenses of
$541,000 incurred by Stratton Mid Cap
Value Fund, Inc., Stratton Funds, Inc.,
and Stratton Real Estate Fund, Inc. in
connection with their reorganizations
were paid by applicant’s investment
adviser.
Filing Dates: The application was
filed on January 20, 2016, and amended
on February 5, 2016.
Applicant’s Address: 150 South
Warner Road, Suite 460–A, King of
Prussia, PA 19406.
Arden Sage Triton Fund, L.L.C. [File
No. 811–21472]; Arden Sage MultiStrategy TEI Institutional Fund, L.L.C.
[File No. 811–22225]; Arden Sage MultiStrategy Institutional Fund, L.L.C. [File
No. 811–22224]; Arden Sage MultiStrategy Fund, L.L.C. [File No. 811–
21778]
Summary: Applicants, closed-end
investment companies and feeder funds
in a master/feeder structure, seek an
order declaring that they have each
ceased to be an investment company.
On February 4, 2016, the master fund in
which each applicant invested
transferred its remaining assets to a
liquidating trust, based on net asset
value. Each applicant’s investors
received cash and a pro rata interest in
the liquidating trust based on the
number of each applicant’s units owned
by the investor. Expenses of $7,000
incurred by each applicant in
connection with the liquidations were
paid by applicants’ investment adviser.
Filing Dates: The applications were
filed on February 10, 2016, and
amended on February 19, 2016 and
February 24, 2016.
Applicant’s Address: 375 Park
Avenue, 32nd Floor, New York, NY
10152.
mstockstill on DSK4VPTVN1PROD with NOTICES
Arden Sage Multi-Strategy Master
Fund, L.L.C. [File No. 811–22223]
Summary: Applicant, a closed-end
investment company and master fund in
a master/feeder structure, seeks an order
declaring that it has ceased to be an
investment company. On February 4,
2016, applicant transferred its
remaining assets to a liquidating trust,
based on net asset value. Each of
applicant’s feeder funds received a pro
rata interest in the liquidating trust,
VerDate Sep<11>2014
19:17 Mar 02, 2016
Jkt 238001
which was distributed to the
shareholders of each of the feeder funds.
Expenses of $21,667 incurred in
connection with the liquidation were
paid by applicant’s investment adviser.
Filing Dates: The application was
filed on February 19, 2016, and
amended on February 24, 2016.
Applicant’s Address: 375 Park
Avenue, 32nd Floor, New York, NY
10152.
Lincoln Advisors Trust [File No. 811–
22583]
Summary: Applicant seeks an order
declaring that it has ceased to be an
investment company. On December 15,
2015, applicant made a liquidating
distribution to its shareholders, based
on net asset value. Expenses of
approximately $489 incurred in
connection with the liquidation were
paid by applicant’s investment adviser.
Filing Date: The application was filed
on February 19, 2016.
Applicant’s Address: 1300 South
Clinton Street, Fort Wayne, IN 46802.
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–04639 Filed 3–2–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77246; File No. SR–ISE–
2015–30]
Self-Regulatory Organizations;
International Securities Exchange,
LLC; Order Instituting Proceedings To
Determine Whether To Approve or
Disapprove a Proposed Rule Change
To Amend Rule 804(g)
February 26, 2016.
I. Introduction
On November 10, 2015, the
International Securities Exchange, LLC
(‘‘ISE’’ or the ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’), pursuant to
Section 19(b)(1) of the Securities
Exchange Act of 1934 (the ‘‘Act’’) 1 and
Rule 19b–4 thereunder,2 a proposed rule
change to require Clearing Member 3
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 A ‘‘Clearing Member’’ is a Member that is selfclearing or an Electronic Access Member that clears
transactions executed on or through the facilities of
the Exchange for other Members of the Exchange.
See ISE Rule 100(a)(8). An ‘‘Electronic Access
Member’’ is an Exchange Member that is approved
to exercise trading privileges associated with EAM
2 17
PO 00000
Frm 00133
Fmt 4703
Sfmt 4703
11305
approval for a market maker to resume
trading after the activation of a marketwide speed bump under ISE Rule
804(g). The proposed rule change was
published for comment in the Federal
Register on November 30, 2015.4 On
January 13, 2016, the Commission
extended the time period within which
to approve the proposed rule change,
disapprove the proposed rule change, or
institute proceedings to determine
whether to disapprove the proposed
rule change to February 28, 2016.5 The
Commission did not receive any
comments on the proposed rule change.
This order institutes proceedings under
Section 19(b)(2)(B) of the Act 6 to
determine whether to approve or
disapprove the proposed rule change.
II. Description of the Proposal
Pursuant to ISE Rule 804(g)(1), the
Exchange requires market makers 7 to
provide parameters according to which
the Exchange will automatically remove
a market maker’s quotations in all series
of an options class. Additionally, the
Exchange requires market makers to
provide a market-wide parameter
according to which the Exchange will
automatically remove a market maker’s
quotes in all classes when, during a time
period established by the market maker,
the total number of quote removal
events (or ‘‘curtailment events’’)
specified in Rule 804(g)(1) and in
Supplementary Material .04 to Rule 722
exceed such specified market-wide
parameter.8 The latter market-wide risk
management functionality is known as a
‘‘market-wide speed bump’’ and is
available for quotes only on ISE or
across both ISE and ISE’s affiliated
exchange, ISE Gemini, LLC.9
Currently, if ISE’s trading system
removes all of a market maker’s quotes
because a market-wide speed bump is
triggered, the market maker may re-enter
the market and resume trading upon
notification to the Exchange’s Market
Operations.10 The Exchange now
proposes to amend ISE Rule 804(g)(2) to
require Clearing Member approval
Rights. See Article XIII, Section 13.1(l) of the
Second Amended and Restated Constitution of ISE.
4 See Securities Exchange Act Release No. 76506
(November 23, 2015), 80 FR 74829 (November 30,
2015) (‘‘Notice’’).
5 See Securities Exchange Act Release No. 76893
(January 13, 2016), 81 FR 3217 (January 20, 2016).
6 15 U.S.C. 78s(b)(2)(B).
7 ISE has two categories of market makers:
Primary Market Makers (‘‘PMMs’’) and Competitive
Market Makers (‘‘CMMs’’). A PMM is appointed to
each options class traded on the Exchange but a
CMM may or may not be appointed to each such
options class. See ISE Rule 802.
8 See ISE Rule 804(g)(2).
9 Id.
10 See Notice, supra note 4, at 74830.
E:\FR\FM\03MRN1.SGM
03MRN1
11306
Federal Register / Vol. 81, No. 42 / Thursday, March 3, 2016 / Notices
before a market maker can resume
trading.11 Specifically, following a
market-wide speed bump, the proposed
rule requires a market maker to notify
its Clearing Member(s) when it is ready
to resume trading and requires each
applicable Clearing Member to inform
the Exchange directly when its
authorization has been given for the
market maker to resume trading.12 In
order to ‘‘facilitate a better response
time’’ from Clearing Members, so that a
market maker can re-enter the market,
the proposal also allows Exchange staff
to notify Clearing Member(s) when a
market maker’s quotes have been
removed pursuant to the market-wide
speed bump.13
The Exchange believes that it is
appropriate to require Clearing Member
approval before a market maker can reenter the market after a market-wide
speed bump because the Clearing
Member guarantees the market maker’s
trades and bears the ultimate financial
risk associated with those transactions.
The Exchange notes that, while not all
market makers are Clearing Members,
all market makers require a Clearing
Member’s consent to clear transactions
on their behalf in order to conduct
business on the Exchange.14 According
to the Exchange, the proposed rule
change will permit Clearing Members to
better monitor and manage the potential
risks assumed by a market maker and
provide Clearing Members with greater
control and flexibility over their risk
tolerance and exposure.15
III. Proceedings To Determine Whether
To Approve or Disapprove SR–ISE–
2015–30 and Grounds for Disapproval
Under Consideration
The Commission is instituting
proceedings pursuant to Section
19(b)(2)(B) of the Act 16 to determine
whether the proposed rule change
11 See
proposed Rule 804(g)(2).
id.
13 See id.
14 Each market maker authorized to trade on the
Exchange must obtain from a Clearing Member a
‘‘Market Maker Letter of Guarantee’’ wherein the
Clearing Member accepts financial responsibility
for all Exchange transactions made by the market
maker. See ISE Rule 808.
15 See Notice, supra note 4, at 74830. Under ISE’s
current rules, the Exchange may share any Memberdesignated risk settings in the trading system with
the Clearing Member that clears transactions on
behalf of the Member. See ISE Rule 706(a).
16 15 U.S.C. 78s(b)(2)(B). Section 19(b)(2)(B) of the
Act also provides that proceedings to determine
whether to disapprove a proposed rule change must
be concluded within 180 days of the date of
publication of notice of the filing of the proposed
rule change. See id. The time for conclusion of the
proceedings may be extended for up to 60 days if
the Commission finds good cause for such
extension and publishes its reasons for so finding.
See id.
mstockstill on DSK4VPTVN1PROD with NOTICES
12 See
VerDate Sep<11>2014
19:17 Mar 02, 2016
Jkt 238001
should be approved or disapproved.
Institution of such proceedings is
appropriate at this time in view of the
legal and policy issues raised by the
proposed rule change, as discussed
below. Institution of proceedings does
not indicate that the Commission has
reached any conclusions with respect to
any of the issues involved. Rather, as
described in greater detail below, the
Commission seeks and encourages
interested persons to provide additional
comment on the proposed rule change.
Pursuant to Section 19(b)(2)(B) of the
Act, the Commission is providing notice
of the grounds for disapproval under
consideration. The Commission is
instituting proceedings because the
proposal raises important issues that
warrant further public comment and
Commission consideration. Specifically,
the Commission is instituting
proceedings to allow for additional
analysis of, and input from commenters
with respect to, the proposed rule
change’s consistency with Section
6(b)(5) of the Act,17 which requires that
the rules of a national securities
exchange be designed, among other
things, to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system and, in general, to protect
investors and the public interest.
Under ISE’s current rules, a market
maker must enter continuous quotations
for the options classes to which it is
appointed.18 In return, the market maker
receives certain benefits, including
participation entitlements 19 and an
exception from the prohibition in
Section 11(a) of the Act.20 As the
Commission has stated in the past, a
market maker must be subject to
sufficient and commensurate affirmative
obligations, including the obligation to
hold itself out as willing to buy and sell
options for its own account on a regular
or continuous basis, to justify favorable
treatment.21 As discussed above,
however, the Exchange now proposes to
17 15
U.S.C. 78f(b)(5).
ISE Rule 804(e).
19 See, e.g., ISE Rule 713.
20 15 U.S.C. 78k(a).
21 See, e.g., Securities Exchange Act Release No.
68341 (December 3, 2012), 77 FR 73065, 73076
(December 7, 2012) (approving the application of
Miami International Securities Exchange, LLC for
registration as a national securities exchange);
Securities Exchange Act Release No. 70050 (July 26,
2013), 78 FR 46622 (August 1, 2013) (approving the
application of Topaz Exchange, LLC for registration
as a national securities exchange); Securities
Exchange Act Release No. 76998 (January 29, 2016),
81 FR 6066 (February 4, 2016) (approving the
application of ISE Mercury, LLC for registration as
a national securities exchange).
18 See
PO 00000
Frm 00134
Fmt 4703
Sfmt 4703
amend ISE Rule 804(g) to require
Clearing Member approval before a
market maker can resume trading after
triggering a market-wide speed bump.
The Exchange justifies the change as
appropriate because, ‘‘[w]hile in some
cases this may result in a minimal delay
for a market maker that wants to reenter
the market quickly following a marketwide speed bump, the Exchange
believes that Clearing Member approval
. . . ensure[s] that the market maker
does not prematurely enter the market
without adequate safeguards . . .’’22
The Exchange, however, does not
provide any basis for its statement that
the proposed rule would result in only
a ‘‘minimal delay’’ for a market maker
seeking to resume quoting. Moreover,
the Exchange does not address how the
proposal impacts the continuous
quoting obligations of market makers.
The Commission accordingly believes
the proposed rule change raises
questions regarding the ability of market
makers to meet their quoting obligations
and, therefore, whether the proposed
rule change is consistent with the
requirements of Section 6(b)(5) of the
Act.
IV. Procedure: Request for Written
Comments
The Commission requests that
interested persons provide written
submissions of their views, data and
arguments with respect to the concerns
identified above, as well as any other
concerns they may have with the
proposed rule change. In particular, the
Commission invites the written views of
interested persons concerning whether
the proposal is consistent with Sections
6(b)(5)23 or any other provision of the
Act, or the rules and regulations
thereunder. Although there does not
appear to be any issue relevant to
approval or disapproval which would
be facilitated by an oral presentation of
views, data, and arguments, the
Commission will consider, pursuant to
Rule 19b–4 under the Act,24 any request
for an opportunity to make an oral
presentation.25
Interested persons are invited to
submit written data, views, and
arguments regarding whether the
22 See
Notice, supra note 4, at 74830.
U.S.C. 78f(b)(5).
24 17 CFR 240.19b–4.
25 Section 19(b)(2) of the Act, as amended by the
Securities Act Amendments of 1975, Pub. L. 94–29
(June 4, 1975), grants to the Commission flexibility
to determine what type of proceeding—either oral
or notice and opportunity for written comments—
is appropriate for consideration of a particular
proposal by a self-regulatory organization. See
Securities Act Amendments of 1975, Senate Comm.
on Banking, Housing & Urban Affairs, S. Rep. No.
75, 94th Cong., 1st Sess. 30 (1975).
23 15
E:\FR\FM\03MRN1.SGM
03MRN1
Federal Register / Vol. 81, No. 42 / Thursday, March 3, 2016 / Notices
proposal should be approved or
disapproved by March 24, 2016. Any
person who wishes to file a rebuttal to
any other person’s submission must file
that rebuttal by April 7, 2016. In light
of the concerns raised by the proposed
rule change, as discussed above, the
Commission invites additional comment
on the proposed rule change as the
Commission continues its analysis of
the proposed rule change’s consistency
with Sections 6(b)(5) and 6(b)(8),26 or
any other provision of the Act, or the
rules and regulations thereunder. The
Commission asks that commenters
address the sufficiency and merit of the
Exchange’s statements in support of the
proposed rule change, in addition to any
other comments they may wish to
submit about the proposed rule change.
Comments may be submitted by any
of the following methods:
mstockstill on DSK4VPTVN1PROD with NOTICES
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
ISE–2015–30 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–2015–30. 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 Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site 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;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–ISE–
2015–30 and should be submitted by
March 24, 2016. Rebuttal comments
should be submitted by April 7, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.27
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–04637 Filed 3–2–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77245; File No. SR–Phlx–
2016–23]
Self-Regulatory Organizations;
NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Adopt a Kill
Switch
February 26, 2016.
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 February
16, 2016, NASDAQ OMX PHLX LLC
(‘‘Phlx’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I, II,
and III, below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
The Exchange proposes to relocate
language in current Rule 1035, entitled
‘‘Acceptable of Bid or Offer’’ [sic] to
Phlx Rule 1019 and adopt an optional
Kill Switch protection. The Kill Switch
will allow Phlx members to remove
quotes and cancel open orders and
prevent new order submission.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://
nasdaqomxphlx.cchwallstreet.com/, at
the principal office of the Exchange, and
at the Commission’s Public Reference
Room.
27 17
CFR 200.30–3(a)(57).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
26 15
U.S.C. 78f(b)(5), (b)(8).
VerDate Sep<11>2014
19:17 Mar 02, 2016
Jkt 238001
PO 00000
Frm 00135
Fmt 4703
Sfmt 4703
11307
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 Exchange proposes to adopt a
new risk protection, a Kill Switch,
applicable to all Phlx members and
member organizations (hereinafter
‘‘member(s)’’). The Kill Switch will
allow Phlx members to remove quotes
and cancel open orders and prevent new
order submission. This feature provides
firms with a powerful risk management
tool for immediate control of their quote
and order activity.
The Exchange proposes to relocate
current Rule 1035, entitled ‘‘Acceptable
of Bid or Offer’’ [sic] to currently
reserved Rule 1019, title revised Rule
1019 ‘‘Acceptance of Bid or Offer,’’ and
add a new section (b) to Rule 1019. The
Phlx Options Kill Switch will be an
optional tool that enables Phlx members
to initiate a message(s) 3 to the Phlx XL
system (‘‘System’’) to: (i) Promptly
remove quotes; and/or (ii) promptly
cancel orders. Phlx members may
submit a request to the System to
remove/cancel quotes and/or orders
based on certain identifiers on either a
user or group level. Phlx members may
elect to remove quotes and cancel orders
by Exchange account, port, and/or badge
or mnemonic (‘‘Identifier’’) or by a
group (one or more Identifier
combinations),4 which are provided by
such Phlx member to the Exchange.
Phlx members may not remove quotes/
orders by symbol. The System will send
an automated message to the Phlx
member when a Kill Switch request has
3 Phlx members will be able to utilize an interface
to send a message to the Exchange to initiate the
Kill Switch or they may contact the Exchange
directly.
4 The type of group permissible would be within
a broker-dealer. For example, this could be
including but not limited to all market maker
accounts or all order entry ports.
E:\FR\FM\03MRN1.SGM
03MRN1
Agencies
[Federal Register Volume 81, Number 42 (Thursday, March 3, 2016)]
[Notices]
[Pages 11305-11307]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-04637]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-77246; File No. SR-ISE-2015-30]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Order Instituting Proceedings To Determine Whether To Approve or
Disapprove a Proposed Rule Change To Amend Rule 804(g)
February 26, 2016.
I. Introduction
On November 10, 2015, the International Securities Exchange, LLC
(``ISE'' or the ``Exchange'') filed with the Securities and Exchange
Commission (the ``Commission''), pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the ``Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to require Clearing Member \3\
approval for a market maker to resume trading after the activation of a
market-wide speed bump under ISE Rule 804(g). The proposed rule change
was published for comment in the Federal Register on November 30,
2015.\4\ On January 13, 2016, the Commission extended the time period
within which to approve the proposed rule change, disapprove the
proposed rule change, or institute proceedings to determine whether to
disapprove the proposed rule change to February 28, 2016.\5\ The
Commission did not receive any comments on the proposed rule change.
This order institutes proceedings under Section 19(b)(2)(B) of the Act
\6\ to determine whether to approve or disapprove the proposed rule
change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ A ``Clearing Member'' is a Member that is self-clearing or
an Electronic Access Member that clears transactions executed on or
through the facilities of the Exchange for other Members of the
Exchange. See ISE Rule 100(a)(8). An ``Electronic Access Member'' is
an Exchange Member that is approved to exercise trading privileges
associated with EAM Rights. See Article XIII, Section 13.1(l) of the
Second Amended and Restated Constitution of ISE.
\4\ See Securities Exchange Act Release No. 76506 (November 23,
2015), 80 FR 74829 (November 30, 2015) (``Notice'').
\5\ See Securities Exchange Act Release No. 76893 (January 13,
2016), 81 FR 3217 (January 20, 2016).
\6\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
II. Description of the Proposal
Pursuant to ISE Rule 804(g)(1), the Exchange requires market makers
\7\ to provide parameters according to which the Exchange will
automatically remove a market maker's quotations in all series of an
options class. Additionally, the Exchange requires market makers to
provide a market-wide parameter according to which the Exchange will
automatically remove a market maker's quotes in all classes when,
during a time period established by the market maker, the total number
of quote removal events (or ``curtailment events'') specified in Rule
804(g)(1) and in Supplementary Material .04 to Rule 722 exceed such
specified market-wide parameter.\8\ The latter market-wide risk
management functionality is known as a ``market-wide speed bump'' and
is available for quotes only on ISE or across both ISE and ISE's
affiliated exchange, ISE Gemini, LLC.\9\
---------------------------------------------------------------------------
\7\ ISE has two categories of market makers: Primary Market
Makers (``PMMs'') and Competitive Market Makers (``CMMs''). A PMM is
appointed to each options class traded on the Exchange but a CMM may
or may not be appointed to each such options class. See ISE Rule
802.
\8\ See ISE Rule 804(g)(2).
\9\ Id.
---------------------------------------------------------------------------
Currently, if ISE's trading system removes all of a market maker's
quotes because a market-wide speed bump is triggered, the market maker
may re-enter the market and resume trading upon notification to the
Exchange's Market Operations.\10\ The Exchange now proposes to amend
ISE Rule 804(g)(2) to require Clearing Member approval
[[Page 11306]]
before a market maker can resume trading.\11\ Specifically, following a
market-wide speed bump, the proposed rule requires a market maker to
notify its Clearing Member(s) when it is ready to resume trading and
requires each applicable Clearing Member to inform the Exchange
directly when its authorization has been given for the market maker to
resume trading.\12\ In order to ``facilitate a better response time''
from Clearing Members, so that a market maker can re-enter the market,
the proposal also allows Exchange staff to notify Clearing Member(s)
when a market maker's quotes have been removed pursuant to the market-
wide speed bump.\13\
---------------------------------------------------------------------------
\10\ See Notice, supra note 4, at 74830.
\11\ See proposed Rule 804(g)(2).
\12\ See id.
\13\ See id.
---------------------------------------------------------------------------
The Exchange believes that it is appropriate to require Clearing
Member approval before a market maker can re-enter the market after a
market-wide speed bump because the Clearing Member guarantees the
market maker's trades and bears the ultimate financial risk associated
with those transactions. The Exchange notes that, while not all market
makers are Clearing Members, all market makers require a Clearing
Member's consent to clear transactions on their behalf in order to
conduct business on the Exchange.\14\ According to the Exchange, the
proposed rule change will permit Clearing Members to better monitor and
manage the potential risks assumed by a market maker and provide
Clearing Members with greater control and flexibility over their risk
tolerance and exposure.\15\
---------------------------------------------------------------------------
\14\ Each market maker authorized to trade on the Exchange must
obtain from a Clearing Member a ``Market Maker Letter of Guarantee''
wherein the Clearing Member accepts financial responsibility for all
Exchange transactions made by the market maker. See ISE Rule 808.
\15\ See Notice, supra note 4, at 74830. Under ISE's current
rules, the Exchange may share any Member-designated risk settings in
the trading system with the Clearing Member that clears transactions
on behalf of the Member. See ISE Rule 706(a).
---------------------------------------------------------------------------
III. Proceedings To Determine Whether To Approve or Disapprove SR-ISE-
2015-30 and Grounds for Disapproval Under Consideration
The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Act \16\ to determine whether the proposed rule
change should be approved or disapproved. Institution of such
proceedings is appropriate at this time in view of the legal and policy
issues raised by the proposed rule change, as discussed below.
Institution of proceedings does not indicate that the Commission has
reached any conclusions with respect to any of the issues involved.
Rather, as described in greater detail below, the Commission seeks and
encourages interested persons to provide additional comment on the
proposed rule change.
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78s(b)(2)(B). Section 19(b)(2)(B) of the Act also
provides that proceedings to determine whether to disapprove a
proposed rule change must be concluded within 180 days of the date
of publication of notice of the filing of the proposed rule change.
See id. The time for conclusion of the proceedings may be extended
for up to 60 days if the Commission finds good cause for such
extension and publishes its reasons for so finding. See id.
---------------------------------------------------------------------------
Pursuant to Section 19(b)(2)(B) of the Act, the Commission is
providing notice of the grounds for disapproval under consideration.
The Commission is instituting proceedings because the proposal raises
important issues that warrant further public comment and Commission
consideration. Specifically, the Commission is instituting proceedings
to allow for additional analysis of, and input from commenters with
respect to, the proposed rule change's consistency with Section 6(b)(5)
of the Act,\17\ which requires that the rules of a national securities
exchange be designed, among other things, to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to remove impediments to and perfect the mechanism
of a free and open market and a national market system and, in general,
to protect investors and the public interest.
---------------------------------------------------------------------------
\17\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
Under ISE's current rules, a market maker must enter continuous
quotations for the options classes to which it is appointed.\18\ In
return, the market maker receives certain benefits, including
participation entitlements \19\ and an exception from the prohibition
in Section 11(a) of the Act.\20\ As the Commission has stated in the
past, a market maker must be subject to sufficient and commensurate
affirmative obligations, including the obligation to hold itself out as
willing to buy and sell options for its own account on a regular or
continuous basis, to justify favorable treatment.\21\ As discussed
above, however, the Exchange now proposes to amend ISE Rule 804(g) to
require Clearing Member approval before a market maker can resume
trading after triggering a market-wide speed bump.
---------------------------------------------------------------------------
\18\ See ISE Rule 804(e).
\19\ See, e.g., ISE Rule 713.
\20\ 15 U.S.C. 78k(a).
\21\ See, e.g., Securities Exchange Act Release No. 68341
(December 3, 2012), 77 FR 73065, 73076 (December 7, 2012) (approving
the application of Miami International Securities Exchange, LLC for
registration as a national securities exchange); Securities Exchange
Act Release No. 70050 (July 26, 2013), 78 FR 46622 (August 1, 2013)
(approving the application of Topaz Exchange, LLC for registration
as a national securities exchange); Securities Exchange Act Release
No. 76998 (January 29, 2016), 81 FR 6066 (February 4, 2016)
(approving the application of ISE Mercury, LLC for registration as a
national securities exchange).
---------------------------------------------------------------------------
The Exchange justifies the change as appropriate because, ``[w]hile
in some cases this may result in a minimal delay for a market maker
that wants to reenter the market quickly following a market-wide speed
bump, the Exchange believes that Clearing Member approval . . .
ensure[s] that the market maker does not prematurely enter the market
without adequate safeguards . . .''\22\ The Exchange, however, does not
provide any basis for its statement that the proposed rule would result
in only a ``minimal delay'' for a market maker seeking to resume
quoting. Moreover, the Exchange does not address how the proposal
impacts the continuous quoting obligations of market makers. The
Commission accordingly believes the proposed rule change raises
questions regarding the ability of market makers to meet their quoting
obligations and, therefore, whether the proposed rule change is
consistent with the requirements of Section 6(b)(5) of the Act.
---------------------------------------------------------------------------
\22\ See Notice, supra note 4, at 74830.
---------------------------------------------------------------------------
IV. Procedure: Request for Written Comments
The Commission requests that interested persons provide written
submissions of their views, data and arguments with respect to the
concerns identified above, as well as any other concerns they may have
with the proposed rule change. In particular, the Commission invites
the written views of interested persons concerning whether the proposal
is consistent with Sections 6(b)(5)\23\ or any other provision of the
Act, or the rules and regulations thereunder. Although there does not
appear to be any issue relevant to approval or disapproval which would
be facilitated by an oral presentation of views, data, and arguments,
the Commission will consider, pursuant to Rule 19b-4 under the Act,\24\
any request for an opportunity to make an oral presentation.\25\
---------------------------------------------------------------------------
\23\ 15 U.S.C. 78f(b)(5).
\24\ 17 CFR 240.19b-4.
\25\ Section 19(b)(2) of the Act, as amended by the Securities
Act Amendments of 1975, Pub. L. 94-29 (June 4, 1975), grants to the
Commission flexibility to determine what type of proceeding--either
oral or notice and opportunity for written comments--is appropriate
for consideration of a particular proposal by a self-regulatory
organization. See Securities Act Amendments of 1975, Senate Comm. on
Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st
Sess. 30 (1975).
---------------------------------------------------------------------------
Interested persons are invited to submit written data, views, and
arguments regarding whether the
[[Page 11307]]
proposal should be approved or disapproved by March 24, 2016. Any
person who wishes to file a rebuttal to any other person's submission
must file that rebuttal by April 7, 2016. In light of the concerns
raised by the proposed rule change, as discussed above, the Commission
invites additional comment on the proposed rule change as the
Commission continues its analysis of the proposed rule change's
consistency with Sections 6(b)(5) and 6(b)(8),\26\ or any other
provision of the Act, or the rules and regulations thereunder. The
Commission asks that commenters address the sufficiency and merit of
the Exchange's statements in support of the proposed rule change, in
addition to any other comments they may wish to submit about the
proposed rule change.
---------------------------------------------------------------------------
\26\ 15 U.S.C. 78f(b)(5), (b)(8).
---------------------------------------------------------------------------
Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-ISE-2015-30 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-2015-30. 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 Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site 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; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-ISE-2015-30 and should be
submitted by March 24, 2016. Rebuttal comments should be submitted by
April 7, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
---------------------------------------------------------------------------
\27\ 17 CFR 200.30-3(a)(57).
---------------------------------------------------------------------------
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-04637 Filed 3-2-16; 8:45 am]
BILLING CODE 8011-01-P