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 (http://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 (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 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 http:// 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]


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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).
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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\
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    \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).
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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.
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    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.
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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\
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    \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).
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    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.
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    \26\ 15 U.S.C. 78f(b)(5), (b)(8).
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    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-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 (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 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\
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    \27\ 17 CFR 200.30-3(a)(57).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-04637 Filed 3-2-16; 8:45 am]
BILLING CODE 8011-01-P