Self-Regulatory Organizations; ISE Gemini, LLC; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To Amend Rule 804(g), 11309-11311 [2016-04638]
Download as PDF
Federal Register / Vol. 81, No. 42 / Thursday, March 3, 2016 / Notices
benefits investors because they receive
better prices and because it lowers
volatility in the options market. For
these reasons, the Exchange does not
believe this proposal imposes an undue
burden on inter-market competition
because other exchanges offer the same
functionality.
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
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A)(iii) of the Act 15 and
subparagraph (f)(6) of Rule 19b–4
thereunder.16
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.
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:
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–
Phlx–2016–23 on the subject line.
15 15
U.S.C. 78s(b)(3)(a)(iii).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
the proposed rule change at least five business days
prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. The Exchange has satisfied this
requirement.
16 17
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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–Phlx–2016–23. 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 such
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–Phlx–
2016–23, and should be submitted on or
before March 24, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–04636 Filed 3–2–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Notice is hereby given, pursuant to
the provisions of the Government in the
Sunshine Act, Public Law 94–409, that
the Securities and Exchange
Commission will hold an Open Meeting
on Monday, March 7, 2016, at 3:30 p.m.,
in the Auditorium (L–002) at the
Commission’s headquarters building, to
PO 00000
CFR 200.30–3(a)(12).
Frm 00137
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hear oral argument in an appeal from an
initial decision of an administrative law
judge by respondents J.S. Oliver Capital
Management, L.P. (‘‘J.S. Oliver’’), and
Ian O. Mausner (‘‘Mausner’’).
On August 5, 2014, the law judge
found that, beginning in 2008, J.S.
Oliver, a registered investment adviser,
and Mausner, its principal, violated
antifraud provisions of the securities
laws by cherry picking profitable trades
for favored accounts and by failing to
disclose uses of soft dollar commissions
to their clients. The initial decision also
found related compliance and
recordkeeping violations. For their
violations, the law judge barred
Mausner from the securities industry,
revoked J.S. Oliver’s investment adviser
registration, issued cease-and-desist
orders against them, and ordered
respondents to disgorge $1,376,440. The
law judge also imposed civil money
penalties of $3,040,000 on Mauser and
$14,975,000 on J.S. Oliver.
Respondents appealed the civil
money penalties imposed in the initial
decision. The oral argument is likely to
address what penalties, if any, are
appropriate in the public interest. Also
likely to be considered at oral argument
is whether these administrative
proceedings violate the U.S.
Constitution.
For further information, please
contact the Office of the Secretary at
(202) 551–5400.
Dated: February 29, 2016.
Brent J. Fields,
Secretary.
[FR Doc. 2016–04792 Filed 3–1–16; 11:15 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77247; File No. SR–ISE
Gemini–2015–17]
Self-Regulatory Organizations; ISE
Gemini, LLC; Order Instituting
Proceedings To Determine Whether To
Approve or Disapprove a Proposed
Rule Change To Amend Rule 804(g)
February 26, 2016.
Sunshine Act Meeting
17 17
11309
I. Introduction
On November 12, 2015, the ISE
Gemini, LLC (‘‘ISE Gemini’’ 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
1 15
U.S.C. 78s(b)(1).
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Federal Register / Vol. 81, No. 42 / Thursday, March 3, 2016 / Notices
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 Gemini 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 Gemini 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) exceed such specified marketwide 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 Gemini
or across both ISE Gemini and ISE
Gemini’s affiliated exchange,
International Securities Exchange, LLC.9
Currently, if ISE Gemini’s trading
system removes all of a market maker’s
quotes because a market-wide speed
2 17
CFR 240.19b–4.
‘‘Clearing Member’’ is a Member that is selfclearing or an Electronic Access Member that clears
transactions for other members of the Exchange. See
ISE Gemini Rule 100(a)(9). 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(j) of the
Constitution of ISE Gemini.
4 See Securities Exchange Act Release No. 76505
(November 23, 2015), 80 FR 74824 (November 30,
2015) (‘‘Notice’’).
5 See Securities Exchange Act Release No. 76894
(January 13, 2016), 81 FR 3218 (January 20, 2016).
6 15 U.S.C. 78s(b)(2)(B).
7 ISE Gemini 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 Gemini Rule 802.
8 See ISE Gemini Rule 804(g)(2).
9 Id.
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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
Gemini Rule 804(g)(2) to require
Clearing Member approval 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
Gemini–2015–17 and Grounds for
Disapproval Under Consideration
The Commission is instituting
proceedings pursuant to Section
10 See
Notice, supra note 4, at 74824.
proposed Rule 804(g)(2).
12 See 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 Gemini Rule 808.
15 See Notice, supra note 4, at 74825. Under ISE
Gemini’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
Gemini Rule 706(a).
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.
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 Gemini’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
11 See
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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.
17 15 U.S.C. 78f(b)(5).
18 See ISE Gemini Rule 804(e).
19 See, e.g., ISE Gemini Rule 713.
20 15 U.S.C. 78k(a).
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Federal Register / Vol. 81, No. 42 / Thursday, March 3, 2016 / Notices
treatment.21 As discussed above,
however, the Exchange now proposes to
amend ISE Gemini 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.
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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
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).
22 See Notice, supra note 4, at 74825.
23 15 U.S.C. 78f(b)(5).
24 17 CFR 240.19b–4.
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for an opportunity to make an oral
presentation.25
Interested persons are invited to
submit written data, views, and
arguments regarding whether the
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:
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 Gemini–2015–17 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 Gemini–2015–17. 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
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).
26 15 U.S.C. 78f(b)(5), (b)(8).
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11311
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
Gemini–2015–17 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. 2016–04638 Filed 3–2–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77241; File No. SR–
NYSEMKT–2016–30]
Self-Regulatory Organizations; NYSE
MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Adopting Investigation,
Disciplinary, Sanction, and Other
Procedural Rules Modeled on the
Rules of the New York Stock Exchange
LLC and Certain Conforming and
Technical Changes
February 26, 2016.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on February
19, 2016, NYSE MKT LLC (‘‘Exchange’’
or ‘‘NYSE MKT’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the self-regulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
27 17
CFR 200.30–3(a)(57).
U.S.C.78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
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Agencies
[Federal Register Volume 81, Number 42 (Thursday, March 3, 2016)]
[Notices]
[Pages 11309-11311]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-04638]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-77247; File No. SR-ISE Gemini-2015-17]
Self-Regulatory Organizations; ISE Gemini, 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 12, 2015, the ISE Gemini, LLC (``ISE Gemini'' 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
[[Page 11310]]
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 Gemini 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 for other
members of the Exchange. See ISE Gemini Rule 100(a)(9). 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(j) of the Constitution of ISE Gemini.
\4\ See Securities Exchange Act Release No. 76505 (November 23,
2015), 80 FR 74824 (November 30, 2015) (``Notice'').
\5\ See Securities Exchange Act Release No. 76894 (January 13,
2016), 81 FR 3218 (January 20, 2016).
\6\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
II. Description of the Proposal
Pursuant to ISE Gemini 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) 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 Gemini or across
both ISE Gemini and ISE Gemini's affiliated exchange, International
Securities Exchange, LLC.\9\
---------------------------------------------------------------------------
\7\ ISE Gemini 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
Gemini Rule 802.
\8\ See ISE Gemini Rule 804(g)(2).
\9\ Id.
---------------------------------------------------------------------------
Currently, if ISE Gemini'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 Gemini Rule 804(g)(2) to require Clearing Member
approval 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 74824.
\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 Gemini Rule
808.
\15\ See Notice, supra note 4, at 74825. Under ISE Gemini'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 Gemini Rule 706(a).
---------------------------------------------------------------------------
III. Proceedings To Determine Whether To Approve or Disapprove SR-ISE
Gemini-2015-17 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.
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\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.
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\17\ 15 U.S.C. 78f(b)(5).
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Under ISE Gemini'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
[[Page 11311]]
treatment.\21\ As discussed above, however, the Exchange now proposes
to amend ISE Gemini Rule 804(g) to require Clearing Member approval
before a market maker can resume trading after triggering a market-wide
speed bump.
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\18\ See ISE Gemini Rule 804(e).
\19\ See, e.g., ISE Gemini 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).
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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.
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\22\ See Notice, supra note 4, at 74825.
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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 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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-ISE Gemini-2015-17 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 Gemini-2015-17. 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 Gemini-2015-17 and
should be submitted by March 24, 2016. Rebuttal comments should be
submitted by April 7, 2016.
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\27\ 17 CFR 200.30-3(a)(57).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-04638 Filed 3-2-16; 8:45 am]
BILLING CODE 8011-01-P