Self-Regulatory Organizations; ISE Mercury, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Establish the Schedule of Fees, 12770-12775 [2016-05322]
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Federal Register / Vol. 81, No. 47 / Thursday, March 10, 2016 / Notices
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:
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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–2016–32 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–Phlx–2016–32. 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
change, or such shorter time as designated by the
Commission. The Exchange has satisfied this
requirement.
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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–
2016–32, and should be submitted on or
before March 31, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.9
Brent J. Fields,
Secretary.
[FR Doc. 2016–05325 Filed 3–9–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
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
self-regulatory organization 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
[Release No. 34–77292; File No. SR–
ISEMercury–2016–02]
Self-Regulatory Organizations; ISE
Mercury, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Establish the
Schedule of Fees
March 4, 2016.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’ or ‘‘Exchange Act’’),1 and Rule
19b–4 thereunder,2 notice is hereby
given that on February 18, 2016, ISE
Mercury, LLC (the ‘‘Exchange’’ or ‘‘ISE
Mercury’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
the proposed rule change, as described
in Items I, II, and III below, which Items
have been prepared by the selfregulatory organization. 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 Substance of
the Proposed Rule Change
ISE Mercury proposes to establish a
Schedule of Fees by adopting fees and
rebates for all Regular Orders in
standard options traded on ISE Mercury,
and adopting route-out fees and
marketing fees. The text of the proposed
rule change is available on the
Exchange’s Internet Web site at https://
www.ise.com, at the principal office of
the Exchange, and at the Commission’s
Public Reference Room.
9 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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The purpose of the proposed rule
filing is to establish a Schedule of Fees
by adopting fees and rebates for Regular
Orders 3 in standard options traded on
ISE Mercury, and adopting route-out
fees and marketing fees.
Regular Order Fees and Rebates
The Exchange proposes to assess per
contract transaction fees and rebates in
all option classes traded on the
Exchange to market participants that
trade on the Exchange. The fees and
rebates depend on the category of
market participant submitting orders to
the Exchange and the type of orders
submitted to the Exchange.
The proposed Schedule of Fees
identifies the following categories of
market participants: (1) Market Maker; 4
(2) Non-ISE Mercury Market Maker; 5 (3)
Firm Proprietary 6/Broker-Dealer; 7 (4)
Professional Customer; 8 (5) Priority
3 A Regular Order is an order that consists of only
a single option series and is not submitted with a
stock leg.
4 The term Market Makers refers to ‘‘Competitive
Market Makers’’ and ‘‘Primary Market Makers’’
collectively. Market Maker orders sent to the
Exchange by an Electronic Access Member are
assessed fees at the same level as Market Maker
orders.
5 A Non-ISE Mercury Market Maker, or Far Away
Market Maker (‘‘FARMM’’), is a market maker as
defined in Section 3(a)(38) of the Securities
Exchange Act of 1934, as amended (‘‘Exchange
Act’’), registered in the same options class on
another options exchange.
6 A Firm Proprietary order is an order submitted
by a member for its own proprietary account.
7 A Broker-Dealer order is an order submitted by
a member for a non-member broker-dealer account.
8 A Professional Customer is a person who is not
a broker/dealer and is not a Priority Customer.
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Customer; 9 and (6) Retail.10 The fees
and rebates to be assessed for Regular
Orders in standard options that are in
the Penny Pilot 11 are: (1) $0.20 fee per
contract for Market Maker orders,12 (2)
$0.47 fee per contract for Non-ISE
Mercury Market Maker, Firm
Proprietary/Broker-Dealer, and
Professional Customer orders; and (3)
($0.18) rebate per contract for Priority
Customer orders. The transaction fees
and rebates to be assessed for Regular
Orders in standard options that are not
in the Penny Pilot are: (1) $0.20 fee per
contract for Market Maker orders; (2)
$0.90 fee per contract for Non-ISE
Mercury Market Maker, Firm
Proprietary/Broker-Dealer, and
Professional Customer orders; and (3)
($0.18) rebate per contract for Priority
Customer orders.
The fees and rebates noted above also
apply to orders that are exposed at the
National Best Bid or Offer (NBBO) by
the Exchange (‘‘Flash Order’’).13 When
ISE Mercury is not at the NBBO, certain
orders are exposed to members to give
them an opportunity to match the NBBO
before those orders are sent for
execution pursuant to intermarket
linkage rules. For all Flash Orders, the
Exchange will charge the applicable fee.
The Exchange proposes to adopt a fee
of $0.20 per contract for Crossing
Orders 14 in all symbols traded on the
Exchange for all market participants,
except Priority Customers who will be
charged $0.00 per contract for Crossing
9 A Priority Customer is a person or entity that is
not a broker/dealer in securities, and does not place
more than 390 orders in listed options per day on
average during a calendar month for its own
beneficial account(s).
10 A Retail order is a Priority Customer order that
originates from a natural person, provided that no
change is made to the terms of the order with
respect to price or side of market and the order does
not originate from a trading algorithm or any other
computerized methodology. On ISE Mercury, Retail
orders will be charged the same fee and receive the
same rebate as Priority Customer orders.
11 Under the Penny Pilot, the minimum price
variation for all participating options classes, except
for the Nasdaq-100 Index Tracking Stock (‘‘QQQ’’),
the SPDR S&P 500 Exchange Traded Fund (‘‘SPY’’)
and the iShares Russell 2000 Index Fund (‘‘IWM’’),
is $0.01 for all quotations in options series that are
quoted at less than $3 per contract and $0.05 for
all quotations in options series that are quoted at
$3 per contract or greater. The proposed fees and
rebates for Penny Pilot symbols apply to all classes
in the Penny Pilot, i.e., to series that are quoted at
less than $3 that have a minimum price variation
of $0.01 and to series that are quoted at $3 or more
that have an minimum price variation of $0.05.
QQQ, SPY, and IWM are quoted in $0.01
increments for all options series.
12 This fee applies to ISE Mercury Market Maker
orders sent to the Exchange by Electronic Access
Members.
13 See ISE Mercury Rule 1901, Supplementary
Material .02.
14 These fees apply to both originating and contra
orders.
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Orders. A Crossing Order is an order
executed in the Exchange’s Facilitation
Mechanism, Solicited Order
Mechanism, Price Improvement
Mechanism (‘‘PIM’’), or submitted as a
Qualified Contingent Cross order.
Orders executed in the Block Order
Mechanism are also considered Crossing
Orders. As an exception to the fees for
Crossing Orders, the Exchange proposes
to adopt a fee of $0.05 per contract for
PIM orders of 500 or fewer contracts in
all symbols traded on the Exchange for
all market participants, except that
Priority Customer orders on the
originating side of a PIM auction will
receive a rebate of ($0.13) per contract.
Priority Customer orders on the contraside of a PIM auction will pay no fee
and receive no rebate. PIM orders
greater than 500 contracts will pay the
Fee for Crossing Orders, described
above.
The Exchange believes the proposed
Fees for Crossing Orders are competitive
with fees charged by other options
exchanges that have functionality for
crossing orders. For example,
International Securities Exchange, LLC’s
(‘‘ISE’’) 15 and ISE Gemini, LLC’s (‘‘ISE
Gemini’’) 16 Fees for Crossing Orders in
all symbols are almost identical to those
charged by ISE Mercury in all symbols.
Additionally, ISE Mercury’s Fees for
PIM Orders of 500 or Fewer Contracts
are similar to ISE’s Fee for PIM Orders
of 100 or Fewer Contracts,17 except that
Priority Customers on ISE Mercury
receive a rebate rather than not being
charged. Rebates for orders of 500
contracts or fewer are designed to
increase Priority Customer order flow to
the Exchange.
The Exchange also proposes to adopt
Fees for Responses to Crossing Orders.
A Response to a Crossing Order is any
contra-side interest (i.e., orders and
quotes) submitted after the
commencement of an auction in the
Exchange’s Facilitation Mechanism,
Solicited Order Mechanism, Block
Order Mechanism, or PIM. The
Exchange proposes to adopt a fee of (1)
$0.20 per contract for Market Maker
orders and (2) $0.50 per contract for
Non-ISE Mercury Market Maker, Firm
15 See ISE Fee Schedule, I. Regular Order Fees
and Rebates, Fee for Crossing Orders at https://
www.ise.com/assets/documents/OptionsExchange/
legal/fee/ISE_fee_schedule.pdf.
16 See ISE Gemini Fee Schedule, I. Regular Order
Fees and Rebates, Fee for Crossing Orders at https://
www.ise.com/assets/gemini/documents/
OptionsExchange/legal/fee/Gemini_Fee_
Schedule.pdf.
17 See ISE Fee Schedule, I. Regular Order Fees
and Rebates, Fee for PIM Orders of 100 or Fewer
Contracts at https://www.ise.com/assets/documents/
OptionsExchange/legal/fee/ISE_fee_schedule.pdf.
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12771
Proprietary/Broker-Dealer, Professional
Customer, and Priority Customer orders.
The Exchange also believes the
proposed fees for Responses to Crossing
Orders are competitive with fees
charged by other options exchanges that
have functionality for crossing orders.
ISE Mercury’s Fees for Responses to
Crossing Orders in all symbols are in
line with those on ISE,18 except that ISE
Mercury offers a reduced fee to Market
Makers because they have requirements
and obligations to the Exchange that the
other market participants do not (such
as quoting requirements). Market
Makers are also charged Marketing Fees,
discussed below, which are not assessed
to other market participants. The
Exchange therefore believes it is
appropriate to charge these fees for
Responses to Crossing Orders.
Route-Out Fees
The Exchange proposes to adopt a
Route-Out Fee of $0.55 per contract for
executions of all market participant
orders for standard options in symbols
that are in the Penny Pilot that are
routed to one or more exchanges in
connection with the Options Order
Protection and Locked/Crossed Market
Plan. The Exchange further proposes to
adopt a Route-Out Fee of $0.96 per
contract for executions of all market
participant orders for standard options
in symbols that are not in the Penny
Pilot that are routed to one or more
exchanges in connection with the
Options Order Protection and Locked/
Crossed Market Plan. No additional
transaction fees are added to the RouteOut Fees, unlike other exchanges,
which, in addition to a fixed route-out
fee, assess the actual transaction fees
charged by the exchange the order is
routed to.19
The Route-Out Fees offset costs
incurred by the Exchange in connection
with using unaffiliated broker-dealers to
access other exchanges for linkage
executions and are therefore appropriate
because market participants that are
submitting these orders can route them
directly to away exchanges, if desired,
and should not be able to forgo an away
market fee by directing their orders to
the Exchange. The Exchange therefore
believes it is appropriate to charge these
orders the proposed fee in order to
18 See id. at I. Regular Order Fees and Rebates,
Fee for Responses to Crossing Orders.
19 See MIAX Fee Schedule, (1) Transaction Fees,
(c) Fees and Rebates for Customer Orders Routed to
Another Options Exchange at https://
www.miaxoptions.com/sites/default/files/MIAX_
Options_Fee_Schedule_02012016B.pdf and PHLX
Fee Schedule, V. Routing Fees, at https://
www.nasdaqtrader.com/Micro.aspx?id=phlxpricing.
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recoup costs associated with routing out
these orders.
Marketing Fees
The Exchange proposes Marketing
Fees that help its Market Makers
establish marketing fee arrangements
with Electronic Access Members
(‘‘EAM’’) in exchange for EAMs routing
some or all of their order flow to those
Market Makers. This program is funded
through a fee paid by Exchange Market
Makers for each Priority Customer
contract they execute against in the
symbols that are subject to their
respective Marketing Fees.20 In
particular, ISE Mercury proposes to
charge Market Makers $0.25 per contract
for options classes that are in the Penny
Pilot and $0.70 per contract for options
classes not in the Penny Pilot when
trading against a Priority Customer
order.21 These fees are the same as those
charged by NASDAQ OMX PHLX
(‘‘PHLX’’),22 which calls these fees
Payment for Order Flow Fees. The
Exchange believes these fees are
appropriate.
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FINRA Web CRD Fees
The Exchange proposes to adopt
regulatory fees related to Web CRD,
which are collected by the Financial
Industry Regulatory Authority
(‘‘FINRA’’) (‘‘FINRA Web CRD Fees’’).23
The proposed fees are collected and
retained by FINRA via Web CRD for the
registration of employees of ISE
Mercury members that are not FINRA
members (‘‘Non-FINRA members’’). The
Exchange is merely listing these fees on
its Schedule of Fees. The Exchange does
not collect or retain these fees.
The FINRA Web CRD Fees listed on
the ISE Mercury Schedule of Fees
20 Marketing Fees apply to ISE Mercury Market
Makers for each Regular Priority Customer contract
executed. Marketing Fees are waived for Flash
Order responses.
21 These Marketing Fees will be rebated
proportionately to the members that paid the fee
such that on a monthly basis the marketing fee fund
balance administered by a Primary Market Maker
for a group of options established under Rule 802(b)
does not exceed $100,000 and the marketing fee
fund balance administered by a preferenced
Competitive Market Maker for such a Group does
not exceed $100,000. A preferenced Competitive
Market Maker that elects not to administer a fund
will not be charged the marketing fee. The
Exchange also assesses an administrative fee of
.45% on the total amount of the fund collected each
month.
22 See PHLX Fee Schedule, II. Multiply Listed
Options Fees, Payment For Order Flow Fees at
https://www.nasdaqtrader.com/
Micro.aspx?id=phlxpricing.
23 FINRA operates Web CRD, the central licensing
and registration system for the U.S. securities
industry. FINRA uses Web CRD to maintain the
qualification, employment and disciplinary
histories of registered associated persons of brokerdealers.
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consists of General Registration Fees of
$100 (for each initial Form U4 filed for
the registration of a representative or
principal), $110 (for the additional
processing of each initial or amended
Form U4, Form U5 or Form BD that
includes the initial reporting,
amendment or certification of one of
more disclosure events or proceedings),
and $45 (annual system processing fee
assessed only during renewals). The
FINRA Web CRD Fees also consist of
Fingerprint Processing Fees for the
initial, second and third submissions.
There is a separate fee for electronic
submissions and paper submissions.
The initial electronic and paper
submission fees are $27.75 and $42.75,
respectively. The second electronic and
paper submission fees are $15.00 and
$30.00, respectively. The third
electronic and paper submission fees are
$27.75 and $42.75, respectively. Finally,
there is a $30 processing fee for
fingerprint results submitted by selfregulatory organizations other than
FINRA. The FINRA Web CRD Fees are
user-based and there is no distinction in
the cost incurred by FINRA if the user
is a FINRA member or a Non-FINRA
member. Accordingly, the proposed fees
mirror those currently assessed by
FINRA.24
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the provisions of Section 6 of the Act,25
in general, and Section 6(b)(4) of the
Act,26 in particular, in that it is designed
to provide for the equitable allocation of
reasonable dues, fees, and other charges
among its members and other persons
using its facilities.
The Exchange believes the fees
proposed for transactions on ISE
Mercury are reasonable. ISE Mercury
will operate within a highly competitive
market in which market participants can
readily send order flow to any of the
thirteen other competing venues if they
deem fees at a particular venue to be
excessive. The proposed fee structure is
intended to attract order flow to ISE
Mercury by offering certain market
participants incentives to submit their
orders to ISE Mercury.
Regular Order Fees and Rebates
The Exchange believes that its
proposal to assess a per contract fee or
rebate for Market Maker, Non-ISE
Mercury Market Maker, Firm
Proprietary/Broker-Dealer, Professional
24 See Securities Exchange Act Release No. 67247
(June 25, 2012), 77 FR 38866 (June 29, 2012) (SR–
FINRA–2012–030) (the ‘‘FINRA Fee Filing’’).
25 15 U.S.C. 78f.
26 15 U.S.C. 78f(b)(4).
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Customer, and Priority Customer orders
is reasonable and equitable because the
proposed fees are within the range of
fees assessed by other exchanges
employing similar pricing schemes. For
example, the fees in the Penny Pilot on
ISE Mercury for all market participants,
except Priority Customers, are similar to
the non-Priority Customer fees charged
on PHLX,27 which range from $0.22 to
$0.49 28 per contract. Further, the rebate
provided for Priority Customer orders
on ISE Mercury is competitive with the
rebates offered by MIAX Options
Exchange (‘‘MIAX’’) in its Priority
Customer Rebate Program. MIAX offers
members a per contract rebate as high as
($0.24) in MIAX select symbols and
($0.21) in non-MIAX select symbols for
Priority Customer orders when the
member reaches MIAX’s highest rebate
tier.29 Additionally, the fees for symbols
not in the Penny Pilot for Non-ISE
Mercury Market Maker, Firm
Proprietary/Broker-Dealer, and
Professional Customer orders are similar
to those on ISE Gemini, which are $0.89
per contract.30 The Exchange believes
the proposed fees and rebates are not
unfairly discriminatory because they
would apply uniformly to similarly
situated market participants and they
are competitive with the fees charged by
other exchanges.
The Exchange believes the proposed
Fees for Crossing Orders are reasonable
and equitably allocated because the
proposed fees are also within the range
of fees assessed by other exchanges. For
example, ISE’s 31 and ISE Gemini’s 32
Fees for Crossing Orders in all symbols
are almost identical to those proposed
by ISE Mercury. Further, the Exchange
believes the proposed Fee for Crossing
Orders is not unfairly discriminatory
because it would uniformly apply to all
market participants, except Priority
Customers, who historically have paid
27 See PHLX Fee Schedule, II. Multiply Listed
Options Fees, at https://www.nasdaqtrader.com/
Micro.aspx?id=phlxpricing.
28 See id. at I. Rebates and Fees for Adding and
Removing Liquidity in SPY, Part A. Simple Order.
29 See MIAX Fee Schedule, (1) Transaction Fees,
(a) Exchange Fees, (iii) Priority Customer Rebate
program at https://www.miaxoptions.com/sites/
default/files/MIAX_Options_Fee_Schedule_
01012015C.pdf.
30 See ISE Gemini Fee Schedule, I. Regular Order
Fees and Rebates, Non-Penny Symbols, Taker Fee
Tiers 1–4 at https://www.ise.com/assets/gemini/
documents/OptionsExchange/legal/fee/Gemini_
Fee_Schedule.pdf.
31 See ISE Fee Schedule, I. Regular Order Fees
and Rebates, Fee for Crossing Orders at https://
www.ise.com/assets/documents/OptionsExchange/
legal/fee/ISE_fee_schedule.pdf.
32 See ISE Gemini Fee Schedule, I. Regular Order
Fees and Rebates, Fee for Crossing Orders at
https://www.ise.com/assets/gemini/documents/
OptionsExchange/legal/fee/Gemini_Fee_
Schedule.pdf.
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lower fees than other market
participants as an incentive to attract
that order flow to the Exchange.
The Exchange believes the proposed
Fees for PIM Orders of 500 or Fewer
Contracts are reasonable and equitably
allocated because the proposed fees are
also within the range of fees assessed by
other exchanges. ISE Mercury’s Fee for
PIM Orders of 500 or Fewer Contracts
are the same as ISE’s Fee for PIM Orders
of 100 or Fewer Contracts,33 except that
Priority Customers orders on ISE
Mercury receive a rebate while ISE does
not charge a fee for Priority Customer
orders. For example, in all symbols, ISE
charges $0.05 for all non-Priority
Customers orders and does not charge a
fee for Priority Customer orders. While
ISE Mercury’s rebate is specifically
targeted towards Priority Customer
orders, the Exchange does not believe
that this is unfairly discriminatory.
Priority Customer orders on the
Exchange are generally entitled to lower
or no fees and the Exchange believes
that attracting more liquidity from
Priority Customers will benefit all
market participants that trade on ISE
Mercury.
The Exchange further believes it is
reasonable and equitable to charge the
proposed Fees for Responses to Crossing
Orders because an execution resulting
from a Response to a Crossing Order is
akin to an execution and therefore its
proposal to establish execution fees is
reasonable and equitable. The Exchange
believes that while the differential
between the fees charged for Crossing
Orders and the Fees for Responses to
Crossing Orders is significant, the
differential on ISE Mercury is similar to
the differential that currently exists on
other exchanges that offer a similar
functionality. For example, as noted
above, ISE’s Fees for Crossing Orders,
which are $0.20 per contract in all
symbols for all market participants,
except Market Makers in non-select
symbols,34 are identical to those
proposed by ISE Mercury.35 And, ISE’s
fees for Responses to Crossing Orders,
which are $0.47 per contract for all
market participants in all symbols, 36
are in line with those on ISE Mercury,
33 See ISE Fee Schedule, I. Regular Order Fees
and Rebates, Fee for PIM Orders of 100 or Fewer
Contracts at https://www.ise.com/assets/documents/
OptionsExchange/legal/fee/ISE_fee_schedule.pdf.
34 These Market Maker fees are subject to tier
discounts on ISE. See ISE Fee Schedule, IV. Other
Options Fees and Rebates, C. ISE Market Maker
Discount Tiers at https://www.ise.com/assets/
documents/OptionsExchange/legal/fee/ISE_fee_
schedule.pdf.
35 See id. at I. Regular Order Fees and Rebates,
Fee for Crossing Orders.
36 Id. at I. Regular Order Fees and Rebates, Fee for
Responses to Crossing Orders.
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except that ISE Mercury charges a lower
fee to Market Makers. ISE Mercury
charges a lower fee to Market Maker
orders because Market Makers have
requirements and obligations to the
Exchange that the other market
participants do not (such as quoting
requirements). Market Makers are also
charged Marketing Fees, which are not
assessed to other market participants.
Therefore, the Exchange believes the
proposed fees are reasonable and
equitably allocated because they are
within the range of fees assessed by
other exchanges employing similar
pricing schemes.
The Exchange is not introducing a
novel pricing scheme for Crossing
Orders or for Responses to Crossing
Orders. This functionality is currently
available on a number of exchanges, all
of which have pricing differentials that
promote internalizing customer orders.
The Exchange believes these are not
unfairly discriminatory because they
would uniformly apply to all similarly
situated market participants.
The Exchange further believes
charging lower fees and providing
higher rebates to Priority Customer
orders attracts that order flow to the
Exchange and thereby creates liquidity
to the benefit of all market participants
who trade on the Exchange. Further, the
Exchange believes that it is equitable
and not unfairly discriminatory to
assess lower fees to Priority Customer
orders. A Priority Customer is by
definition not a broker or dealer in
securities, and does not place more than
390 orders in listed options per day on
average during a calendar month for its
own beneficial account(s). This
limitation does not apply to participants
on the Exchange whose behavior is
substantially similar to that of market
professionals, including Professional
Customers, Non-ISE Mercury Market
Makers, and Firm Proprietary/BrokerDealers, who will generally submit a
higher number of orders (many of which
do not result in executions) than
Priority Customers. Further,
Professional Customers engage in
trading activity similar to that
conducted by Market Makers and
proprietary traders. Finally, the
Exchange believes that the proposed
rebates are competitive with rebates
provided by other exchanges, as
discussed above, and are therefore
reasonable and equitable.
Finally, the Exchange believes that
the price differentiation between the
other market participants is justified.
With respect to fees for Market Maker
orders, as noted above, the Exchange
believes that the price differentiation
between the other market participants is
PO 00000
Frm 00094
Fmt 4703
Sfmt 4703
12773
appropriate and not unfairly
discriminatory because Market Makers
have requirements and obligations to
the Exchange that the other market
participants do not (such as quoting
requirements). Market makers also incur
Marketing Fees, which the other market
participants do not. The Exchange
believes that it is equitable and not
unfairly discriminatory to assess a
higher fee to certain market participants
that do not have such requirements and
obligations that Exchange Market
Makers do. The Exchange believes that
the proposed fees are fair, equitable, and
not unfairly discriminatory because the
proposed fees are consistent with price
differentiation that exists today at other
options exchanges.37
Route-Out Fees
The Exchange believes the proposed
route-out fees are reasonable and
equitable as they provide the Exchange
the ability to recover costs associated
with using unaffiliated broker-dealers to
route orders to other exchanges for
linkage executions. The Exchange also
believes that the proposed fees are not
unfairly discriminatory because these
fees would be uniformly applied to all
market participant orders. As fees to
access liquidity for orders have risen at
other exchanges, it has become
necessary for the Exchange to adopt
routing fees in order to recoup the costs
associated with routing linkage orders.
The Exchange notes that a number of
other exchanges currently charge a
variety of routing related fees associated
with customer and non-customer orders
that are subject to linkage handling. The
Exchange also notes that the fees
proposed herein are within the range of
fees charged by other Exchanges.38
Marketing Fees
The Exchange believes the proposed
Marketing Fees are reasonable and
equitable because the proposed fees will
allow the Exchange and its Market
Makers to better compete for order flow
since the Exchange will now collect the
same amount of fees as PHLX in options
classes that are subject to its Payment
for Order Flow Fees.39 The Exchange
37 See PHLX Fee Schedule, II. Multiply Listed
Options Fees at https://www.nasdaqtrader.com/
Micro.aspx?id=phlxpricing.
38 See ISE Fee Schedule, IV. Other Options Fees
and Rebates, F. Route-Out Fees at https://
www.ise.com/assets/documents/OptionsExchange/
legal/fee/ISE_fee_schedule.pdf and ISE Gemini Fee
Schedule, II. Other Options Fees and Rebates, A.
Route-Out Fees at https://www.ise.com/assets/
gemini/documents/OptionsExchange/legal/fee/
Gemini_Fee_Schedule.pdf.
39 See PHLX Fee Schedule, II. Multiply Listed
Options Fees, Payment for Order Flow Fees at
E:\FR\FM\10MRN1.SGM
Continued
10MRN1
12774
Federal Register / Vol. 81, No. 47 / Thursday, March 10, 2016 / Notices
believes that with these proposed fees,
Market Makers will have greater
incentive to trade on ISE Mercury in the
symbols that are subject to Marketing
Fees and thus enhance competition.
mstockstill on DSK4VPTVN1PROD with NOTICES
FINRA Web CRD Fees
The Exchange believes that its
proposal to adopt the FINRA Web CRD
Fees is reasonable because the proposed
fees are identical to those adopted by
FINRA for use of Web CRD for
disclosure and the registration of FINRA
members and their associated persons.
In the FINRA Fee Filing, FINRA noted
that it believed that its fees are
reasonable based on the increased costs
associated with operating and
maintaining Web CRD, and listed a
number of enhancements made to Web
CRD in support of its fee change. These
costs are borne by FINRA when a NonFINRA member uses Web CRD. FINRA
further noted its belief that the fees are
reasonable because they help to ensure
the integrity of the information in Web
CRD, which is very important because
the Commission, FINRA, other selfregulatory organizations and state
securities regulators use Web CRD to
make licensing and registration
decisions, among other things. The
Exchange notes that the proposed rule
change is reasonable because the
amount of the fees are those provided by
FINRA, and the Exchange does not
collect or retain these fees. The
proposed rule change is also equitable
and not unfairly discriminatory because
the Exchange will not be collecting or
retaining these fees, therefore will not
be in a position to apply them in an
inequitable or unfairly discriminatory
manner.
The Exchange notes that all of the
proposed fees and rebates, discussed
above, are intended to establish ISE
Mercury as an attractive venue for
market participants to direct their order
flow as the proposed fees and rebates
are competitive with those established
by other exchanges for similar trading
activities. The Exchange will be
operating in a highly competitive
market in which market participants can
readily direct order flow to another
exchange if they deem fees at a
particular exchange to be too high, or in
the case of rebates, not high enough. For
the reasons noted above, the Exchange
believes that the proposed fees are fair,
equitable, and not unfairly
discriminatory.
17:55 Mar 09, 2016
In accordance with Section 6(b)(8) of
the Act,40 the Exchange does not believe
that the proposed rule change will
impose any burden on intermarket or
intramarket competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
The Exchange notes that the
difference between the Fees for Crossing
Orders and the Fees for Responses to
Crossing Orders are not unfairly
discriminatory and do not impose an
undue burden on competition. The
Exchange believes the crossing
mechanisms on ISE Mercury provide
incentives for market participants to
submit customer order flow to the
Exchange and thus, creates a greater
opportunity for customers to receive
better executions. The crossing
mechanisms on ISE Mercury provide an
opportunity for market participants to
compete for customer orders, and have
no limitations regarding the number of
and type of market participant that can
participate and compete for such orders.
ISE Mercury notes that its market model
and fees are generally intended to attract
a specific segment of the options
industry and the Exchange is competing
with other exchanges that currently
attract that segment.
Unilateral action by ISE Mercury in
establishing fees for services provided to
its members and others using its
facilities will not have any adverse
impact on competition. As a new
entrant in the already highly
competitive environment for equity
options trading, ISE Mercury does not
have the market power necessary to set
prices for services that are inequitably
allocated, unreasonable or unfairly
discriminatory in violation of the Act.
ISE Mercury’s proposed fees and
rebates, as described herein, are
comparable to fees charged and rebates
provided by other options exchanges for
the same or similar services. To the
extent the proposed fees and rebates fail
to attract order flow away from its
competitors, ISE Mercury may have to
adjust level of fees and rebates.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange has not solicited, and
does not intend to solicit, comments on
this proposed rule change. The
Exchange has not received any
unsolicited written comments from
members or other interested parties.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act,41 and
subparagraph (f)(2) of Rule 19b–4
thereunder,42 because it establishes a
due, fee, or other charge imposed by ISE
Mercury.
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or 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:
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–
ISEMercury–2016–02 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–ISEMercury–2016–02. 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
41 15
https://www.nasdaqtrader.com/
Micro.aspx?id=phlxpricing.
VerDate Sep<11>2014
B. Self-Regulatory Organization’s
Statement on Burden on Competition
40 15
Jkt 238001
PO 00000
U.S.C. 78f(b)(8).
Frm 00095
Fmt 4703
42 17
Sfmt 4703
E:\FR\FM\10MRN1.SGM
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
10MRN1
Federal Register / Vol. 81, No. 47 / Thursday, March 10, 2016 / Notices
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–
ISEMercury–2016–02, and should be
submitted on or before March 31, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.43
Brent J. Fields,
Secretary.
[FR Doc. 2016–05322 Filed 3–9–16; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–77294; File No. SR–
NYSEArca–2016–40]
March 4, 2016.
mstockstill on DSK4VPTVN1PROD with NOTICES
Pursuant to section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on March 1,
2016, NYSE Arca, Inc. (the ‘‘Exchange’’
or ‘‘NYSE Arca’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III 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.
I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
The Exchange proposes to modify the
NYSE Arca Options Fee Schedule (‘‘Fee
Schedule’’) to address how the
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
VerDate Sep<11>2014
17:55 Mar 09, 2016
Jkt 238001
In its filing with the Commission, the
self-regulatory organization 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 those 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 parts of such
statements.
1. Purpose
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Modify the NYSE Arca
Options Fee Schedule Relating to
ByRDs Transaction Fees
1 15
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
SECURITIES AND EXCHANGE
COMMISSION
43 17
Exchange would treat transactions in
Binary Return Derivatives contracts
(‘‘ByRDs’’). The Exchange proposes to
implement the fee change effective
March 1, 2016. The proposed rule
change is available on the Exchange’s
Web site at www.nyse.com, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
The purpose of this filing is to
propose revisions to the Fee Schedule to
address how the Exchange would treat
transactions in ByRDs.
The Exchange recently added rules
related to ByRDs and plans to launch
trading in ByRDs in March 2016.4 To
encourage trading in ByRDs, the
Exchange proposes to exempt
transactions in ByRds from all
transaction fees and credits at this time.,
[sic] The Exchange also proposes that
any volume in ByRDs would be
included in the calculations to qualify
for any volume-based incentives
currently being offered on the Exchange.
Accordingly, the Exchange proposes to
add Endnote 14 to the Fee Schedule
regarding the Rates for Standard
Options transactions to reflect this
proposed change.
The Exchange believes the proposed
treatment of ByRDs for purposes of the
Fee Schedule would further the
Exchange’s goal of introducing new
4 See Securities Exchange Act Release No. 77044
(February 3, 2016), 81 FR 6908 (February 3 [sic],
2016) (SR–Arca–2–16) (immediate effectiveness
filing adopting rules relating to ByRDs). ByRDs are
European-style option contracts on individual
stocks, exchange-traded funds (‘‘ETFs’’) and IndexLinked Securities that have a fixed return in cash
based on a set strike price; satisfy specified listing
criteria; and may only be excercised at expiration
pursuant to the Rules of the Options Clearing
Corporation (the ‘‘OCC’’).
PO 00000
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Fmt 4703
Sfmt 4703
12775
products to the marketplace by
encouraging trading in these products.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,5 in general, and
furthers the objectives of sections 6(b)(4)
and (5) of the Act,6 in particular,
because it provides for the equitable
allocation of reasonable dues, fees, and
other charges among its members,
issuers and other persons using its
facilities and does not unfairly
discriminate between customers,
issuers, brokers or dealers.
The Exchange believes the proposed
change is reasonable and does not
unfairly discriminate between
customers, issues, brokers, or dealers,
because the Exchange’s treatment of
ByRDs would apply equally to all
market participants that opted to trade
ByRDs. Further, the proposed change is
reasonable and does not unfairly
discriminate because exempting ByRDs
from transaction fees, while still
including any volume in ByRDs in the
calculations to qualify for any volumebased incentives offered on the
Exchange would further the Exchange’s
goal of introducing new products to the
marketplace by encouraging trading in
these products. To the extent that the
proposed change incentivizes any
market participants to direct their order
flow to the Exchange, all market
participants would benefit from
increased liquidity and trading
opportunities on the Exchange.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
In accordance with section 6(b)(8) of
the Act,7 the Exchange does not believe
that the proposed rule change will
impose any burden on competition that
is not necessary or appropriate in
furtherance of the purposes of the Act.
The Exchange believes that the
proposed change is pro-competitive as it
would further the Exchange’s goal of
introducing new products to the
marketplace and encouraging trading in
these products, which would in turn,
benefit market participants. To the
extent that this purpose is achieved, all
of the Exchange’s market participants
should benefit from the improved
market liquidity. Enhanced market
quality and increased transaction
volume that results from the anticipated
increase in order flow directed to the
Exchange will benefit all market
5 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4) and (5).
7 15 U.S.C. 78f(b)(8).
6 15
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]]>Agencies
[Federal Register Volume 81, Number 47 (Thursday, March 10, 2016)]
[Notices]
[Pages 12770-12775]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-05322]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-77292; File No. SR-ISEMercury-2016-02]
Self-Regulatory Organizations; ISE Mercury, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Establish the
Schedule of Fees
March 4, 2016.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'' or ``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\
notice is hereby given that on February 18, 2016, ISE Mercury, LLC (the
``Exchange'' or ``ISE Mercury'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change, as described in
Items I, II, and III below, which Items have been prepared by the self-
regulatory organization. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
ISE Mercury proposes to establish a Schedule of Fees by adopting
fees and rebates for all Regular Orders in standard options traded on
ISE Mercury, and adopting route-out fees and marketing fees. The text
of the proposed rule change is available on the Exchange's Internet Web
site at https://www.ise.com, at the principal office of the Exchange,
and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of, and basis for, the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The self-regulatory organization has prepared summaries,
set forth in Sections A, B and C below, of the most significant aspects
of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule filing is to establish a Schedule
of Fees by adopting fees and rebates for Regular Orders \3\ in standard
options traded on ISE Mercury, and adopting route-out fees and
marketing fees.
---------------------------------------------------------------------------
\3\ A Regular Order is an order that consists of only a single
option series and is not submitted with a stock leg.
---------------------------------------------------------------------------
Regular Order Fees and Rebates
The Exchange proposes to assess per contract transaction fees and
rebates in all option classes traded on the Exchange to market
participants that trade on the Exchange. The fees and rebates depend on
the category of market participant submitting orders to the Exchange
and the type of orders submitted to the Exchange.
The proposed Schedule of Fees identifies the following categories
of market participants: (1) Market Maker; \4\ (2) Non-ISE Mercury
Market Maker; \5\ (3) Firm Proprietary \6\/Broker-Dealer; \7\ (4)
Professional Customer; \8\ (5) Priority
[[Page 12771]]
Customer; \9\ and (6) Retail.\10\ The fees and rebates to be assessed
for Regular Orders in standard options that are in the Penny Pilot \11\
are: (1) $0.20 fee per contract for Market Maker orders,\12\ (2) $0.47
fee per contract for Non-ISE Mercury Market Maker, Firm Proprietary/
Broker-Dealer, and Professional Customer orders; and (3) ($0.18) rebate
per contract for Priority Customer orders. The transaction fees and
rebates to be assessed for Regular Orders in standard options that are
not in the Penny Pilot are: (1) $0.20 fee per contract for Market Maker
orders; (2) $0.90 fee per contract for Non-ISE Mercury Market Maker,
Firm Proprietary/Broker-Dealer, and Professional Customer orders; and
(3) ($0.18) rebate per contract for Priority Customer orders.
---------------------------------------------------------------------------
\4\ The term Market Makers refers to ``Competitive Market
Makers'' and ``Primary Market Makers'' collectively. Market Maker
orders sent to the Exchange by an Electronic Access Member are
assessed fees at the same level as Market Maker orders.
\5\ A Non-ISE Mercury Market Maker, or Far Away Market Maker
(``FARMM''), is a market maker as defined in Section 3(a)(38) of the
Securities Exchange Act of 1934, as amended (``Exchange Act''),
registered in the same options class on another options exchange.
\6\ A Firm Proprietary order is an order submitted by a member
for its own proprietary account.
\7\ A Broker-Dealer order is an order submitted by a member for
a non-member broker-dealer account.
\8\ A Professional Customer is a person who is not a broker/
dealer and is not a Priority Customer.
\9\ A Priority Customer is a person or entity that is not a
broker/dealer in securities, and does not place more than 390 orders
in listed options per day on average during a calendar month for its
own beneficial account(s).
\10\ A Retail order is a Priority Customer order that originates
from a natural person, provided that no change is made to the terms
of the order with respect to price or side of market and the order
does not originate from a trading algorithm or any other
computerized methodology. On ISE Mercury, Retail orders will be
charged the same fee and receive the same rebate as Priority
Customer orders.
\11\ Under the Penny Pilot, the minimum price variation for all
participating options classes, except for the Nasdaq-100 Index
Tracking Stock (``QQQ''), the SPDR S&P 500 Exchange Traded Fund
(``SPY'') and the iShares Russell 2000 Index Fund (``IWM''), is
$0.01 for all quotations in options series that are quoted at less
than $3 per contract and $0.05 for all quotations in options series
that are quoted at $3 per contract or greater. The proposed fees and
rebates for Penny Pilot symbols apply to all classes in the Penny
Pilot, i.e., to series that are quoted at less than $3 that have a
minimum price variation of $0.01 and to series that are quoted at $3
or more that have an minimum price variation of $0.05. QQQ, SPY, and
IWM are quoted in $0.01 increments for all options series.
\12\ This fee applies to ISE Mercury Market Maker orders sent to
the Exchange by Electronic Access Members.
---------------------------------------------------------------------------
The fees and rebates noted above also apply to orders that are
exposed at the National Best Bid or Offer (NBBO) by the Exchange
(``Flash Order'').\13\ When ISE Mercury is not at the NBBO, certain
orders are exposed to members to give them an opportunity to match the
NBBO before those orders are sent for execution pursuant to intermarket
linkage rules. For all Flash Orders, the Exchange will charge the
applicable fee.
---------------------------------------------------------------------------
\13\ See ISE Mercury Rule 1901, Supplementary Material .02.
---------------------------------------------------------------------------
The Exchange proposes to adopt a fee of $0.20 per contract for
Crossing Orders \14\ in all symbols traded on the Exchange for all
market participants, except Priority Customers who will be charged
$0.00 per contract for Crossing Orders. A Crossing Order is an order
executed in the Exchange's Facilitation Mechanism, Solicited Order
Mechanism, Price Improvement Mechanism (``PIM''), or submitted as a
Qualified Contingent Cross order. Orders executed in the Block Order
Mechanism are also considered Crossing Orders. As an exception to the
fees for Crossing Orders, the Exchange proposes to adopt a fee of $0.05
per contract for PIM orders of 500 or fewer contracts in all symbols
traded on the Exchange for all market participants, except that
Priority Customer orders on the originating side of a PIM auction will
receive a rebate of ($0.13) per contract. Priority Customer orders on
the contra-side of a PIM auction will pay no fee and receive no rebate.
PIM orders greater than 500 contracts will pay the Fee for Crossing
Orders, described above.
---------------------------------------------------------------------------
\14\ These fees apply to both originating and contra orders.
---------------------------------------------------------------------------
The Exchange believes the proposed Fees for Crossing Orders are
competitive with fees charged by other options exchanges that have
functionality for crossing orders. For example, International
Securities Exchange, LLC's (``ISE'') \15\ and ISE Gemini, LLC's (``ISE
Gemini'') \16\ Fees for Crossing Orders in all symbols are almost
identical to those charged by ISE Mercury in all symbols. Additionally,
ISE Mercury's Fees for PIM Orders of 500 or Fewer Contracts are similar
to ISE's Fee for PIM Orders of 100 or Fewer Contracts,\17\ except that
Priority Customers on ISE Mercury receive a rebate rather than not
being charged. Rebates for orders of 500 contracts or fewer are
designed to increase Priority Customer order flow to the Exchange.
---------------------------------------------------------------------------
\15\ See ISE Fee Schedule, I. Regular Order Fees and Rebates,
Fee for Crossing Orders at https://www.ise.com/assets/documents/OptionsExchange/legal/fee/ISE_fee_schedule.pdf.
\16\ See ISE Gemini Fee Schedule, I. Regular Order Fees and
Rebates, Fee for Crossing Orders at https://www.ise.com/assets/gemini/documents/OptionsExchange/legal/fee/Gemini_Fee_Schedule.pdf.
\17\ See ISE Fee Schedule, I. Regular Order Fees and Rebates,
Fee for PIM Orders of 100 or Fewer Contracts at https://www.ise.com/assets/documents/OptionsExchange/legal/fee/ISE_fee_schedule.pdf.
---------------------------------------------------------------------------
The Exchange also proposes to adopt Fees for Responses to Crossing
Orders. A Response to a Crossing Order is any contra-side interest
(i.e., orders and quotes) submitted after the commencement of an
auction in the Exchange's Facilitation Mechanism, Solicited Order
Mechanism, Block Order Mechanism, or PIM. The Exchange proposes to
adopt a fee of (1) $0.20 per contract for Market Maker orders and (2)
$0.50 per contract for Non-ISE Mercury Market Maker, Firm Proprietary/
Broker-Dealer, Professional Customer, and Priority Customer orders.
The Exchange also believes the proposed fees for Responses to
Crossing Orders are competitive with fees charged by other options
exchanges that have functionality for crossing orders. ISE Mercury's
Fees for Responses to Crossing Orders in all symbols are in line with
those on ISE,\18\ except that ISE Mercury offers a reduced fee to
Market Makers because they have requirements and obligations to the
Exchange that the other market participants do not (such as quoting
requirements). Market Makers are also charged Marketing Fees, discussed
below, which are not assessed to other market participants. The
Exchange therefore believes it is appropriate to charge these fees for
Responses to Crossing Orders.
---------------------------------------------------------------------------
\18\ See id. at I. Regular Order Fees and Rebates, Fee for
Responses to Crossing Orders.
---------------------------------------------------------------------------
Route-Out Fees
The Exchange proposes to adopt a Route-Out Fee of $0.55 per
contract for executions of all market participant orders for standard
options in symbols that are in the Penny Pilot that are routed to one
or more exchanges in connection with the Options Order Protection and
Locked/Crossed Market Plan. The Exchange further proposes to adopt a
Route-Out Fee of $0.96 per contract for executions of all market
participant orders for standard options in symbols that are not in the
Penny Pilot that are routed to one or more exchanges in connection with
the Options Order Protection and Locked/Crossed Market Plan. No
additional transaction fees are added to the Route-Out Fees, unlike
other exchanges, which, in addition to a fixed route-out fee, assess
the actual transaction fees charged by the exchange the order is routed
to.\19\
---------------------------------------------------------------------------
\19\ See MIAX Fee Schedule, (1) Transaction Fees, (c) Fees and
Rebates for Customer Orders Routed to Another Options Exchange at
https://www.miaxoptions.com/sites/default/files/MIAX_Options_Fee_Schedule_02012016B.pdf and PHLX Fee Schedule, V.
Routing Fees, at https://www.nasdaqtrader.com/Micro.aspx?id=phlxpricing.
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The Route-Out Fees offset costs incurred by the Exchange in
connection with using unaffiliated broker-dealers to access other
exchanges for linkage executions and are therefore appropriate because
market participants that are submitting these orders can route them
directly to away exchanges, if desired, and should not be able to forgo
an away market fee by directing their orders to the Exchange. The
Exchange therefore believes it is appropriate to charge these orders
the proposed fee in order to
[[Page 12772]]
recoup costs associated with routing out these orders.
Marketing Fees
The Exchange proposes Marketing Fees that help its Market Makers
establish marketing fee arrangements with Electronic Access Members
(``EAM'') in exchange for EAMs routing some or all of their order flow
to those Market Makers. This program is funded through a fee paid by
Exchange Market Makers for each Priority Customer contract they execute
against in the symbols that are subject to their respective Marketing
Fees.\20\ In particular, ISE Mercury proposes to charge Market Makers
$0.25 per contract for options classes that are in the Penny Pilot and
$0.70 per contract for options classes not in the Penny Pilot when
trading against a Priority Customer order.\21\ These fees are the same
as those charged by NASDAQ OMX PHLX (``PHLX''),\22\ which calls these
fees Payment for Order Flow Fees. The Exchange believes these fees are
appropriate.
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\20\ Marketing Fees apply to ISE Mercury Market Makers for each
Regular Priority Customer contract executed. Marketing Fees are
waived for Flash Order responses.
\21\ These Marketing Fees will be rebated proportionately to the
members that paid the fee such that on a monthly basis the marketing
fee fund balance administered by a Primary Market Maker for a group
of options established under Rule 802(b) does not exceed $100,000
and the marketing fee fund balance administered by a preferenced
Competitive Market Maker for such a Group does not exceed $100,000.
A preferenced Competitive Market Maker that elects not to administer
a fund will not be charged the marketing fee. The Exchange also
assesses an administrative fee of .45% on the total amount of the
fund collected each month.
\22\ See PHLX Fee Schedule, II. Multiply Listed Options Fees,
Payment For Order Flow Fees at https://www.nasdaqtrader.com/Micro.aspx?id=phlxpricing.
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FINRA Web CRD Fees
The Exchange proposes to adopt regulatory fees related to Web CRD,
which are collected by the Financial Industry Regulatory Authority
(``FINRA'') (``FINRA Web CRD Fees'').\23\ The proposed fees are
collected and retained by FINRA via Web CRD for the registration of
employees of ISE Mercury members that are not FINRA members (``Non-
FINRA members''). The Exchange is merely listing these fees on its
Schedule of Fees. The Exchange does not collect or retain these fees.
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\23\ FINRA operates Web CRD, the central licensing and
registration system for the U.S. securities industry. FINRA uses Web
CRD to maintain the qualification, employment and disciplinary
histories of registered associated persons of broker-dealers.
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The FINRA Web CRD Fees listed on the ISE Mercury Schedule of Fees
consists of General Registration Fees of $100 (for each initial Form U4
filed for the registration of a representative or principal), $110 (for
the additional processing of each initial or amended Form U4, Form U5
or Form BD that includes the initial reporting, amendment or
certification of one of more disclosure events or proceedings), and $45
(annual system processing fee assessed only during renewals). The FINRA
Web CRD Fees also consist of Fingerprint Processing Fees for the
initial, second and third submissions. There is a separate fee for
electronic submissions and paper submissions. The initial electronic
and paper submission fees are $27.75 and $42.75, respectively. The
second electronic and paper submission fees are $15.00 and $30.00,
respectively. The third electronic and paper submission fees are $27.75
and $42.75, respectively. Finally, there is a $30 processing fee for
fingerprint results submitted by self-regulatory organizations other
than FINRA. The FINRA Web CRD Fees are user-based and there is no
distinction in the cost incurred by FINRA if the user is a FINRA member
or a Non-FINRA member. Accordingly, the proposed fees mirror those
currently assessed by FINRA.\24\
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\24\ See Securities Exchange Act Release No. 67247 (June 25,
2012), 77 FR 38866 (June 29, 2012) (SR-FINRA-2012-030) (the ``FINRA
Fee Filing'').
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\25\ in general, and
Section 6(b)(4) of the Act,\26\ in particular, in that it is designed
to provide for the equitable allocation of reasonable dues, fees, and
other charges among its members and other persons using its facilities.
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\25\ 15 U.S.C. 78f.
\26\ 15 U.S.C. 78f(b)(4).
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The Exchange believes the fees proposed for transactions on ISE
Mercury are reasonable. ISE Mercury will operate within a highly
competitive market in which market participants can readily send order
flow to any of the thirteen other competing venues if they deem fees at
a particular venue to be excessive. The proposed fee structure is
intended to attract order flow to ISE Mercury by offering certain
market participants incentives to submit their orders to ISE Mercury.
Regular Order Fees and Rebates
The Exchange believes that its proposal to assess a per contract
fee or rebate for Market Maker, Non-ISE Mercury Market Maker, Firm
Proprietary/Broker-Dealer, Professional Customer, and Priority Customer
orders is reasonable and equitable because the proposed fees are within
the range of fees assessed by other exchanges employing similar pricing
schemes. For example, the fees in the Penny Pilot on ISE Mercury for
all market participants, except Priority Customers, are similar to the
non-Priority Customer fees charged on PHLX,\27\ which range from $0.22
to $0.49 \28\ per contract. Further, the rebate provided for Priority
Customer orders on ISE Mercury is competitive with the rebates offered
by MIAX Options Exchange (``MIAX'') in its Priority Customer Rebate
Program. MIAX offers members a per contract rebate as high as ($0.24)
in MIAX select symbols and ($0.21) in non-MIAX select symbols for
Priority Customer orders when the member reaches MIAX's highest rebate
tier.\29\ Additionally, the fees for symbols not in the Penny Pilot for
Non-ISE Mercury Market Maker, Firm Proprietary/Broker-Dealer, and
Professional Customer orders are similar to those on ISE Gemini, which
are $0.89 per contract.\30\ The Exchange believes the proposed fees and
rebates are not unfairly discriminatory because they would apply
uniformly to similarly situated market participants and they are
competitive with the fees charged by other exchanges.
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\27\ See PHLX Fee Schedule, II. Multiply Listed Options Fees, at
https://www.nasdaqtrader.com/Micro.aspx?id=phlxpricing.
\28\ See id. at I. Rebates and Fees for Adding and Removing
Liquidity in SPY, Part A. Simple Order.
\29\ See MIAX Fee Schedule, (1) Transaction Fees, (a) Exchange
Fees, (iii) Priority Customer Rebate program at https://www.miaxoptions.com/sites/default/files/MIAX_Options_Fee_Schedule_01012015C.pdf.
\30\ See ISE Gemini Fee Schedule, I. Regular Order Fees and
Rebates, Non-Penny Symbols, Taker Fee Tiers 1-4 at https://www.ise.com/assets/gemini/documents/OptionsExchange/legal/fee/Gemini_Fee_Schedule.pdf.
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The Exchange believes the proposed Fees for Crossing Orders are
reasonable and equitably allocated because the proposed fees are also
within the range of fees assessed by other exchanges. For example,
ISE's \31\ and ISE Gemini's \32\ Fees for Crossing Orders in all
symbols are almost identical to those proposed by ISE Mercury. Further,
the Exchange believes the proposed Fee for Crossing Orders is not
unfairly discriminatory because it would uniformly apply to all market
participants, except Priority Customers, who historically have paid
[[Page 12773]]
lower fees than other market participants as an incentive to attract
that order flow to the Exchange.
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\31\ See ISE Fee Schedule, I. Regular Order Fees and Rebates,
Fee for Crossing Orders at https://www.ise.com/assets/documents/OptionsExchange/legal/fee/ISE_fee_schedule.pdf.
\32\ See ISE Gemini Fee Schedule, I. Regular Order Fees and
Rebates, Fee for Crossing Orders at https://www.ise.com/assets/gemini/documents/OptionsExchange/legal/fee/Gemini_Fee_Schedule.pdf.
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The Exchange believes the proposed Fees for PIM Orders of 500 or
Fewer Contracts are reasonable and equitably allocated because the
proposed fees are also within the range of fees assessed by other
exchanges. ISE Mercury's Fee for PIM Orders of 500 or Fewer Contracts
are the same as ISE's Fee for PIM Orders of 100 or Fewer Contracts,\33\
except that Priority Customers orders on ISE Mercury receive a rebate
while ISE does not charge a fee for Priority Customer orders. For
example, in all symbols, ISE charges $0.05 for all non-Priority
Customers orders and does not charge a fee for Priority Customer
orders. While ISE Mercury's rebate is specifically targeted towards
Priority Customer orders, the Exchange does not believe that this is
unfairly discriminatory. Priority Customer orders on the Exchange are
generally entitled to lower or no fees and the Exchange believes that
attracting more liquidity from Priority Customers will benefit all
market participants that trade on ISE Mercury.
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\33\ See ISE Fee Schedule, I. Regular Order Fees and Rebates,
Fee for PIM Orders of 100 or Fewer Contracts at https://www.ise.com/assets/documents/OptionsExchange/legal/fee/ISE_fee_schedule.pdf.
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The Exchange further believes it is reasonable and equitable to
charge the proposed Fees for Responses to Crossing Orders because an
execution resulting from a Response to a Crossing Order is akin to an
execution and therefore its proposal to establish execution fees is
reasonable and equitable. The Exchange believes that while the
differential between the fees charged for Crossing Orders and the Fees
for Responses to Crossing Orders is significant, the differential on
ISE Mercury is similar to the differential that currently exists on
other exchanges that offer a similar functionality. For example, as
noted above, ISE's Fees for Crossing Orders, which are $0.20 per
contract in all symbols for all market participants, except Market
Makers in non-select symbols,\34\ are identical to those proposed by
ISE Mercury.\35\ And, ISE's fees for Responses to Crossing Orders,
which are $0.47 per contract for all market participants in all
symbols, \36\ are in line with those on ISE Mercury, except that ISE
Mercury charges a lower fee to Market Makers. ISE Mercury charges a
lower fee to Market Maker orders because Market Makers have
requirements and obligations to the Exchange that the other market
participants do not (such as quoting requirements). Market Makers are
also charged Marketing Fees, which are not assessed to other market
participants. Therefore, the Exchange believes the proposed fees are
reasonable and equitably allocated because they are within the range of
fees assessed by other exchanges employing similar pricing schemes.
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\34\ These Market Maker fees are subject to tier discounts on
ISE. See ISE Fee Schedule, IV. Other Options Fees and Rebates, C.
ISE Market Maker Discount Tiers at https://www.ise.com/assets/documents/OptionsExchange/legal/fee/ISE_fee_schedule.pdf.
\35\ See id. at I. Regular Order Fees and Rebates, Fee for
Crossing Orders.
\36\ Id. at I. Regular Order Fees and Rebates, Fee for Responses
to Crossing Orders.
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The Exchange is not introducing a novel pricing scheme for Crossing
Orders or for Responses to Crossing Orders. This functionality is
currently available on a number of exchanges, all of which have pricing
differentials that promote internalizing customer orders. The Exchange
believes these are not unfairly discriminatory because they would
uniformly apply to all similarly situated market participants.
The Exchange further believes charging lower fees and providing
higher rebates to Priority Customer orders attracts that order flow to
the Exchange and thereby creates liquidity to the benefit of all market
participants who trade on the Exchange. Further, the Exchange believes
that it is equitable and not unfairly discriminatory to assess lower
fees to Priority Customer orders. A Priority Customer is by definition
not a broker or dealer in securities, and does not place more than 390
orders in listed options per day on average during a calendar month for
its own beneficial account(s). This limitation does not apply to
participants on the Exchange whose behavior is substantially similar to
that of market professionals, including Professional Customers, Non-ISE
Mercury Market Makers, and Firm Proprietary/Broker-Dealers, who will
generally submit a higher number of orders (many of which do not result
in executions) than Priority Customers. Further, Professional Customers
engage in trading activity similar to that conducted by Market Makers
and proprietary traders. Finally, the Exchange believes that the
proposed rebates are competitive with rebates provided by other
exchanges, as discussed above, and are therefore reasonable and
equitable.
Finally, the Exchange believes that the price differentiation
between the other market participants is justified. With respect to
fees for Market Maker orders, as noted above, the Exchange believes
that the price differentiation between the other market participants is
appropriate and not unfairly discriminatory because Market Makers have
requirements and obligations to the Exchange that the other market
participants do not (such as quoting requirements). Market makers also
incur Marketing Fees, which the other market participants do not. The
Exchange believes that it is equitable and not unfairly discriminatory
to assess a higher fee to certain market participants that do not have
such requirements and obligations that Exchange Market Makers do. The
Exchange believes that the proposed fees are fair, equitable, and not
unfairly discriminatory because the proposed fees are consistent with
price differentiation that exists today at other options exchanges.\37\
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\37\ See PHLX Fee Schedule, II. Multiply Listed Options Fees at
https://www.nasdaqtrader.com/Micro.aspx?id=phlxpricing.
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Route-Out Fees
The Exchange believes the proposed route-out fees are reasonable
and equitable as they provide the Exchange the ability to recover costs
associated with using unaffiliated broker-dealers to route orders to
other exchanges for linkage executions. The Exchange also believes that
the proposed fees are not unfairly discriminatory because these fees
would be uniformly applied to all market participant orders. As fees to
access liquidity for orders have risen at other exchanges, it has
become necessary for the Exchange to adopt routing fees in order to
recoup the costs associated with routing linkage orders. The Exchange
notes that a number of other exchanges currently charge a variety of
routing related fees associated with customer and non-customer orders
that are subject to linkage handling. The Exchange also notes that the
fees proposed herein are within the range of fees charged by other
Exchanges.\38\
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\38\ See ISE Fee Schedule, IV. Other Options Fees and Rebates,
F. Route-Out Fees at https://www.ise.com/assets/documents/OptionsExchange/legal/fee/ISE_fee_schedule.pdf and ISE Gemini Fee
Schedule, II. Other Options Fees and Rebates, A. Route-Out Fees at
https://www.ise.com/assets/gemini/documents/OptionsExchange/legal/fee/Gemini_Fee_Schedule.pdf.
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Marketing Fees
The Exchange believes the proposed Marketing Fees are reasonable
and equitable because the proposed fees will allow the Exchange and its
Market Makers to better compete for order flow since the Exchange will
now collect the same amount of fees as PHLX in options classes that are
subject to its Payment for Order Flow Fees.\39\ The Exchange
[[Page 12774]]
believes that with these proposed fees, Market Makers will have greater
incentive to trade on ISE Mercury in the symbols that are subject to
Marketing Fees and thus enhance competition.
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\39\ See PHLX Fee Schedule, II. Multiply Listed Options Fees,
Payment for Order Flow Fees at https://www.nasdaqtrader.com/Micro.aspx?id=phlxpricing.
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FINRA Web CRD Fees
The Exchange believes that its proposal to adopt the FINRA Web CRD
Fees is reasonable because the proposed fees are identical to those
adopted by FINRA for use of Web CRD for disclosure and the registration
of FINRA members and their associated persons. In the FINRA Fee Filing,
FINRA noted that it believed that its fees are reasonable based on the
increased costs associated with operating and maintaining Web CRD, and
listed a number of enhancements made to Web CRD in support of its fee
change. These costs are borne by FINRA when a Non-FINRA member uses Web
CRD. FINRA further noted its belief that the fees are reasonable
because they help to ensure the integrity of the information in Web
CRD, which is very important because the Commission, FINRA, other self-
regulatory organizations and state securities regulators use Web CRD to
make licensing and registration decisions, among other things. The
Exchange notes that the proposed rule change is reasonable because the
amount of the fees are those provided by FINRA, and the Exchange does
not collect or retain these fees. The proposed rule change is also
equitable and not unfairly discriminatory because the Exchange will not
be collecting or retaining these fees, therefore will not be in a
position to apply them in an inequitable or unfairly discriminatory
manner.
The Exchange notes that all of the proposed fees and rebates,
discussed above, are intended to establish ISE Mercury as an attractive
venue for market participants to direct their order flow as the
proposed fees and rebates are competitive with those established by
other exchanges for similar trading activities. The Exchange will be
operating in a highly competitive market in which market participants
can readily direct order flow to another exchange if they deem fees at
a particular exchange to be too high, or in the case of rebates, not
high enough. For the reasons noted above, the Exchange believes that
the proposed fees are fair, equitable, and not unfairly discriminatory.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\40\ the Exchange
does not believe that the proposed rule change will impose any burden
on intermarket or intramarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act.
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\40\ 15 U.S.C. 78f(b)(8).
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The Exchange notes that the difference between the Fees for
Crossing Orders and the Fees for Responses to Crossing Orders are not
unfairly discriminatory and do not impose an undue burden on
competition. The Exchange believes the crossing mechanisms on ISE
Mercury provide incentives for market participants to submit customer
order flow to the Exchange and thus, creates a greater opportunity for
customers to receive better executions. The crossing mechanisms on ISE
Mercury provide an opportunity for market participants to compete for
customer orders, and have no limitations regarding the number of and
type of market participant that can participate and compete for such
orders. ISE Mercury notes that its market model and fees are generally
intended to attract a specific segment of the options industry and the
Exchange is competing with other exchanges that currently attract that
segment.
Unilateral action by ISE Mercury in establishing fees for services
provided to its members and others using its facilities will not have
any adverse impact on competition. As a new entrant in the already
highly competitive environment for equity options trading, ISE Mercury
does not have the market power necessary to set prices for services
that are inequitably allocated, unreasonable or unfairly discriminatory
in violation of the Act. ISE Mercury's proposed fees and rebates, as
described herein, are comparable to fees charged and rebates provided
by other options exchanges for the same or similar services. To the
extent the proposed fees and rebates fail to attract order flow away
from its competitors, ISE Mercury may have to adjust level of fees and
rebates.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange has not solicited, and does not intend to solicit,
comments on this proposed rule change. The Exchange has not received
any unsolicited written comments from members or other interested
parties.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act,\41\ and subparagraph (f)(2) of Rule 19b-4
thereunder,\42\ because it establishes a due, fee, or other charge
imposed by ISE Mercury.
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\41\ 15 U.S.C. 78s(b)(3)(A)(ii).
\42\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
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:
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-ISEMercury-2016-02 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-ISEMercury-2016-02. 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
[[Page 12775]]
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-ISEMercury-2016-02, and should be submitted on or before
March 31, 2016.
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\43\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\43\
Brent J. Fields,
Secretary.
[FR Doc. 2016-05322 Filed 3-9-16; 8:45 am]
BILLING CODE 8011-01-P
