Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Eliminate the Strict Concentration Limits on Primary Market Makers, 16248-16250 [2016-06745]

Download as PDF 16248 Federal Register / Vol. 81, No. 58 / Friday, March 25, 2016 / Notices asabaliauskas on DSK3SPTVN1PROD with NOTICES Agreement’’).1 The Adviser will provide the Funds with continuous and comprehensive investment management services subject to the supervision of, and policies established by, each Fund’s board of trustees (‘‘Board’’). The Advisory Agreement permits the Adviser, subject to the approval of the Board, to delegate to one or more subadvisers (each, a ‘‘Sub-Adviser’’ and collectively, the ‘‘Sub-Advisers’’) the responsibility to provide the day-to-day portfolio investment management of each Fund, subject to the supervision and direction of the Adviser. The primary responsibility for managing the Funds will remain vested in the Adviser. The Adviser will hire, evaluate, allocate assets to and oversee the Sub-Advisers, including determining whether a Sub-Adviser should be terminated, at all times subject to the authority of the Board. 2. Applicants request an exemption to permit the Adviser, subject to Board approval, to hire certain Sub-Advisers pursuant to Sub-Advisory Agreements and materially amend existing SubAdvisory Agreements without obtaining the shareholder approval required under Section 15(a) of the Act and Rule 18f– 2 under the Act.2 Applicants also seek an exemption from the Disclosure Requirements to permit a Fund to disclose (as both a dollar amount and a percentage of the Fund’s net assets): (a) The aggregate fees paid to the Adviser; and (b) the aggregate fees paid to SubAdvisers other than Affiliated SubAdvisers; and (c) the fee paid to each Affiliated Sub-Adviser (collectively, ‘‘Aggregate Fee Disclosure’’). 3. Applicants agree that any order granting the requested relief will be subject to the terms and conditions stated in the Application. Such terms and conditions provide for, among other safeguards, appropriate disclosure to Fund shareholders and notification about sub-advisory changes and 1 Applicants request relief with respect to any existing and any future series of the Trust and any other registered open-end management company or series thereof that: (a) Is advised by the Adviser or its successor or by a person controlling, controlled by, or under common control with the Adviser or its successor (each, also an ‘‘Adviser’’); (b) uses the manager of managers structure described in the application; and (c) complies with the terms and conditions of the application (any such series, a ‘‘Fund’’ and collectively, the ‘‘Funds’’). For purposes of the requested order, ‘‘successor’’ is limited to an entity that results from a reorganization into another jurisdiction or a change in the type of business organization. 2 The requested relief will not extend to any SubAdviser that is an affiliated person, as defined in Section 2(a)(3) of the Act, of a Fund or the Adviser, other than by reason of serving as a sub-adviser to one or more of the Funds, or as an investment adviser or subadviser to any fund of the Trust other than a Fund (‘‘Affiliated Sub-Adviser’’). VerDate Sep<11>2014 18:30 Mar 24, 2016 Jkt 238001 enhanced Board oversight to protect the interests of the Funds’ shareholders. 4. Section 6(c) of the Act provides that the Commission may exempt any person, security, or transaction or any class or classes of persons, securities, or transactions from any provisions of the Act, or any rule thereunder, if such relief is necessary or appropriate in the public interest and consistent with the protection of investors and purposes fairly intended by the policy and provisions of the Act. Applicants believe that the requested relief meets this standard because, as further explained in the Application, the Advisory Agreements will remain subject to shareholder approval, while the role of the Sub-Advisers is substantially similar to that of individual portfolio managers, so that requiring shareholder approval of SubAdvisory Agreements would impose unnecessary delays and expenses on the Funds. Applicants believe that the requested relief from the Disclosure Requirements meets this standard because it will improve the Adviser’s ability to negotiate fees paid to the SubAdvisers that are more advantageous for the Funds. For the Commission, by the Division of Investment Management, under delegated authority. Brent J. Fields, Secretary. [FR Doc. 2016–06748 Filed 3–24–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–77410; File No. SR–ISE– 2016–07] Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Eliminate the Strict Concentration Limits on Primary Market Makers March 21, 2016. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on March 15, 2016, the International Securities Exchange, LLC (the ‘‘Exchange’’ or the ‘‘ISE’’) filed with the Securities and Exchange 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 1 15 2 17 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00122 Fmt 4703 Sfmt 4703 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 proposes to eliminate the 30% strict cap on the number of Primary Market Maker (‘‘PMM’’) memberships that the ISE’s Board of Directors (the ‘‘Board’’) can approve for an ISE member to operate. The text of the proposed rule change is available on the Exchange’s Web site at 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 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 these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposal is to eliminate the 30% strict cap on the number of PMM memberships that the Board can approve for an ISE member to operate.3 ISE Rule 303(b) currently requires the Board show ‘‘good cause’’ to approve any PMM membership that would result in the PMM operating trading privileges associated with more than one PMM membership. The Board may waive the limitations contained in this rule if it determines that good cause has been shown and such action is, in its judgment, in the best interests of the Exchange.4 The Board is not permitted, 3 A PMM serves a function similar to that of a specialist on other exchanges. Among other things, a PMM must provide continuous quotations in all assigned options classes. See Rule 804(e)(1); Supplementary Material .01 to Rule 804. There are currently 10 outstanding PMM memberships authorized and issued by the Exchange under its Third Amended and Restated LLC Agreement (the ‘‘LLC Agreement’’). See LLC Agreement, Section 6.1(a). 4 When making its determination whether good cause has been shown to waive the limitations contained in this rule, the Board must consider whether an operational, business or regulatory need E:\FR\FM\25MRN1.SGM 25MRN1 Federal Register / Vol. 81, No. 58 / Friday, March 25, 2016 / Notices asabaliauskas on DSK3SPTVN1PROD with NOTICES however, to grant this approval if the member and its affiliates would, as a result, be approved to exercise trading privileges associated with more than 30% of all outstanding PMM memberships.5 Section 6.5(b) of ISE’s Third Amended and Restated Limited Liability Company Agreement (the ‘‘LLC Agreement’’) contains the same 30% strict cap as Rule 303(b). This limitation on exercising PMM trading privileges is in addition to ownership and voting limitations in the LLC Agreement and in the Exchange’s rules that prohibit any member from owning (or voting the shares representing) more than 20% of any class of membership.6 Due to the continued concentration and specialization in the options market making community, and the decreasing number of market makers available to operate these memberships, the Exchange is proposing to eliminate the 30% cap on the number of PMM memberships that the Board can approve for a member to operate. As the number of market makers decreases, the Exchange is concerned that there may not be a sufficient number of members qualified to be PMMs if the Exchange retains the current 30% cap (thus limiting a member to operating three PMM memberships). The options markets are highly competitive, and each exchange actively seeks to attract order flow by disseminating tight and liquid markets and by providing a high level of customer satisfaction. Ensuring that the Exchange has high quality PMMs is critical in this competitive battle. The Exchange believes that the proposed approach is consistent with treatment on other markets that do not have strict market maker concentration limits, and will enable the Board to approve members to operate multiple PMM memberships after the Board determines that good cause has been shown and if doing so would be in the best interest of the Exchange. The Commission has previously approved rule changes that eliminated mandatory caps on the number of issues to exceed the limits has been demonstrated, and in those cases where such a need is demonstrated, the Board must also consider any operational, business or regulatory concerns may be raised if such a waiver were granted. See Supplementary Material .01 to Rule 303. 5 In 2006, the Commission approved an ISE proposal to increase the maximum number of PMM memberships that an ISE member may operate from two to three PMM memberships. See Securities Exchange Act Release No. 53271 (February 10, 2006), 71 FR 8625 (February 17, 2006) (SR–ISE– 2005–46) (Approval Order). 6 See LLC Agreement, Section 6.5(a); Supplementary Material .02 to Rule 303. The Exchange is not proposing any changes to the ownership and voting limitations. VerDate Sep<11>2014 18:30 Mar 24, 2016 Jkt 238001 that may be allocated to market makers on other markets, such as on Pacific Exchange, Inc. (‘‘PCX’’) (n/k/a ‘‘NYSE Arca’’), where the Commission approved a rule change by PCX to eliminate its Lead Market Maker (‘‘LMM’’) concentration limit of 15% of the issues traded on the PCX options floor.7 There, the Commission noted that PCX’s concentration limits served the purpose of minimizing the disturbance to a fair and orderly market that may otherwise result from the failure of an LMM. However, the Commission also noted that other exchanges did not impose specified mandatory limits on the number of options that may be allocated to specialists, citing to the rules of the Chicago Board Options Exchange (‘‘CBOE’’).8 In addition, the Commission has previously granted registration to new exchanges that do not have similar concentration limits.9 The Exchange recognizes that increasing the number of PMM memberships a member can operate could raise issues regarding concentration of market making expertise. In this regard, the proposed rule change is only an enabling rule. With the proposed change, the Board will still be required to show good cause to approve any member to operate more than one PMM membership, and could consider the number of memberships already by the member in determining whether or not there is good cause shown. Thus, the Board will need to weigh each potential application on its own merits, balancing the potential benefits of allowing a member to exercise more than one PMM membership against any potential concentration concerns. The Board would not be prohibited under the rules and under the LLC Agreement, however, from approving PMMs to operate more than a specified percentage of outstanding memberships. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder that are applicable to a national securities exchange, and, in particular, with the requirements of Section 6(b) of the 7 See Securities Exchange Act Release Nos. 47795 (May 5, 2003), 68 FR 25074 (May 9, 2003) (Notice); 48029 (June 13, 2003), 68 FR 37187 (June 23, 2003) (SR–PCX–2002–25) (Approval Order). 8 See CBOE Rule 8.84 (Rule 8.84 does not impose a mandatory cap on the number of issues that may be allocated to a Designated Primary Market-Maker (‘‘DPM’’). 9 See MIAX Options Exchange (‘‘MIAX’’) Rules. PO 00000 Frm 00123 Fmt 4703 Sfmt 4703 16249 Act.10 In particular, the proposal is consistent with Section 6(b)(5) of the Act,11 because it is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanisms of a free and open market and a national market system and, in general, to protect investors and the public interest. The options industry continues to experience a consolidation and decrease in the number of market makers and therefore, the Exchange is proposing a rule change that would eliminate the 30% PMM cap and would allow the Board the flexibility to approve or deny each potential PMM application based upon its determination of whether good cause had been shown and if doing so would be in the best interest of the Exchange. Also as noted above, the Commission has previously approved rule changes eliminating mandatory caps on the number of issues that may be allocated to market makers on other markets, and has granted registration to new exchanges that do not have similar concentration limits. The Exchange therefore believes that the proposed rule change is designed to remove impediments to and perfect the mechanisms of a free and open market and a national market system. Furthermore, this proposed rule change would not amend the current prohibitions in the LLC Agreement and in the Exchange’s rules against a member owning or voting more than 20% of any class of membership. Thus, the only way a member could operate more than 30% of all outstanding PMM memberships would be to lease such membership, with the lease providing that the lessor retains all voting rights.12 B. Self-Regulatory Organization’s Statement on Burden on Competition In accordance with Section 6(b)(8) of the Act,13 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. To the contrary, the Exchange believes that the proposed rule change will increase competition among market makers to be approved as a PMM on the Exchange, thus allowing the Exchange to choose the most qualified PMM that will provide the Exchange with strong market making capabilities. Also as noted above, other markets do not have 10 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). 12 See ISE Second A&R Constitution, Section 12.4; Supplementary Material .02 to Rule 303. 13 15 U.S.C. 78f(b)(8). 11 15 E:\FR\FM\25MRN1.SGM 25MRN1 16250 Federal Register / Vol. 81, No. 58 / Friday, March 25, 2016 / Notices comparable mandatory caps or concentration limits, so eliminating the 30% PMM cap will bring the Exchange’s rules in line with its competitors. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange has neither solicited nor received written comments on this proposed rule change. The Exchange has not received any written comments from members or other interested parties. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the 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, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 14 and Rule 19b–4(f)(6) thereunder.15 The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest. Therefore, the Commission hereby waives the operative delay and designates the proposed rule change operative upon filing.16 As noted above, the Exchange states that waiver of this requirement will allow the Exchange to immediately remove the 30% cap and align its rules with other competing options markets that do not have comparable restrictions. The Exchange also notes that the proposed rule change preserves existing ownership and voting limitations in the LLC Agreement. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if 14 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). As required under Rule 19b–4(f)(6)(iii), the Exchange provided the Commission with written notice of its intent to file the proposed rule change, along with a brief description and the text of 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. 16 For purposes only of waiving the 30-day operative delay, the Commission has also considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). asabaliauskas on DSK3SPTVN1PROD with NOTICES 15 17 VerDate Sep<11>2014 19:13 Mar 24, 2016 Jkt 238001 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– ISE–2016–07 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–ISE–2016–07. 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– PO 00000 Frm 00124 Fmt 4703 Sfmt 4703 2016–07 and should be submitted on or before April 15, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 Brent J. Fields, Secretary. [FR Doc. 2016–06745 Filed 3–24–16; 8:45 am] BILLING CODE 8011–01–P DEPARTMENT OF STATE Public Notice; 30-Day Notice of Proposed Information Collection: Smart Traveler Enrollment Program Notice of request for public comment and submission to OMB of proposed collection of information. ACTION: The Department of State has submitted the information collection described below to the Office of Management and Budget (OMB) for approval. In accordance with the Paperwork Reduction Act of 1995 we are requesting comments on this collection from all interested individuals and organizations. The purpose of this Notice is to allow 30 days for public comment. DATES: Submit comments directly to the Office of Management and Budget (OMB) up to April 25, 2016. ADDRESSES: Direct comments to the Department of State Desk Officer in the Office of Information and Regulatory Affairs at the Office of Management and Budget (OMB). You may submit comments by the following methods: • Email: oira_submission@ omb.eop.gov. You must include the DS form number, information collection title, and the OMB control number in the subject line of your message. • Fax: 202–395–5806. Attention: Desk Officer for Department of State. FOR FURTHER INFORMATION CONTACT: Direct requests for additional information regarding the collection listed in this notice, including requests for copies of the proposed collection instrument and supporting documents, to Derek Rivers, Bureau of Consular Affairs, Overseas Citizens Services (CA/ OCS/PMO), who may be reached on 202–485–6332 or at RiversDA@state.gov. SUPPLEMENTARY INFORMATION: • Title of Information Collection: Smart Traveler Enrollment Program • OMB Control Number: 1405–0152 • Type of Request: Revision of a Currently Approved Collection • Originating Office: Bureau of Consular Affairs, CA/OCS/PMO SUMMARY: 17 17 E:\FR\FM\25MRN1.SGM CFR 200.30–3(a)(12). 25MRN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 81, Number 58 (Friday, March 25, 2016)]
[Notices]
[Pages 16248-16250]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-06745]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77410; File No. SR-ISE-2016-07]

Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change To Eliminate the Strict Concentration Limits on Primary Market
Makers

March 21, 2016.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on March 15, 2016, the International Securities Exchange, LLC (the
``Exchange'' or the ``ISE'') filed with the Securities and Exchange
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.
---------------------------------------------------------------------------

\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

ISE proposes to eliminate the 30% strict cap on the number of
Primary Market Maker (``PMM'') memberships that the ISE's Board of
Directors (the ``Board'') can approve for an ISE member to operate. The
text of the proposed rule change is available on the Exchange's Web
site at 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 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 these statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
The purpose of the proposal is to eliminate the 30% strict cap on
the number of PMM memberships that the Board can approve for an ISE
member to operate.\3\ ISE Rule 303(b) currently requires the Board show
``good cause'' to approve any PMM membership that would result in the
PMM operating trading privileges associated with more than one PMM
membership. The Board may waive the limitations contained in this rule
if it determines that good cause has been shown and such action is, in
its judgment, in the best interests of the Exchange.\4\ The Board is
not permitted,

[[Page 16249]]

however, to grant this approval if the member and its affiliates would,
as a result, be approved to exercise trading privileges associated with
more than 30% of all outstanding PMM memberships.\5\ Section 6.5(b) of
ISE's Third Amended and Restated Limited Liability Company Agreement
(the ``LLC Agreement'') contains the same 30% strict cap as Rule
303(b). This limitation on exercising PMM trading privileges is in
addition to ownership and voting limitations in the LLC Agreement and
in the Exchange's rules that prohibit any member from owning (or voting
the shares representing) more than 20% of any class of membership.\6\
---------------------------------------------------------------------------

\3\ A PMM serves a function similar to that of a specialist on
other exchanges. Among other things, a PMM must provide continuous
quotations in all assigned options classes. See Rule 804(e)(1);
Supplementary Material .01 to Rule 804. There are currently 10
outstanding PMM memberships authorized and issued by the Exchange
under its Third Amended and Restated LLC Agreement (the ``LLC
Agreement''). See LLC Agreement, Section 6.1(a).
\4\ When making its determination whether good cause has been
shown to waive the limitations contained in this rule, the Board
must consider whether an operational, business or regulatory need to
exceed the limits has been demonstrated, and in those cases where
such a need is demonstrated, the Board must also consider any
operational, business or regulatory concerns may be raised if such a
waiver were granted. See Supplementary Material .01 to Rule 303.
\5\ In 2006, the Commission approved an ISE proposal to increase
the maximum number of PMM memberships that an ISE member may operate
from two to three PMM memberships. See Securities Exchange Act
Release No. 53271 (February 10, 2006), 71 FR 8625 (February 17,
2006) (SR-ISE-2005-46) (Approval Order).
\6\ See LLC Agreement, Section 6.5(a); Supplementary Material
.02 to Rule 303. The Exchange is not proposing any changes to the
ownership and voting limitations.
---------------------------------------------------------------------------

Due to the continued concentration and specialization in the
options market making community, and the decreasing number of market
makers available to operate these memberships, the Exchange is
proposing to eliminate the 30% cap on the number of PMM memberships
that the Board can approve for a member to operate.
As the number of market makers decreases, the Exchange is concerned
that there may not be a sufficient number of members qualified to be
PMMs if the Exchange retains the current 30% cap (thus limiting a
member to operating three PMM memberships). The options markets are
highly competitive, and each exchange actively seeks to attract order
flow by disseminating tight and liquid markets and by providing a high
level of customer satisfaction. Ensuring that the Exchange has high
quality PMMs is critical in this competitive battle.
The Exchange believes that the proposed approach is consistent with
treatment on other markets that do not have strict market maker
concentration limits, and will enable the Board to approve members to
operate multiple PMM memberships after the Board determines that good
cause has been shown and if doing so would be in the best interest of
the Exchange.
The Commission has previously approved rule changes that eliminated
mandatory caps on the number of issues that may be allocated to market
makers on other markets, such as on Pacific Exchange, Inc. (``PCX'')
(n/k/a ``NYSE Arca''), where the Commission approved a rule change by
PCX to eliminate its Lead Market Maker (``LMM'') concentration limit of
15% of the issues traded on the PCX options floor.\7\ There, the
Commission noted that PCX's concentration limits served the purpose of
minimizing the disturbance to a fair and orderly market that may
otherwise result from the failure of an LMM. However, the Commission
also noted that other exchanges did not impose specified mandatory
limits on the number of options that may be allocated to specialists,
citing to the rules of the Chicago Board Options Exchange
(``CBOE'').\8\ In addition, the Commission has previously granted
registration to new exchanges that do not have similar concentration
limits.\9\
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\7\ See Securities Exchange Act Release Nos. 47795 (May 5,
2003), 68 FR 25074 (May 9, 2003) (Notice); 48029 (June 13, 2003), 68
FR 37187 (June 23, 2003) (SR-PCX-2002-25) (Approval Order).
\8\ See CBOE Rule 8.84 (Rule 8.84 does not impose a mandatory
cap on the number of issues that may be allocated to a Designated
Primary Market-Maker (``DPM'').
\9\ See MIAX Options Exchange (``MIAX'') Rules.
---------------------------------------------------------------------------

The Exchange recognizes that increasing the number of PMM
memberships a member can operate could raise issues regarding
concentration of market making expertise. In this regard, the proposed
rule change is only an enabling rule. With the proposed change, the
Board will still be required to show good cause to approve any member
to operate more than one PMM membership, and could consider the number
of memberships already by the member in determining whether or not
there is good cause shown. Thus, the Board will need to weigh each
potential application on its own merits, balancing the potential
benefits of allowing a member to exercise more than one PMM membership
against any potential concentration concerns. The Board would not be
prohibited under the rules and under the LLC Agreement, however, from
approving PMMs to operate more than a specified percentage of
outstanding memberships.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder that are applicable to a national securities exchange, and,
in particular, with the requirements of Section 6(b) of the Act.\10\ In
particular, the proposal is consistent with Section 6(b)(5) of the
Act,\11\ because it is designed to promote just and equitable
principles of trade, to remove impediments to and perfect the
mechanisms of a free and open market and a national market system and,
in general, to protect investors and the public interest.
---------------------------------------------------------------------------

\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

The options industry continues to experience a consolidation and
decrease in the number of market makers and therefore, the Exchange is
proposing a rule change that would eliminate the 30% PMM cap and would
allow the Board the flexibility to approve or deny each potential PMM
application based upon its determination of whether good cause had been
shown and if doing so would be in the best interest of the Exchange.
Also as noted above, the Commission has previously approved rule
changes eliminating mandatory caps on the number of issues that may be
allocated to market makers on other markets, and has granted
registration to new exchanges that do not have similar concentration
limits. The Exchange therefore believes that the proposed rule change
is designed to remove impediments to and perfect the mechanisms of a
free and open market and a national market system. Furthermore, this
proposed rule change would not amend the current prohibitions in the
LLC Agreement and in the Exchange's rules against a member owning or
voting more than 20% of any class of membership. Thus, the only way a
member could operate more than 30% of all outstanding PMM memberships
would be to lease such membership, with the lease providing that the
lessor retains all voting rights.\12\
---------------------------------------------------------------------------

\12\ See ISE Second A&R Constitution, Section 12.4;
Supplementary Material .02 to Rule 303.
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

In accordance with Section 6(b)(8) of the Act,\13\ 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. To the contrary,
the Exchange believes that the proposed rule change will increase
competition among market makers to be approved as a PMM on the
Exchange, thus allowing the Exchange to choose the most qualified PMM
that will provide the Exchange with strong market making capabilities.
Also as noted above, other markets do not have

[[Page 16250]]

comparable mandatory caps or concentration limits, so eliminating the
30% PMM cap will bring the Exchange's rules in line with its
competitors.
---------------------------------------------------------------------------

\13\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

The Exchange has neither solicited nor received written comments on
this proposed rule change. The Exchange has not received any written
comments from members or other interested parties.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

Because the 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, the proposed rule change has become effective
pursuant to Section 19(b)(3)(A) of the Act \14\ and Rule 19b-4(f)(6)
thereunder.\15\
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\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written
notice of its intent to file the proposed rule change, along with a
brief description and the text of 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.
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The Exchange has asked the Commission to waive the 30-day operative
delay so that the proposal may become operative immediately upon
filing. The Commission believes that waiving the 30-day operative delay
is consistent with the protection of investors and the public interest.
Therefore, the Commission hereby waives the operative delay and
designates the proposed rule change operative upon filing.\16\ As noted
above, the Exchange states that waiver of this requirement will allow
the Exchange to immediately remove the 30% cap and align its rules with
other competing options markets that do not have comparable
restrictions. The Exchange also notes that the proposed rule change
preserves existing ownership and voting limitations in the LLC
Agreement.
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\16\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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 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-ISE-2016-07 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-ISE-2016-07. 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-2016-07 and should be
submitted on or before April 15, 2016.
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\17\ 17 CFR 200.30-3(a)(12).

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
Brent J. Fields,
Secretary.
[FR Doc. 2016-06745 Filed 3-24-16; 8:45 am]
BILLING CODE 8011-01-P

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