Self-Regulatory Organizations; ISE Gemini, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Make a Number of Non-Controversial and Technical Changes, 79540-79543 [2016-27237]

Download as PDF 79540 Federal Register / Vol. 81, No. 219 / Monday, November 14, 2016 / Notices 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: For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.23 Brent J. Fields, Secretary. [FR Doc. 2016–27235 Filed 11–10–16; 8:45 am] SECURITIES AND EXCHANGE COMMISSION • 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– NASDAQ–2016–149 on the subject line. Self-Regulatory Organizations; ISE Gemini, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Make a Number of Non-Controversial and Technical Changes Paper Comments November 7, 2016. • Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. mstockstill on DSK3G9T082PROD with NOTICES [Release No. 34–79253; File No. SR– ISEGemini–2016–13] Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on October 26, 2016, ISE Gemini, LLC (‘‘ISE Gemini’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. VerDate Sep<11>2014 17:26 Nov 10, 2016 Jkt 241001 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change BILLING CODE 8011–01–P Electronic Comments All submissions should refer to File Number SR–NASDAQ–2016–149. 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–NASDAQ–2016–149 and should be submitted on or before December 5, 2016. the most significant aspects of such statements. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to make a number of non-controversial and technical changes to its rules as described in more detail below. 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 Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of 23 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00130 Fmt 4703 Sfmt 4703 1. Purpose The Exchange is proposing to make a number of non-controversial changes and technical corrections to its rules. Specifically, these changes are all to correct typographical errors and delete obsolete rule text.3 The changes are described in more detail below. 1. No Bid Options/Limit Price Rule 713(b), which deals with priority of orders, provides that if the lowest offer for any options contract is $0.05 then no member shall enter a market order to sell that series, and any such market order shall be considered a limit order to sell at a price of $0.05. This provision is intended to prevent members from submitting market orders to sell in no bid series, which could execute at a price of $0.00, and to instead convert those orders to limit orders with a limit price equal to the minimum trading increment, i.e., $0.05 for most option classes.4 A ‘‘no bid’’ or ‘‘zero bid’’ series refers to an option where the bid price is $0.00. Series of options quoted no bid are usually deep out-of-the-money series that are perceived as having little if any chance of expiring in-the-money. For options that trade in regular nickel increments, a best offer of $0.05 corresponds to a best bid of $0.00, i.e. one minimum trading increment below the offer. However, option series may be no bid with other offer prices as well. For example, an option class would be considered no bid if it is quoted at $0.00 (bid)–$0.15 (offer). In order to avoid having these orders execute at a price of $0.00, the Exchange proposes to clarify that Rule 713(b) applies to all option classes that are quoted no bid, rather than just those option classes that have an offer of $0.05. Currently, options exchanges have in place a pilot (the ‘‘Penny Pilot’’) to quote and trade options in one cent increments, lowering the minimum trading increment from $0.05 in certain symbols. The Exchange therefore 3 See also Securities Exchange Act Release No. 73808 (December 10, 2014), 79 FR 74797 (December 16, 2014) (SR–ISE–2014–54) (order approving the same proposed rule changes to the International Securities Exchange, LLC (‘‘ISE’’) rulebook). 4 Symbols not included in the Penny Pilot generally trade in $0.05 increments if the options contract is trading at less than $3.00 per option, and $0.10 increments if the options contract is trading at $3.00 per option or higher. See Rule 710. E:\FR\FM\14NON1.SGM 14NON1 Federal Register / Vol. 81, No. 219 / Monday, November 14, 2016 / Notices proposes to amend Rule 713(b) to clarify that the Exchange will put a limit price equal to the minimum trading increment on market orders to sell a no bid option series. For example, if the deep out-of-the-money SPY December $230.00 call, which is traded in penny increments, is quoted at $0.00 (bid)– $0.03 (offer), a market order to sell would instead be treated as a limit order to sell at a price of $0.01. 2. Non-Displayed Penny Orders and Quotes The Exchange currently has rules in place that allow members to enter nondisplayed orders and quotes in penny increments in designated options with a minimum trading increment greater than one cent (‘‘non-displayed penny orders and quotes’’).5 A non-displayed penny order or quote is available for execution at its penny price but is displayed at the closest minimum trading increment that does not violate the limit price.6 The Exchange does not offer non-displayed penny orders or quotes and therefore proposes to delete obsolete references to this order type from its rules. First, the Exchange proposes to delete Rule 715(b)(4), which defines non-displayed penny orders. Second, the Exchange proposes to delete language in Rule 804(b)(1) and Rule 805(a) that permits market makers to enter non-displayed penny quotes and orders, respectively. Third, the Exchange proposes to delete language in Supplementary Material .06 to Rule 716 concerning split prices for nondisplayed penny orders and quotes entered into the Facilitation and Solicitation Mechanisms. Finally, the Exchange proposes to delete language in Supplementary Material .03 to Rule 717 concerning the execution of nondisplayed penny orders that an Electronic Access Member represents as agent against principal orders and orders solicited from other broker dealers. mstockstill on DSK3G9T082PROD with NOTICES 3. Customer Participation Orders A customer participation order (‘‘CPO’’) is an order type that can be used by Public Customers 7 to participate in the Price Improvement Mechanism (‘‘PIM’’).8 Upon entry of a 5 See Rule 715(b)(4), Rule 804(b)(1) and Rule 805(a). 6 See Rule 715(b)(4) and Rule 804(b)(1). 7 The term ‘‘Public Customer’’ means a person or entity that is not a broker or dealer in securities. See Rule 100(a)(38). 8 The PIM is a process by which an Electronic Access Member can provide price improvement opportunities for a transaction wherein the Electronic Access Member seeks to facilitate an order it represents as agent, and/or a transaction wherein the Electronic Access Member solicited VerDate Sep<11>2014 17:26 Nov 10, 2016 Jkt 241001 Crossing Transaction into the PIM,9 a broadcast message is sent to all members, who then have 500 milliseconds to enter orders that indicate the size and price at which they want to participate in the execution (‘‘Improvement Orders’’).10 The CPO is an instruction to the member to enter an Improvement Order on behalf of a Public Customer. Specifically, a CPO is a limit order on behalf of a Public Customer that, in addition to the limit order price in standard increments, includes a price stated in one cent increments at which the Public Customer wishes to participate in trades executed in the same options series in penny increments through the PIM.11 The Exchange does not offer CPOs and therefore proposes to delete obsolete references to this order type from its rules. The Exchange first proposes to delete Rule 715(f), which defines CPOs. Furthermore, the Exchange proposes to remove two references to CPOs in other rules. Specifically, the Exchange proposes to remove references to CPOs in Supplementary Material .06 to Rule 723, which explains when Improvement Orders can be entered with respect to CPOs,12 and in Rule 723(d), which notes that the agency side of an order entered into the Price Improvement Mechanism may execute against CPOs at the end of the exposure period. 4. Linkage Rules The Exchange proposes to delete Supplementary Material .04 and .05 to Rule 803, which contains duplicative and obsolete provisions relevant to away market routing. In particular, the content of Supplementary Material .04 and .05 to Rule 803 is now contained in Supplementary Material .06 and .07 to Rule 1901 13 because linkage handling is performed by unaffiliated broker dealers interest to execute against an order it represents as agent (a ‘‘Crossing Transaction’’). See Rule 723(a). 9 A Crossing Transaction is comprised of the order the Electronic Access Member represents as agent (the ‘‘Agency Order’’) and a counter-side order for the full size of the Agency Order (the ‘‘Counter-Side Order’’). The Counter-Side Order may represent interest for the Member’s own account, or interest the Member has solicited from one or more other parties, or a combination of both. See Rule 723(b). 10 See Rule 723(c)(1). 11 See Rule 715(f). 12 Although CPOs are no longer available, members will continue to be able to enter Improvement Orders for the account of Public Customers. 13 See Securities Exchange Act Release No. 73808 (December 10, 2014), 79 FR 74797 (December 16, 2014) (SR–ISE–2014–54) (order approving the proposed changes to move Supplementary Material .04 and .05 to Rule 803 to Supplementary Material .06 and .07 to Rule 1901 in the ISE rulebook). Chapter 19 of the Exchange’s rulebook incorporates Chapter 19 of the ISE rulebook by reference. PO 00000 Frm 00131 Fmt 4703 Sfmt 4703 79541 (i.e., Linkage Handlers) on the Exchange. Therefore as described above, the Exchange proposes to delete this language from Rule 803, which concerns the obligations of market makers. 5. Supplementary Material The Exchange notes that certain supplementary material is mistakenly labelled as ‘‘supplemental’’ material in the Exchange’s rulebook.14 In order to achieve consistency with how other rules are labelled, the Exchange proposes to change these to instead refer to ‘‘supplementary’’ material. Finally, the Exchange proposes to make a nonsubstantive change to Supplementary Material to Rule 803, which concerns the obligations of market makers, by updating the word ‘‘To’’ to lower case. 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.15 In particular, the proposal is consistent with Section 6(b)(5) of the Act 16 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 Exchange believes it is appropriate to make the proposed technical corrections to its rules so that Exchange members and investors have a clear and accurate understanding of the meaning of the ISE Gemini rules. 1. No Bid Options/Limit Price The Exchange currently operates a pilot program to permit designated options classes to be quoted and traded in increments as low as one cent. The Exchange is proposing to amend Rule 713(b) to account for the fact that option classes selected for inclusion in the Penny Pilot are permitted to trade in penny increments. For penny classes that are quoted no bid, the Exchange will convert a market order to sell to a limit order with a price of one cent. In addition, the proposed rule change clarifies that Rule 713(b) applies to all series with a bid of $0.00, and not just those series that also have an offer of $0.05. The proposed rule change is necessary to account for options trading in multiple trading increments, 14 See ‘‘Supplemental’’ Material to Rules 717 and 809. See also reference in Rule 721(a)(3) to ‘‘Supplemental’’ Material .01 to Rule 717. 15 15 U.S.C. 78f(b). 16 15 U.S.C. 78f(b)(5). E:\FR\FM\14NON1.SGM 14NON1 79542 Federal Register / Vol. 81, No. 219 / Monday, November 14, 2016 / Notices including under the Penny Pilot, and will ensure that market orders to sell are not inadvertently executed at a price of zero. The Exchange believes that these changes more accurately reflect the intent of Rule 713(b), as described above, and will eliminate investor confusion with respect to the operation of this rule by more accurately describing the functionality provided by the Exchange. 2. Non-Displayed Penny Orders and Quotes/Customer Participation Orders As explained above, the Exchange does not offer non-displayed penny orders and quotes or customer participation orders, and thus proposes to remove obsolete definitions and other outdated references to these order types. The Exchange believes that these changes will eliminate investor confusion regarding order types available for trading on ISE Gemini to the benefit of members and investors. 3. Linkage Rules The proposed changes to the linkage rules are non-substantive and intended to reduce investor confusion. As explained above, the Exchange is deleting duplicative and obsolete rule text from Chapter 8 of its rulebook because linkage handling is handled by Linkage Handlers. Therefore, the Exchange believes that these rules are more appropriately located in Chapter 19 of the Exchange’s rulebook, which incorporates by reference Chapter 19 of the ISE rulebook. 4. Supplementary Material The proposed change to label supplementary material correctly is non-substantive and is intended to achieve consistency in how these rules are labelled to the benefit of members and investors. mstockstill on DSK3G9T082PROD with NOTICES B. Self-Regulatory Organization’s Statement on Burden on Competition In accordance with Section 6(b)(8) of the Act,17 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 proposed rule change makes technical, non-substantive amendments to the Exchange’s rules in order to eliminate investor confusion, and is not designed to have any competitive impact. 17 15 U.S.C. 78f(b)(8). VerDate Sep<11>2014 17:26 Nov 10, 2016 Jkt 241001 C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A)(iii) of the Act 18 and subparagraph (f)(6) of Rule 19b–4 thereunder.19 A proposed rule change filed under Rule 19b–4(f)(6) normally does not become operative prior to 30 days after the date of filing. However, Rule 19b– 4(f)(6)(iii) 20 permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. In its filing with the Commission, the Exchange requests that the Commission waive the 30-day operative delay. The Exchange asserts that waiver of the operative delay is consistent with the protection of investors and the public interest because the proposed rule change makes non-substantive, technical changes to the Exchange’s rules. The Exchange also believes that the proposed rule change increases the clarity of ISE Gemini rules to the benefit of members and investors that trade on the Exchange. For these reasons, the Commission believes that waiver of the 30-day operative delay is consistent with the protection of investors and the public interest. Therefore, the Commission designates the proposed rule change to be operative upon filing.21 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if 18 15 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. 20 17 CFR 240.19b–4(f)(6)(iii). 21 For purposes only of waiving the 30-day operative delay, the Commission also has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 19 17 PO 00000 Frm 00132 Fmt 4703 Sfmt 4703 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– ISEGemini–2016–13 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–ISEGemini–2016–13. 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– E:\FR\FM\14NON1.SGM 14NON1 Federal Register / Vol. 81, No. 219 / Monday, November 14, 2016 / Notices ISEGemini–2016–13 and should be submitted on or before December 5, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.22 Brent J. Fields, Secretary. [FR Doc. 2016–27237 Filed 11–10–16; 8:45 am] BILLING CODE 8011–01–P II. Clearing Agency’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change SECURITIES AND EXCHANGE COMMISSION [Release No. 34–79252; File No. SR–DTC– 2016–011] Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Allow DTC To Automate the Process for Participants To Submit Eligibility Requests for the DTC Custody Service November 7, 2016. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4,2 notice is hereby given that on October 28, 2016, The Depository Trust Company (‘‘DTC’’) 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 clearing agency. DTC filed the proposed rule change pursuant to Section 19(b)(3)(A) 3 of the Act and Rule 19b–4(f)(4) 4 thereunder. The proposed rule change was effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Clearing Agency’s Statement of the Terms of Substance of the Proposed Rule Change The proposed rule change 5 would amend the DTC Custody Service Guide (‘‘Custody Guide’’) 6 to allow DTC to (i) enhance the process by which Participants submit requests to make Securities, and assets that are not Securities (‘‘Non-Security Assets’’), as applicable, eligible for deposit into the 22 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b–4(f)(4). 5 Capitalized terms not otherwise defined herein have the respective meanings set forth in the DTC Rules, By-laws and Organization Certificate (‘‘Rules’’), available at https://www.dtcc.com/legal/ rules-and-procedures.aspx. 6 Available at https://www.dtcc.com/∼/media/ Files/Downloads/legal/service-guides/Custody.pdf. mstockstill on DSK3G9T082PROD with NOTICES 1 15 VerDate Sep<11>2014 17:26 Nov 10, 2016 Jkt 241001 Custody Service (‘‘Custody Eligibility Requests’’) and (ii) add functionality for Participants to inquire as to whether a particular issue is eligible for the Custody Service. Upon its implementation, the proposed rule change would enhance efficiencies for Participants and DTC by providing a secure, centralized environment for the submission of Custody Eligibility Requests. In its filing with the Commission, the clearing agency 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 clearing agency has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. (A) Clearing Agency’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose In order for DTC to accept a Security or a Non-Security Asset, as applicable, for deposit into the Custody Service, DTC requires that the Security or NonSecurity Asset be made eligible for the Custody Service pursuant to a Custody Eligibility Request.7 The proposed rule change would allow DTC to transfer the existing request method for Custody Eligibility Requests by which Participants submit requests via email, to an Internet-based application (‘‘Application’’), as more fully described below (‘‘Enhanced Process’’).8 Upon implementation, the Enhanced Process would (i) promote a more secure environment by providing for the submission and processing of Custody Eligibility Requests through the Application,9 and (ii) enhance efficiencies for DTC by reducing the 7 Once the Security or Non-Security Asset subject of the Custody Eligibility Request is made eligible by DTC for deposit into the Custody Service, additional deposits of that Security or Non-Security Asset by the requesting Participant or other Participants may be made without requiring submission of another Custody Eligibility Request. 8 The Custody Guide provides that Custody Service functions may become accessible via webbased services as announced by DTC via Important Notice from time to time. See Custody Guide, supra note 6 at 4. DTC would announce the proposed rule change via Important Notice. 9 The Application has been designed to provide a secure, centralized online system managed by DTC, whereas Participant security protocols for the transmission of emails may vary. PO 00000 Frm 00133 Fmt 4703 Sfmt 4703 79543 manual processing of Custody Eligibility requests, as more fully described below. Background The Custody Service enables Participants that hold (i) Securities that (A) are not presently eligible for bookentry services at DTC and/or (B) would otherwise be eligible for DTC book-entry services but are not registered in the name of DTC’s nominee, Cede & Co., and/or (ii) certain Non-Security Assets, to deposit those Securities and/or NonSecurity Assets with DTC for safekeeping, in accordance with requirements set forth in the Custody Guide.10 Securities and Non-Security Assets deposited through the Custody Service are maintained in DTC’s secure vault in a Participant’s name or a Participant’s customer’s name (i.e., they are not transferred into DTC’s nominee name, Cede & Co).11 In addition, once a Security is deposited into the Custody Service, DTC may perform limited depository services relating to the Security including physical processing for the Security on a Participant’s behalf, such as facilitating the transfer of Security Certificates, and providing services available through the Custody Reorganization Service.12 The proposed rule change would amend the Custody Guide to allow DTC to implement the Enhanced Process by moving the processing of Custody Eligibility Requests to the Application and replacing certain manual processes, as more fully described below. Existing Process In order for an issue to be made eligible for deposit to the Custody Service, a Participant must submit a Custody Eligibility Request to DTC. The Custody Eligibility Request is submitted by email and must include certain data elements (‘‘Data Elements’’) 13 and a 10 See Custody Guide for the types of Securities and Non-Security Assets eligible for deposit to the Custody Service (‘‘Custody Eligible Security Types’’), supra note 6, at 5,12. 11 Cede & Co. is the holder of record of Securities eligible for DTC’s book-entry services. 12 See Custody Guide, supra note 6, 14–17 (providing Procedures for the Custody Reorganization Service). The limited depository services provided by DTC as described above relate only to securities processing functions and do not apply to Non-Security Assets. 13 Data Elements include DTC Participant Number (to identify the Participant making the Custody Eligibility Request), CUSIP (if available); Sub-Issue Type (required); description of the Security or Non-Security Asset (‘‘Security Description’’) (required); U.S/Non U.S. (This field is required for corporate debt and equity issues. All certificates of deposit and collateralized mortgage obligations must be U.S. issues. For municipal securities, this field is set to U.S. and is not updateable); Issuer Country of Origin (required for E:\FR\FM\14NON1.SGM Continued 14NON1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 81, Number 219 (Monday, November 14, 2016)]
[Notices]
[Pages 79540-79543]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-27237]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79253; File No. SR-ISEGemini-2016-13]

Self-Regulatory Organizations; ISE Gemini, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Make a Number of
Non-Controversial and Technical Changes

November 7, 2016.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on October 26, 2016, ISE Gemini, LLC (``ISE Gemini'' or ``Exchange'')
filed with the Securities and Exchange Commission (``SEC'' or
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the Exchange. The Commission
is publishing this notice to solicit comments on the proposed rule
change from interested persons.
---------------------------------------------------------------------------

\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

The Exchange proposes to make a number of non-controversial and
technical changes to its rules as described in more detail below.
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 Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.

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

1. Purpose
The Exchange is proposing to make a number of non-controversial
changes and technical corrections to its rules. Specifically, these
changes are all to correct typographical errors and delete obsolete
rule text.\3\ The changes are described in more detail below.
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\3\ See also Securities Exchange Act Release No. 73808 (December
10, 2014), 79 FR 74797 (December 16, 2014) (SR-ISE-2014-54) (order
approving the same proposed rule changes to the International
Securities Exchange, LLC (``ISE'') rulebook).
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1. No Bid Options/Limit Price
Rule 713(b), which deals with priority of orders, provides that if
the lowest offer for any options contract is $0.05 then no member shall
enter a market order to sell that series, and any such market order
shall be considered a limit order to sell at a price of $0.05. This
provision is intended to prevent members from submitting market orders
to sell in no bid series, which could execute at a price of $0.00, and
to instead convert those orders to limit orders with a limit price
equal to the minimum trading increment, i.e., $0.05 for most option
classes.\4\ A ``no bid'' or ``zero bid'' series refers to an option
where the bid price is $0.00. Series of options quoted no bid are
usually deep out-of-the-money series that are perceived as having
little if any chance of expiring in-the-money. For options that trade
in regular nickel increments, a best offer of $0.05 corresponds to a
best bid of $0.00, i.e. one minimum trading increment below the offer.
However, option series may be no bid with other offer prices as well.
For example, an option class would be considered no bid if it is quoted
at $0.00 (bid)-$0.15 (offer). In order to avoid having these orders
execute at a price of $0.00, the Exchange proposes to clarify that Rule
713(b) applies to all option classes that are quoted no bid, rather
than just those option classes that have an offer of $0.05. Currently,
options exchanges have in place a pilot (the ``Penny Pilot'') to quote
and trade options in one cent increments, lowering the minimum trading
increment from $0.05 in certain symbols. The Exchange therefore

[[Page 79541]]

proposes to amend Rule 713(b) to clarify that the Exchange will put a
limit price equal to the minimum trading increment on market orders to
sell a no bid option series. For example, if the deep out-of-the-money
SPY December $230.00 call, which is traded in penny increments, is
quoted at $0.00 (bid)-$0.03 (offer), a market order to sell would
instead be treated as a limit order to sell at a price of $0.01.
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\4\ Symbols not included in the Penny Pilot generally trade in
$0.05 increments if the options contract is trading at less than
$3.00 per option, and $0.10 increments if the options contract is
trading at $3.00 per option or higher. See Rule 710.
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2. Non-Displayed Penny Orders and Quotes
The Exchange currently has rules in place that allow members to
enter non-displayed orders and quotes in penny increments in designated
options with a minimum trading increment greater than one cent (``non-
displayed penny orders and quotes'').\5\ A non-displayed penny order or
quote is available for execution at its penny price but is displayed at
the closest minimum trading increment that does not violate the limit
price.\6\ The Exchange does not offer non-displayed penny orders or
quotes and therefore proposes to delete obsolete references to this
order type from its rules. First, the Exchange proposes to delete Rule
715(b)(4), which defines non-displayed penny orders. Second, the
Exchange proposes to delete language in Rule 804(b)(1) and Rule 805(a)
that permits market makers to enter non-displayed penny quotes and
orders, respectively. Third, the Exchange proposes to delete language
in Supplementary Material .06 to Rule 716 concerning split prices for
non-displayed penny orders and quotes entered into the Facilitation and
Solicitation Mechanisms. Finally, the Exchange proposes to delete
language in Supplementary Material .03 to Rule 717 concerning the
execution of non-displayed penny orders that an Electronic Access
Member represents as agent against principal orders and orders
solicited from other broker dealers.
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\5\ See Rule 715(b)(4), Rule 804(b)(1) and Rule 805(a).
\6\ See Rule 715(b)(4) and Rule 804(b)(1).
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3. Customer Participation Orders
A customer participation order (``CPO'') is an order type that can
be used by Public Customers \7\ to participate in the Price Improvement
Mechanism (``PIM'').\8\ Upon entry of a Crossing Transaction into the
PIM,\9\ a broadcast message is sent to all members, who then have 500
milliseconds to enter orders that indicate the size and price at which
they want to participate in the execution (``Improvement Orders'').\10\
The CPO is an instruction to the member to enter an Improvement Order
on behalf of a Public Customer. Specifically, a CPO is a limit order on
behalf of a Public Customer that, in addition to the limit order price
in standard increments, includes a price stated in one cent increments
at which the Public Customer wishes to participate in trades executed
in the same options series in penny increments through the PIM.\11\ The
Exchange does not offer CPOs and therefore proposes to delete obsolete
references to this order type from its rules. The Exchange first
proposes to delete Rule 715(f), which defines CPOs. Furthermore, the
Exchange proposes to remove two references to CPOs in other rules.
Specifically, the Exchange proposes to remove references to CPOs in
Supplementary Material .06 to Rule 723, which explains when Improvement
Orders can be entered with respect to CPOs,\12\ and in Rule 723(d),
which notes that the agency side of an order entered into the Price
Improvement Mechanism may execute against CPOs at the end of the
exposure period.
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\7\ The term ``Public Customer'' means a person or entity that
is not a broker or dealer in securities. See Rule 100(a)(38).
\8\ The PIM is a process by which an Electronic Access Member
can provide price improvement opportunities for a transaction
wherein the Electronic Access Member seeks to facilitate an order it
represents as agent, and/or a transaction wherein the Electronic
Access Member solicited interest to execute against an order it
represents as agent (a ``Crossing Transaction''). See Rule 723(a).
\9\ A Crossing Transaction is comprised of the order the
Electronic Access Member represents as agent (the ``Agency Order'')
and a counter-side order for the full size of the Agency Order (the
``Counter-Side Order''). The Counter-Side Order may represent
interest for the Member's own account, or interest the Member has
solicited from one or more other parties, or a combination of both.
See Rule 723(b).
\10\ See Rule 723(c)(1).
\11\ See Rule 715(f).
\12\ Although CPOs are no longer available, members will
continue to be able to enter Improvement Orders for the account of
Public Customers.
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4. Linkage Rules
The Exchange proposes to delete Supplementary Material .04 and .05
to Rule 803, which contains duplicative and obsolete provisions
relevant to away market routing. In particular, the content of
Supplementary Material .04 and .05 to Rule 803 is now contained in
Supplementary Material .06 and .07 to Rule 1901 \13\ because linkage
handling is performed by unaffiliated broker dealers (i.e., Linkage
Handlers) on the Exchange. Therefore as described above, the Exchange
proposes to delete this language from Rule 803, which concerns the
obligations of market makers.
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\13\ See Securities Exchange Act Release No. 73808 (December 10,
2014), 79 FR 74797 (December 16, 2014) (SR-ISE-2014-54) (order
approving the proposed changes to move Supplementary Material .04
and .05 to Rule 803 to Supplementary Material .06 and .07 to Rule
1901 in the ISE rulebook). Chapter 19 of the Exchange's rulebook
incorporates Chapter 19 of the ISE rulebook by reference.
---------------------------------------------------------------------------

5. Supplementary Material
The Exchange notes that certain supplementary material is
mistakenly labelled as ``supplemental'' material in the Exchange's
rulebook.\14\ In order to achieve consistency with how other rules are
labelled, the Exchange proposes to change these to instead refer to
``supplementary'' material. Finally, the Exchange proposes to make a
non-substantive change to Supplementary Material to Rule 803, which
concerns the obligations of market makers, by updating the word ``To''
to lower case.
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\14\ See ``Supplemental'' Material to Rules 717 and 809. See
also reference in Rule 721(a)(3) to ``Supplemental'' Material .01 to
Rule 717.
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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.\15\ In
particular, the proposal is consistent with Section 6(b)(5) of the Act
\16\ 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 Exchange believes it is
appropriate to make the proposed technical corrections to its rules so
that Exchange members and investors have a clear and accurate
understanding of the meaning of the ISE Gemini rules.
---------------------------------------------------------------------------

\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

1. No Bid Options/Limit Price
The Exchange currently operates a pilot program to permit
designated options classes to be quoted and traded in increments as low
as one cent. The Exchange is proposing to amend Rule 713(b) to account
for the fact that option classes selected for inclusion in the Penny
Pilot are permitted to trade in penny increments. For penny classes
that are quoted no bid, the Exchange will convert a market order to
sell to a limit order with a price of one cent. In addition, the
proposed rule change clarifies that Rule 713(b) applies to all series
with a bid of $0.00, and not just those series that also have an offer
of $0.05. The proposed rule change is necessary to account for options
trading in multiple trading increments,

[[Page 79542]]

including under the Penny Pilot, and will ensure that market orders to
sell are not inadvertently executed at a price of zero. The Exchange
believes that these changes more accurately reflect the intent of Rule
713(b), as described above, and will eliminate investor confusion with
respect to the operation of this rule by more accurately describing the
functionality provided by the Exchange.
2. Non-Displayed Penny Orders and Quotes/Customer Participation Orders
As explained above, the Exchange does not offer non-displayed penny
orders and quotes or customer participation orders, and thus proposes
to remove obsolete definitions and other outdated references to these
order types. The Exchange believes that these changes will eliminate
investor confusion regarding order types available for trading on ISE
Gemini to the benefit of members and investors.
3. Linkage Rules
The proposed changes to the linkage rules are non-substantive and
intended to reduce investor confusion. As explained above, the Exchange
is deleting duplicative and obsolete rule text from Chapter 8 of its
rulebook because linkage handling is handled by Linkage Handlers.
Therefore, the Exchange believes that these rules are more
appropriately located in Chapter 19 of the Exchange's rulebook, which
incorporates by reference Chapter 19 of the ISE rulebook.
4. Supplementary Material
The proposed change to label supplementary material correctly is
non-substantive and is intended to achieve consistency in how these
rules are labelled to the benefit of members and investors.

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

In accordance with Section 6(b)(8) of the Act,\17\ 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 proposed
rule change makes technical, non-substantive amendments to the
Exchange's rules in order to eliminate investor confusion, and is not
designed to have any competitive impact.
---------------------------------------------------------------------------

\17\ 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

No written comments were either solicited or received.

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

Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \18\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\19\
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\18\ 15 U.S.C. 78s(b)(3)(A)(iii).
\19\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative prior to 30 days after the date of filing.
However, Rule 19b-4(f)(6)(iii) \20\ permits the Commission to designate
a shorter time if such action is consistent with the protection of
investors and the public interest. In its filing with the Commission,
the Exchange requests that the Commission waive the 30-day operative
delay. The Exchange asserts that waiver of the operative delay is
consistent with the protection of investors and the public interest
because the proposed rule change makes non-substantive, technical
changes to the Exchange's rules. The Exchange also believes that the
proposed rule change increases the clarity of ISE Gemini rules to the
benefit of members and investors that trade on the Exchange. For these
reasons, the Commission believes that waiver of the 30-day operative
delay is consistent with the protection of investors and the public
interest. Therefore, the Commission designates the proposed rule change
to be operative upon filing.\21\
---------------------------------------------------------------------------

\20\ 17 CFR 240.19b-4(f)(6)(iii).
\21\ For purposes only of waiving the 30-day operative delay,
the Commission also has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------

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-ISEGemini-2016-13 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-ISEGemini-2016-13. 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-

[[Page 79543]]

ISEGemini-2016-13 and should be submitted on or before December 5,
2016.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
Brent J. Fields,
Secretary.
---------------------------------------------------------------------------

\22\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2016-27237 Filed 11-10-16; 8:45 am]
BILLING CODE 8011-01-P

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