Self-Regulatory Organizations; ISE Gemini, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Adjust Qualifying Tier Thresholds and Fees and Rebates, 95710-95713 [2016-31305]
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Federal Register / Vol. 81, No. 249 / Wednesday, December 28, 2016 / Notices
working with market participants to
provide the information necessary to
educate retail investors.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the self-regulatory
organization consents, the Commission
will:
(A) by order approve or disapprove
such proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
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 FINRA. 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–FINRA–
2016–047 and should be submitted on
or before January 18, 2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.36
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2016–31308 Filed 12–27–16; 8:45 am]
BILLING CODE 8011–01–P
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–
FINRA–2016–047 on the subject line.
sradovich on DSK3GMQ082PROD with NOTICES
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:
Self-Regulatory Organizations; ISE
Gemini, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Adjust Qualifying Tier
Thresholds and Fees and Rebates
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–FINRA–2016–047. 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.,
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Jkt 241001
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–79644; File No. SR–
ISEGemini–2016–22]
December 21, 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 December
9, 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to adjust
qualifying tier thresholds and fees and
rebates under the Schedule of Fees.
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.
36 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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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 purpose of the proposed rule
change is to adjust qualifying tier
thresholds and fees and rebates under
the Exchange’s Schedule of Fees. Each
of the proposed changes is described in
more detail below.
Qualifying Tier Thresholds
ISE Gemini currently provides
volume-based maker rebates to Market
Maker 3 and Priority Customer 4 orders
in five tiers based on a member’s
average daily volume (‘‘ADV’’) in the
following categories: (i) Total Affiliated
Member ADV,5 (ii) Priority Customer
Maker ADV,6 and (iii) Total Affiliated
Member ADV with a Minimum Priority
Customer Maker ADV, as shown in the
table below.7 In addition, the Exchange
3 The term Market Maker refers to ‘‘Competitive
Market Makers’’ and ‘‘Primary Market Makers’’
collectively.
4 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).
5 The Total Affiliated Member ADV category
includes all volume in all symbols and order types,
including both maker and taker volume and volume
executed in the PIM, Facilitation, Solicitation, and
QCC mechanisms.
6 The Priority Customer Maker ADV category
includes all Priority Customer volume that adds
liquidity in all symbols.
7 All eligible volume from affiliated members is
aggregated in determining applicable tiers, provided
there is at least 75% common ownership between
the Members as reflected on each Member’s Form
BD, Schedule A.
The highest tier threshold attained by any method
above applies retroactively in a given month to all
eligible traded contracts and applies to all eligible
market participants.
Any day that the market is not open for the entire
trading day or the Exchange instructs members in
writing to route their orders to other markets may
be excluded from the ADV calculation; provided
that the Exchange will only remove the day for
members that would have a lower ADV with the
day included.
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Federal Register / Vol. 81, No. 249 / Wednesday, December 28, 2016 / Notices
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charges volume based taker fees to
market participants based on achieving
these volume thresholds.
TABLE 1—CURRENT
Total Affiliated Member
ADV
Tier
Tier
Tier
Tier
Tier
Tier
1
2
3
4
5
....................................................................
....................................................................
....................................................................
....................................................................
....................................................................
As outlined in the following table, the
Exchange now proposes to decrease the
number of tiers available to four, modify
the ADV thresholds required for
members to achieve for each of those
tiers, and eliminate the qualifying
thresholds based on Total Affiliated
Member ADV with a Minimum Priority
Customer Maker ADV. With the
elimination of the fifth tier, the
Exchange hereby proposes to eliminate
all fees and rebates applicable to
members that achieve that tier.8 As
described in the following sections, the
Exchange is proposing to make changes
to rates in other tiers so that fees and
rebates remain competitive.
TABLE 1—PROPOSED
Tier
Total Affiliated
Member ADV
Priority
Customer
Maker ADV
Tier 1 .....
Tier 2 .....
0–99,999 .........
100,000–
224,999.
225,000–
349,999.
350,000 or
more.
0–19,999.
20,000–99,999.
Tier 3 .....
Tier 4 .....
100,000–
149,999.
150,000 or
more.
sradovich on DSK3GMQ082PROD with NOTICES
Maker Rebates in Penny Symbols and
SPY
Currently, the Exchange provides a
maker rebate to Market Maker orders in
Penny Symbols and SPY that is $0.30
per contract in Tier 1, $0.32 per contract
in Tier 2 (or $0.33 per contract for
members that execute a Market Maker
ADV of 100,000 to 124,999 contracts in
a given month), $0.34 per contract in
Tier 3, $0.37 per contract in Tier 4, and
$0.38 per contract in Tier 5. The
Exchange proposes to increase the
maker rebate provided to Market Maker
orders in Penny Symbols and SPY to
8 The current fees and rebates applicable to Tier
5 are described in the following sections. Those fees
and rebates are eliminated in connection with the
reduction to four tiers.
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Priority Customer Maker
ADV
0–49,999
50,000–124,999
125,000–249,999
250,000–349,999
350,000+
0–19,999
20,000–49,999
50,000–84,999
85,000–124,999
125,000+
$0.45 per contract in Tier 4.9 In
addition, the Exchange proposes to
eliminate the higher maker rebate
provided in Tier 2 for members that
execute a Market Maker ADV of 100,000
to 124,999 contracts in a given month.10
Currently, the Exchange provides a
maker rebate to Priority Customer orders
in Penny Symbols and SPY that is $0.25
per contract in Tier 1 (or $0.32 per
contract for members that execute a
Priority Customer Maker ADV of 5,000
to 19,999 contracts in a given month),
$0.40 per contract in Tier 2, $0.48 per
contract in Tier 3, $0.50 per contract in
Tier 4, and $0.52 per contract in Tier 5.
The Exchange proposes to increase the
maker rebate provided to Priority
Customer orders in Penny Symbols and
SPY to $0.53 per contract in Tier 4.
Maker Rebates in Non-Penny Symbols
Currently, the Exchange provides a
maker rebate to Market Maker orders in
Non-Penny Symbols that is $0.40 per
contract in Tier 1, $0.42 per contract in
Tier 2 (or $0.43 per contract for
members that execute a Market Maker
ADV of 100,000 to 124,999 contracts in
a given month), $0.44 per contract in
Tier 3, $0.47 per contract in Tier 4, and
$0.49 per contract in Tier 5. The
Exchange proposes to increase the
maker rebate provided to Market Maker
orders in Non-Penny Symbols to $0.50
per contract in Tier 3, and $0.75 per
contract in Tier 4. In addition, the
Exchange proposes to eliminate the
higher rebate provided in Tier 2 for
members that execute a Market Maker
ADV of 100,000 to 124,999 contracts in
a given month.11
9 Tier 5 is being eliminated, and the Exchange has
therefore proposed to eliminate all fees and rebates
applicable to members that achieve this tier. See id.
and accompanying text. The proposed Tier 4 rates
in this and following sections will therefore
represent the rates for the highest volume tier.
10 The Exchange will therefore eliminate footnote
9 under the Schedule of Fees, Section I Regular
Order Fees and Rebates.
11 The Exchange will therefore eliminate footnote
10 under the Schedule of Fees, Section I Regular
Order Fees and Rebates.
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Total Affiliated Member
ADV/Minimum Priority
Customer Maker ADV
0–39,999/0+
40,000–99,999/15,000+
100,000–174,999/40,000+
175,000–249,999/65,000+
250,000+/85,000+
Currently, the Exchange provides a
maker rebate to Priority Customer orders
in Non-Penny Symbols that is $0.75 per
contract in Tier 1 (or $0.76 per contract
for members that execute a Priority
Customer Maker ADV of 5,000 to 19,999
contracts in a given month), $0.80 per
contract in Tier 2, and $0.85 per
contract in Tiers 3 through 5. The
Exchange proposes to increase the
maker rebate provided to Priority
Customer orders in Non-Penny Symbols
to $1.05 per contract in Tier 4.
Taker Fees in Penny Symbols and SPY
Currently, the Exchange charges a
taker fee for Market Maker and Non-ISE
Gemini Market Maker 12 orders in Penny
Symbols and SPY that is $0.49 per
contract for Tiers 1 through 4, and $0.48
per contract in Tier 5, for trades
executed against a Non-Priority
Customer.13 Firm Proprietary,14 BrokerDealer,15 and Professional Customer 16
orders in Penny Symbols and SPY are
charged a $0.49 per contract taker fee for
trades executed against a Non-Priority
Customer, regardless of the tier
achieved. The taker fee is $0.50 per
contract for all Non-Priority Customer
orders in Penny Symbols and SPY for
trades executed against a Priority
Customer. Finally, the Exchange charges
a taker fee for Priority Customer orders
in Penny Symbols and SPY that is $0.45
per contract in Tier 1, and $0.44 per
contract in Tiers 2 through 5. Priority
12 A ‘‘Non-ISE Gemini Market Maker’’ is a market
maker as defined in Section 3(a)(38) of the
Securities Exchange Act of 1934, as amended,
registered in the same options class on another
options exchange.
13 Non-Priority Customer includes Market Maker,
Non-ISE Market Maker, Firm Proprietary, BrokerDealer, and Professional Customer.
14 A ‘‘Firm Proprietary’’ order is an order
submitted by a member for its own proprietary
account.
15 A ‘‘Broker-Dealer’’ order is an order submitted
by a member for a broker-dealer account that is not
its own proprietary account.
16 A ‘‘Professional Customer’’ is a person or entity
that is not a broker/dealer and is not a Priority
Customer.
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Customer orders are charged these rates
regardless of the counterparty.
The Exchange proposes to decrease
the taker fee charged to Market Maker
and Non-ISE Gemini Market Maker
orders in Penny Symbols and SPY to
$0.48 per contract in Tier 4 for trades
executed against a Non-Priority
Customer. The Exchange also proposes
to increase the taker fee for Priority
Customer orders in Penny Symbols and
SPY to $0.48 per contract in Tier 1,
$0.47 per contract in Tiers 2 and 3, and
$0.45 per contract in Tier 4. Finally, the
Exchange proposes to charge a taker fee
of $0.49 per contract for Priority
Customer orders in Penny Symbols and
SPY for trades executed against a
Priority Customer.
sradovich on DSK3GMQ082PROD with NOTICES
Taker Fees in Non-Penny Symbols
Currently, the Exchange charges a
taker fee for Non-Priority Customer
orders in Non-Penny Symbols that is
$0.89 per contract, regardless of the tier
achieved.17 In addition, the Exchange
charges a taker fee for Priority Customer
orders that is $0.82 per contract for Tier
1, and $0.81 per contract for Tiers 2
through 5. Today, the taker fees in NonPenny Symbols described above apply
regardless of the counterparty.
The Exchange proposes to increase
the taker fee for Non-Priority Customer
orders to $1.10 for trades executed
against a Priority Customer in NonPenny Symbols. In addition, the
Exchange proposes to increase the taker
fee for Priority Customer orders in NonPenny Symbols to $0.85 per contract for
trades executed against a Priority
Customer. With these changes, different
taker fees will be charged for trades
executed against a Priority Customer
similar to taker fees charged in Penny
Symbols. Orders that do not trade
against a Priority Customer will
continue to be charged at their current
rates.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the provisions of Section 6 of the Act,18
in general, and Section 6(b)(4) of the
Act,19 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 that the
proposed fee change is reasonable and
17 Non-Priority Customer orders are also charged
the taker fee for trades executed during the opening
rotation. Priority Customer orders executed during
the opening rotation receive the applicable maker
rebate based on the tier achieved.
18 15 U.S.C. 78f.
19 15 U.S.C. 78f(b)(4).
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equitable. The Exchange is reducing the
number of tiers offered to four, and is
eliminating one of the methods of
achieving those tiers—i.e., the Total
Affiliated Member ADV/Minimum
Priority Customer ADV categories.
These two changes will simplify the
Exchange’s volume tiers. As the
Exchange implements new pricing
programs over time, the Exchange
believes that it is appropriate to
eliminate pricing programs when the
Exchange no longer believes they are
necessary. With respect to the
elimination of the Total Affiliated
Member ADV/Minimum Priority
Customer ADV qualifying methodology
in particular, the Exchange notes that
members were not making use of these
qualifying thresholds to achieve higher
tiers on the Exchange. The Exchange
therefore believes that it is appropriate
to remove this alternative method of
qualifying for higher tiers. The proposed
changes to the tier structure are also
accompanied by changes to the fees
charged and rebates offered to members.
The Exchange believes that these
changes taken together will be attractive
to market participants. The proposed fee
change will allow the Exchange to offer
more favorable rebates to Market Maker
and Priority Customer orders in the
highest tiers, and is designed to attract
more of that volume to the Exchange.
Even though the Exchange is reducing
the number of volume tiers, the maker
rebates proposed for the new highest
tier (i.e., Tier 4) are higher than the
current Tier 5 maker rebates.
Today, the Exchange provides
enhanced maker rebates for Market
Maker Priority Customer orders. Further
increasing the rebates will incentivize
these members to send additional order
flow to ISE Gemini, thereby creating
additional liquidity to the benefit of
members and investors that trade on the
Exchange. Although the proposed fee
changes are designed to attract liquidity
from Market Makers and Priority
Customers by increasing maker rebates,
certain taker fees will also be increased.
The Exchange believes that the taker fee
increases are appropriate as the fees will
remain attractive to market participants
who will now also benefit from
additional liquidity posted on the
Exchange.
With respect to increased taker fees
for trades executed against a Priority
Customer, the Exchange believes that
the proposed fees are appropriate as
they are designed to offset the enhanced
rebates. With the proposed changes,
Priority Customers will be offered even
more favorable maker rebates. The
Exchange believes that members will
benefit from the additional liquidity
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created by the higher Priority Customer
rebates, and it is therefore appropriate to
charge an increased taker fee for trades
executed against a Priority Customer.
Furthermore, these taker fees are within
the range of taker fees charged on other
markets, including for example the
Nasdaq Options Market (‘‘NOM’’),
which charges a taker fee of up to $1.10
in Non-Penny Pilot Options and $0.50
per contract in Penny Pilot Options.20
The Exchange also does not believe
that the proposed fee change is unfairly
discriminatory. While the proposed fee
change generally increases maker
rebates for Market Maker and Priority
Customer orders, and increases taker
fees for trades executed against a
Priority Customer, the Exchange believe
that the proposed fee structure will
remain attractive to all members. As has
historically been the case, Market Maker
and Priority Customer orders will earn
more favorable maker rebates in order to
encourage that order flow. Market
Makers have different requirements and
obligations to the Exchange that other
market participants do not (such as
quoting requirements). In addition, 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 whose behavior is
substantially similar to that of market
professionals, including Professional
Customers, who will generally submit a
higher number of orders than Priority
Customers.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
In accordance with Section 6(b)(8) of
the Act,21 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 changes to fees and rebates are
designed to attract additional order flow
to the Exchange. The Exchange believes
that the proposed fees and rebates are
competitive with fees and rebates
offered to orders executed on other
options exchanges. The Exchange
operates in a highly competitive market
in which market participants can
readily direct their order flow to
competing venues. In such an
environment, the Exchange must
continually review, and consider
adjusting, its fees and rebates to remain
20 See NOM Rules, Chapter XV Options Pricing,
Sec. 2 NOM—Fees and Rebates.
21 15 U.S.C. 78f(b)(8).
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Federal Register / Vol. 81, No. 249 / Wednesday, December 28, 2016 / Notices
competitive with other exchanges. For
the reasons described above, the
Exchange believes that the proposed fee
changes reflect this competitive
environment.
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
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act,22 and Rule
19b–4(f)(2) 23 thereunder. 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:
sradovich on DSK3GMQ082PROD with NOTICES
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
ISEGemini–2016–22 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–2016–22. 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–
ISEGemini–2016–22 and should be
submitted on or before January 18, 2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2016–31305 Filed 12–27–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–79646; File No. SR–BOX–
2016–59]
Self-Regulatory Organizations; BOX
Options Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Adopt Rule
3220, Disruptive Quoting and Trading
Activity Prohibited and Rule 12160,
Expedited Suspension Proceeding
December 21, 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 December
14, 2016, BOX Options Exchange LLC
(‘‘BOX’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the Exchange. The
Commission is publishing this notice to
24 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
22 15
U.S.C. 78s(b)(3)(A)(ii).
23 17 CFR 240.19b–4(f)(2).
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95713
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
The Exchange proposes to adopt (i)
BOX Rule 3220 (Disruptive Quoting and
Trading Activity Prohibited) to clearly
prohibit disruptive quoting and trading
activity on the Exchange and (ii) BOX
Rule 12160 (Expedited Suspension
Proceeding) to permit the Exchange to
take prompt action to suspend Option
Participants or their clients that violate
Rule 3220. The text of the proposed rule
change is available from the principal
office of the Exchange, at the
Commission’s Public Reference Room
and also on the Exchange’s Internet Web
site at https://boxexchange.com.
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 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 the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to adopt BOX
Rule 3220 (Disruptive Quoting and
Trading Activity Prohibited) to clearly
prohibit disruptive quoting and trading
activity on the Exchange and to adopt a
new Exchange Rule 12160 (Expedited
Suspension Proceeding), to permit the
Exchange to take prompt action to
suspend Options Participants 3 and their
clients that violate such rule.
Background
As a national securities exchange
registered pursuant to Section 6 of the
Act, the Exchange is required to be
organized and to have the capacity to
enforce compliance by its members and
persons associated with its members,
with the Act, the rules and regulations
3 The term ‘‘Options Participant’’ or ‘‘Participant’’
means a firm, or organization that is registered with
the Exchange pursuant to the Rule 2000 Series for
purposes of participating in options trading on BOX
as an ‘‘Order Flow Provider’’ or ‘‘Market Maker’’.
E:\FR\FM\28DEN1.SGM
28DEN1
]]>Agencies
[Federal Register Volume 81, Number 249 (Wednesday, December 28, 2016)]
[Notices]
[Pages 95710-95713]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-31305]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-79644; File No. SR-ISEGemini-2016-22]
Self-Regulatory Organizations; ISE Gemini, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Adjust
Qualifying Tier Thresholds and Fees and Rebates
December 21, 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 December 9, 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.
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\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 adjust qualifying tier thresholds and fees
and rebates under the Schedule of Fees.
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 purpose of the proposed rule change is to adjust qualifying
tier thresholds and fees and rebates under the Exchange's Schedule of
Fees. Each of the proposed changes is described in more detail below.
Qualifying Tier Thresholds
ISE Gemini currently provides volume-based maker rebates to Market
Maker \3\ and Priority Customer \4\ orders in five tiers based on a
member's average daily volume (``ADV'') in the following categories:
(i) Total Affiliated Member ADV,\5\ (ii) Priority Customer Maker
ADV,\6\ and (iii) Total Affiliated Member ADV with a Minimum Priority
Customer Maker ADV, as shown in the table below.\7\ In addition, the
Exchange
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\3\ The term Market Maker refers to ``Competitive Market
Makers'' and ``Primary Market Makers'' collectively.
\4\ 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).
\5\ The Total Affiliated Member ADV category includes all volume
in all symbols and order types, including both maker and taker
volume and volume executed in the PIM, Facilitation, Solicitation,
and QCC mechanisms.
\6\ The Priority Customer Maker ADV category includes all
Priority Customer volume that adds liquidity in all symbols.
\7\ All eligible volume from affiliated members is aggregated in
determining applicable tiers, provided there is at least 75% common
ownership between the Members as reflected on each Member's Form BD,
Schedule A.
The highest tier threshold attained by any method above applies
retroactively in a given month to all eligible traded contracts and
applies to all eligible market participants.
Any day that the market is not open for the entire trading day
or the Exchange instructs members in writing to route their orders
to other markets may be excluded from the ADV calculation; provided
that the Exchange will only remove the day for members that would
have a lower ADV with the day included.
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[[Page 95711]]
charges volume based taker fees to market participants based on
achieving these volume thresholds.
Table 1--Current
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total Affiliated Member
Tier Total Affiliated Member Priority Customer Maker ADV/Minimum Priority
ADV ADV Customer Maker ADV
--------------------------------------------------------------------------------------------------------------------------------------------------------
Tier 1........................................................... 0-49,999 0-19,999 0-39,999/0+
Tier 2........................................................... 50,000-124,999 20,000-49,999 40,000-99,999/15,000+
Tier 3........................................................... 125,000-249,999 50,000-84,999 100,000-174,999/40,000+
Tier 4........................................................... 250,000-349,999 85,000-124,999 175,000-249,999/65,000+
Tier 5........................................................... 350,000+ 125,000+ 250,000+/85,000+
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As outlined in the following table, the Exchange now proposes to
decrease the number of tiers available to four, modify the ADV
thresholds required for members to achieve for each of those tiers, and
eliminate the qualifying thresholds based on Total Affiliated Member
ADV with a Minimum Priority Customer Maker ADV. With the elimination of
the fifth tier, the Exchange hereby proposes to eliminate all fees and
rebates applicable to members that achieve that tier.\8\ As described
in the following sections, the Exchange is proposing to make changes to
rates in other tiers so that fees and rebates remain competitive.
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\8\ The current fees and rebates applicable to Tier 5 are
described in the following sections. Those fees and rebates are
eliminated in connection with the reduction to four tiers.
Table 1--Proposed
------------------------------------------------------------------------
Total Affiliated Priority Customer
Tier Member ADV Maker ADV
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Tier 1.......................... 0-99,999.......... 0-19,999.
Tier 2.......................... 100,000-224,999... 20,000-99,999.
Tier 3.......................... 225,000-349,999... 100,000-149,999.
Tier 4.......................... 350,000 or more... 150,000 or more.
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Maker Rebates in Penny Symbols and SPY
Currently, the Exchange provides a maker rebate to Market Maker
orders in Penny Symbols and SPY that is $0.30 per contract in Tier 1,
$0.32 per contract in Tier 2 (or $0.33 per contract for members that
execute a Market Maker ADV of 100,000 to 124,999 contracts in a given
month), $0.34 per contract in Tier 3, $0.37 per contract in Tier 4, and
$0.38 per contract in Tier 5. The Exchange proposes to increase the
maker rebate provided to Market Maker orders in Penny Symbols and SPY
to $0.45 per contract in Tier 4.\9\ In addition, the Exchange proposes
to eliminate the higher maker rebate provided in Tier 2 for members
that execute a Market Maker ADV of 100,000 to 124,999 contracts in a
given month.\10\
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\9\ Tier 5 is being eliminated, and the Exchange has therefore
proposed to eliminate all fees and rebates applicable to members
that achieve this tier. See id. and accompanying text. The proposed
Tier 4 rates in this and following sections will therefore represent
the rates for the highest volume tier.
\10\ The Exchange will therefore eliminate footnote 9 under the
Schedule of Fees, Section I Regular Order Fees and Rebates.
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Currently, the Exchange provides a maker rebate to Priority
Customer orders in Penny Symbols and SPY that is $0.25 per contract in
Tier 1 (or $0.32 per contract for members that execute a Priority
Customer Maker ADV of 5,000 to 19,999 contracts in a given month),
$0.40 per contract in Tier 2, $0.48 per contract in Tier 3, $0.50 per
contract in Tier 4, and $0.52 per contract in Tier 5. The Exchange
proposes to increase the maker rebate provided to Priority Customer
orders in Penny Symbols and SPY to $0.53 per contract in Tier 4.
Maker Rebates in Non-Penny Symbols
Currently, the Exchange provides a maker rebate to Market Maker
orders in Non-Penny Symbols that is $0.40 per contract in Tier 1, $0.42
per contract in Tier 2 (or $0.43 per contract for members that execute
a Market Maker ADV of 100,000 to 124,999 contracts in a given month),
$0.44 per contract in Tier 3, $0.47 per contract in Tier 4, and $0.49
per contract in Tier 5. The Exchange proposes to increase the maker
rebate provided to Market Maker orders in Non-Penny Symbols to $0.50
per contract in Tier 3, and $0.75 per contract in Tier 4. In addition,
the Exchange proposes to eliminate the higher rebate provided in Tier 2
for members that execute a Market Maker ADV of 100,000 to 124,999
contracts in a given month.\11\
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\11\ The Exchange will therefore eliminate footnote 10 under the
Schedule of Fees, Section I Regular Order Fees and Rebates.
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Currently, the Exchange provides a maker rebate to Priority
Customer orders in Non-Penny Symbols that is $0.75 per contract in Tier
1 (or $0.76 per contract for members that execute a Priority Customer
Maker ADV of 5,000 to 19,999 contracts in a given month), $0.80 per
contract in Tier 2, and $0.85 per contract in Tiers 3 through 5. The
Exchange proposes to increase the maker rebate provided to Priority
Customer orders in Non-Penny Symbols to $1.05 per contract in Tier 4.
Taker Fees in Penny Symbols and SPY
Currently, the Exchange charges a taker fee for Market Maker and
Non-ISE Gemini Market Maker \12\ orders in Penny Symbols and SPY that
is $0.49 per contract for Tiers 1 through 4, and $0.48 per contract in
Tier 5, for trades executed against a Non-Priority Customer.\13\ Firm
Proprietary,\14\ Broker-Dealer,\15\ and Professional Customer \16\
orders in Penny Symbols and SPY are charged a $0.49 per contract taker
fee for trades executed against a Non-Priority Customer, regardless of
the tier achieved. The taker fee is $0.50 per contract for all
Non[hyphen]Priority Customer orders in Penny Symbols and SPY for trades
executed against a Priority Customer. Finally, the Exchange charges a
taker fee for Priority Customer orders in Penny Symbols and SPY that is
$0.45 per contract in Tier 1, and $0.44 per contract in Tiers 2 through
5. Priority
[[Page 95712]]
Customer orders are charged these rates regardless of the counterparty.
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\12\ A ``Non-ISE Gemini Market Maker'' is a market maker as
defined in Section 3(a)(38) of the Securities Exchange Act of 1934,
as amended, registered in the same options class on another options
exchange.
\13\ Non-Priority Customer includes Market Maker, Non-ISE Market
Maker, Firm Proprietary, Broker-Dealer, and Professional Customer.
\14\ A ``Firm Proprietary'' order is an order submitted by a
member for its own proprietary account.
\15\ A ``Broker-Dealer'' order is an order submitted by a member
for a broker-dealer account that is not its own proprietary account.
\16\ A ``Professional Customer'' is a person or entity that is
not a broker/dealer and is not a Priority Customer.
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The Exchange proposes to decrease the taker fee charged to Market
Maker and Non-ISE Gemini Market Maker orders in Penny Symbols and SPY
to $0.48 per contract in Tier 4 for trades executed against a Non-
Priority Customer. The Exchange also proposes to increase the taker fee
for Priority Customer orders in Penny Symbols and SPY to $0.48 per
contract in Tier 1, $0.47 per contract in Tiers 2 and 3, and $0.45 per
contract in Tier 4. Finally, the Exchange proposes to charge a taker
fee of $0.49 per contract for Priority Customer orders in Penny Symbols
and SPY for trades executed against a Priority Customer.
Taker Fees in Non-Penny Symbols
Currently, the Exchange charges a taker fee for Non-Priority
Customer orders in Non-Penny Symbols that is $0.89 per contract,
regardless of the tier achieved.\17\ In addition, the Exchange charges
a taker fee for Priority Customer orders that is $0.82 per contract for
Tier 1, and $0.81 per contract for Tiers 2 through 5. Today, the taker
fees in Non-Penny Symbols described above apply regardless of the
counterparty.
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\17\ Non[hyphen]Priority Customer orders are also charged the
taker fee for trades executed during the opening rotation. Priority
Customer orders executed during the opening rotation receive the
applicable maker rebate based on the tier achieved.
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The Exchange proposes to increase the taker fee for Non-Priority
Customer orders to $1.10 for trades executed against a Priority
Customer in Non-Penny Symbols. In addition, the Exchange proposes to
increase the taker fee for Priority Customer orders in Non-Penny
Symbols to $0.85 per contract for trades executed against a Priority
Customer. With these changes, different taker fees will be charged for
trades executed against a Priority Customer similar to taker fees
charged in Penny Symbols. Orders that do not trade against a Priority
Customer will continue to be charged at their current rates.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\18\ in general, and
Section 6(b)(4) of the Act,\19\ 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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\18\ 15 U.S.C. 78f.
\19\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that the proposed fee change is reasonable
and equitable. The Exchange is reducing the number of tiers offered to
four, and is eliminating one of the methods of achieving those tiers--
i.e., the Total Affiliated Member ADV/Minimum Priority Customer ADV
categories. These two changes will simplify the Exchange's volume
tiers. As the Exchange implements new pricing programs over time, the
Exchange believes that it is appropriate to eliminate pricing programs
when the Exchange no longer believes they are necessary. With respect
to the elimination of the Total Affiliated Member ADV/Minimum Priority
Customer ADV qualifying methodology in particular, the Exchange notes
that members were not making use of these qualifying thresholds to
achieve higher tiers on the Exchange. The Exchange therefore believes
that it is appropriate to remove this alternative method of qualifying
for higher tiers. The proposed changes to the tier structure are also
accompanied by changes to the fees charged and rebates offered to
members. The Exchange believes that these changes taken together will
be attractive to market participants. The proposed fee change will
allow the Exchange to offer more favorable rebates to Market Maker and
Priority Customer orders in the highest tiers, and is designed to
attract more of that volume to the Exchange. Even though the Exchange
is reducing the number of volume tiers, the maker rebates proposed for
the new highest tier (i.e., Tier 4) are higher than the current Tier 5
maker rebates.
Today, the Exchange provides enhanced maker rebates for Market
Maker Priority Customer orders. Further increasing the rebates will
incentivize these members to send additional order flow to ISE Gemini,
thereby creating additional liquidity to the benefit of members and
investors that trade on the Exchange. Although the proposed fee changes
are designed to attract liquidity from Market Makers and Priority
Customers by increasing maker rebates, certain taker fees will also be
increased. The Exchange believes that the taker fee increases are
appropriate as the fees will remain attractive to market participants
who will now also benefit from additional liquidity posted on the
Exchange.
With respect to increased taker fees for trades executed against a
Priority Customer, the Exchange believes that the proposed fees are
appropriate as they are designed to offset the enhanced rebates. With
the proposed changes, Priority Customers will be offered even more
favorable maker rebates. The Exchange believes that members will
benefit from the additional liquidity created by the higher Priority
Customer rebates, and it is therefore appropriate to charge an
increased taker fee for trades executed against a Priority Customer.
Furthermore, these taker fees are within the range of taker fees
charged on other markets, including for example the Nasdaq Options
Market (``NOM''), which charges a taker fee of up to $1.10 in Non-Penny
Pilot Options and $0.50 per contract in Penny Pilot Options.\20\
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\20\ See NOM Rules, Chapter XV Options Pricing, Sec. 2 NOM--Fees
and Rebates.
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The Exchange also does not believe that the proposed fee change is
unfairly discriminatory. While the proposed fee change generally
increases maker rebates for Market Maker and Priority Customer orders,
and increases taker fees for trades executed against a Priority
Customer, the Exchange believe that the proposed fee structure will
remain attractive to all members. As has historically been the case,
Market Maker and Priority Customer orders will earn more favorable
maker rebates in order to encourage that order flow. Market Makers have
different requirements and obligations to the Exchange that other
market participants do not (such as quoting requirements). In addition,
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 whose
behavior is substantially similar to that of market professionals,
including Professional Customers, who will generally submit a higher
number of orders than Priority Customers.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\21\ 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
changes to fees and rebates are designed to attract additional order
flow to the Exchange. The Exchange believes that the proposed fees and
rebates are competitive with fees and rebates offered to orders
executed on other options exchanges. The Exchange operates in a highly
competitive market in which market participants can readily direct
their order flow to competing venues. In such an environment, the
Exchange must continually review, and consider adjusting, its fees and
rebates to remain
[[Page 95713]]
competitive with other exchanges. For the reasons described above, the
Exchange believes that the proposed fee changes reflect this
competitive environment.
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\21\ 15 U.S.C. 78f(b)(8).
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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
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act,\22\ and Rule 19b-4(f)(2) \23\ thereunder.
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.
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\22\ 15 U.S.C. 78s(b)(3)(A)(ii).
\23\ 17 CFR 240.19b-4(f)(2).
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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-2016-22 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-2016-22. 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-ISEGemini-2016-22 and should
be submitted on or before January 18, 2017.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
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\24\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2016-31305 Filed 12-27-16; 8:45 am]
BILLING CODE 8011-01-P
