Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Supplementary Material .03 to Rule 713 To Change the Allocation Entitlement for Preferred PMMs, 18329-18331 [2017-07750]

Download as PDF Federal Register / Vol. 82, No. 73 / Tuesday, April 18, 2017 / Notices contact Brent J. Fields from the Office of the Secretary at (202) 551–5400. Dated: April 13, 2017. Brent J. Fields, Secretary. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change [FR Doc. 2017–07867 Filed 4–14–17; 11:15 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–80438; File No. SR–ISE– 2017–31] Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Supplementary Material .03 to Rule 713 To Change the Allocation Entitlement for Preferred PMMs April 12, 2017. 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 April 5, 2017, Nasdaq ISE, LLC (‘‘ISE’’ or ‘‘Exchange’’ ) 3 filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III, 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 amend Supplementary Material .03 to Rule 713 to change the allocation entitlement for Preferred PMMs. 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. sradovich on DSK3GMQ082PROD with NOTICES 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 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 ISE was renamed Nasdaq ISE, LLC in a rule change that became operative on April 3, 2017. See Securities Exchange Act Release No. 80325 (March 29, 2017) (SR–ISE–2017–25). VerDate Sep<11>2014 16:55 Apr 17, 2017 Jkt 241001 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. 1. Purpose Supplementary Material .03 to Rule 713 allows an Electronic Access Member (‘‘EAM’’) to designate a ‘‘Preferred Market Maker’’ on orders it enters into the System (‘‘Preferenced Orders’’). A Preferred Market Maker may be the Primary Market Maker (‘‘PMM’’) appointed to the options class or any Competitive Market Maker (‘‘CMM’’) appointed to the options class.4 The purpose of the proposed rule change is to amend Supplementary Material .03 to Rule 713 to change the allocation entitlement for PMMs that receive Preferenced Orders (i.e., ‘‘Preferred PMMs’’), consistent with allocation entitlements for PMM equivalents on another options exchange. Currently, a Preferred Market Maker that is quoting at the national best bid of offer (‘‘NBBO’’) at the time the Preferenced Order is received,5 is entitled to participation rights equal to the greater of: (i) The proportion of the total size at the best price represented by the size of its quote, or (ii) sixty percent (60%) of the contracts to be allocated if there is only one (1) other Professional Order or market maker quotation at the best price and forty percent (40%) if there are two (2) or more other Professional Orders and/or market maker quotes at the best price.6 This allocation entitlement is in lieu of the regular allocation provided in Supplementary Material .01 to Rule 713, and applies regardless of whether the Preferred Market Maker is a PMM or CMM. In some instances where the Preferred Market Maker is the PMM appointed to the options class this results in a preferenced allocation that is worse than the market maker’s regular allocation entitlement. Specifically, Supplementary Material .01(c) to Rule 713 provides a small order entitlement whereby orders of five contracts or fewer are executed first by the PMM. A PMM that normally receives an Supplementary Material .03(a) to Rule 713. the Preferred Market Maker is not quoting at a price equal to the NBBO at the time the Preferenced Order is received, the Exchange’s regular allocation procedure applies to the execution of the Preferenced Order. See Supplementary Material .03(b) to Rule 713. 6 See Supplementary Material .03(c) to Rule 713. 18329 allocation entitlement for orders of five contracts or fewer,7 would not receive this allocation entitlement if it were designated as the Preferred Market Maker. The Exchange now proposes to amend the participation rights of Preferred PMMs such that the PMM appointed in an option class will receive participation rights that are consistent with the higher allocation entitlement given to PMM equivalents on the MIAX Options Exchange (‘‘MIAX’’). In particular, the Exchange proposes to amend Supplementary Material .03(c) to Rule 713 to provide that, the Preferred Market Maker has participation rights equal to the greater of: (i) The proportion of the total size at the best price represented by the size of its quote, (ii) sixty percent (60%) of the contracts to be allocated if there is only one (1) other Professional Order or market maker quotation at the best price and forty percent (40%) if there are two (2) or more other Professional Orders and/or market maker quotes at the best price, or (iii) the full size of a Preferenced Order for five (5) contracts or fewer if the Primary Market Maker appointed to the options class is designated as the Preferred Market Maker—i.e., the small order allocation entitlement contained in Supplementary Material .01(c) to Rule 713. Thus, the PMM appointed to an options class would receive an allocation entitlement for orders of five contracts or fewer, regardless of whether that order is submitted as a Preferenced Order. The Exchange believes that this is appropriate since the PMMs obligations to the market are the same regardless of whether an order happens to be submitted with a preference instruction. PMM equivalents on MIAX currently receive this participation right when preferenced, in addition to the regular 60% or 40% preferenced allocation currently provided in the rule.8 Preferred CMMs will continue to receive the same allocation entitlement that they receive today. Pursuant to Supplementary Material .01(c) to Rule 713 the Exchange evaluates on a quarterly basis what percentage of the volume executed on the Exchange is comprised of orders for five (5) contracts or fewer executed by PMMs. The Exchange represents that this review will extend to the small order entitlement for Preferred PMMs. 4 See 5 If PO 00000 Frm 00053 Fmt 4703 Sfmt 4703 7 See Supplementary Material .01(c) to Rule 713. MIAX Rule 514(g), (i). The proposed allocation entitlement is also the same as allocation entitlements recently adopted by the Exchange’s affiliate, ISE Gemini, LLC. See Securities Exchange Act Release No. 80239 (March 14, 2017), 82 FR 14413 (March 20, 2017) (SR–ISEGemini–2017–14). 8 See E:\FR\FM\18APN1.SGM 18APN1 18330 Federal Register / Vol. 82, No. 73 / Tuesday, April 18, 2017 / Notices Thus, consistent with Supplementary Material .01(c) to Rule 713, the Exchange will reduce the size of the orders included in the small order entitlement if such percentage is over forty percent (40%). sradovich on DSK3GMQ082PROD with NOTICES Implementation The proposed rule change will be implemented on the Exchange’s new INET trading system, which is scheduled to launch in Q2 2017,9 provided that the Exchange will provide notice of this change in a circular to be distributed to members prior to implementing the new allocation entitlement on INET. The INET migration will take place on a symbol by symbol basis as specified by the Exchange in a notice to be provided to Members. The Exchange is proposing to implement this rule change on the INET platform as the symbols migrate to that platform. As such, PMMs will begin receiving the small order entitlement in symbols as they migrate to the INET platform. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder that are applicable to a national securities exchange, and, in particular, with the requirements of Section 6(b) of the Act.10 In particular, the proposal is consistent with Section 6(b)(5) of the Act,11 because it is designed to promote just and equitable principles of trade, 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 that the proposed rule change is consistent with the protection of investors and the public interest as it will allow EAMs to send Preferenced Orders to the PMM appointed in an options class without inadvertently disadvantaging the PMM compared to if the order was not preferenced. The regular allocation entitlements for PMMs, including the small order entitlement, are designed to balance the obligations that the PMM has to the market with corresponding benefits. The Exchange believes that it is appropriate to provide the small order entitlement also when the PMM is designated as a Preferred Market Maker as the obligations that the PMM has to the market are not diminished when it 9 See Securities Exchange Act Release No. 80075 (February 21, 2017), 82 FR 11975 (February 27, 2017) (SR–ISE–2017–03). 10 15 U.S.C. 78f(b). 11 15 U.S.C. 78f(b)(5). VerDate Sep<11>2014 16:55 Apr 17, 2017 Jkt 241001 receives a Preferenced Order. MIAX similarly provides the small order entitlement to the PMM regardless of whether the order is submitted as a Preferenced Order.12 At the same time, the proposed rule change does not amend the current participation rights for Preferred CMMs, which is also consistent with allocation rules of MIAX. While the Exchange believes that it is appropriate to grant PMMs an allocation entitlement for small sized orders preferenced to them in recognition of the obligations that PMMs have to maintain fair and orderly markets, the Exchange does not believe that it is appropriate at this time to extend this entitlement to CMMs, preferenced or otherwise. B. Self-Regulatory Organization’s Statement on Burden on Competition In accordance with Section 6(b)(8) of the Act,13 the Exchange does not believe that the proposed rule change will impose any burden on intermarket or intramarket competition that is not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change is designed to allow EAMs to send Preferenced Orders to the PMM appointed in an options class without inadvertently disadvantaging the PMM by reducing its participation rights. The proposed allocation entitlements are equivalent to those currently in effect on another options exchange.14 The proposed rule change is therefore not designed to impose any significant burden on competition. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A)(iii) of the Act 15 and 12 See supra note 7. [sic] U.S.C. 78f(b)(8). 14 See supra note 7. [sic] 15 15 U.S.C. 78s(b)(3)(A)(iii). 13 15 PO 00000 Frm 00054 Fmt 4703 Sfmt 4703 subparagraph (f)(6) of Rule 19b–4 thereunder.16 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– ISE–2017–31 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–ISE–2017–31. 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 16 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. E:\FR\FM\18APN1.SGM 18APN1 Federal Register / Vol. 82, No. 73 / Tuesday, April 18, 2017 / Notices Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–ISE– 2017–31 and should be submitted on or before May 9, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–07750 Filed 4–17–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–80443; File No. SR–CBOE– 2017–032] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to FLEX Options Pilot Program April 12, 2017. sradovich on DSK3GMQ082PROD with NOTICES 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 April 4, 2017, Chicago Board Options Exchange, Incorporated (‘‘Exchange’’ or ‘‘CBOE’’) 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 Exchange filed the proposal as a ‘‘noncontroversial’’ proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 3 and Rule 19b–4(f)(6) thereunder.4 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 extend the operation of its Flexible Exchange 17 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)(iii). 4 17 CFR 240.19b–4(f)(6). 1 15 VerDate Sep<11>2014 17:52 Apr 17, 2017 Jkt 241001 Options (‘‘FLEX Options’’) pilot program through May 3, 2018.5 The text of the proposed rule change is provided below (additions are italicized; deletions are [bracketed]). * * * * * Chicago Board Options Exchange, Incorporated Rules * * * * * Rule 24A.4. Terms of FLEX Options No change. . . . Interpretations and Policies .01 FLEX Index Option PM Settlements Pilot Program: Notwithstanding subparagraph (a)(2)(iv) above, for a pilot period ending the earlier of May 3, 201[7]8 or the date on which the pilot program is approved on a permanent basis, a FLEX Index Option that expires on an Expiration Friday may have any exercise settlement value that is permissible pursuant to subparagraph (b)(3) above. .02 No change. * * * * * Rule 24B.4. Terms of FLEX Options No change. . . . Interpretations and Policies .01 FLEX Index Option PM Settlements Pilot Program: Notwithstanding subparagraph (a)(2)(iv) above, for a pilot period ending the earlier of May 3, 201[7]8 or the date on which the pilot program is approved on a permanent basis, a FLEX Index Option that expires on an Expiration Friday may have any exercise settlement value that is permissible pursuant to subparagraph (b)(3) above. .02 No change. * * * * * The text of the proposed rule change is also available on the Exchange’s Web site (https://www.cboe.com/AboutCBOE/ CBOELegalRegulatoryHome.aspx), at the Exchange’s Office of the Secretary, and at the Commission’s Public Reference Room. 5 FLEX Options provide investors with the ability to customize basic option features including size, expiration date, exercise style, and certain exercise prices. FLEX Options can be FLEX Index Options or FLEX Equity Options. In addition, other products are permitted to be traded pursuant to the FLEX trading procedures. For example, credit options are eligible for trading as FLEX Options pursuant to the FLEX rules in Chapters XXIVA and XXIVB. See CBOE Rules 24A.1(e) and (f), 24A.4(b)(1) and (c)(1), 24B.1(f) and (g), 24B.4(b)(1) and (c)(1), and 29.18. The rules governing the trading of FLEX Options on the FLEX Request for Quote (‘‘RFQ’’) System platform are contained in Chapter XXIVA. The rules governing the trading of FLEX Options on the FLEX Hybrid Trading System platform are contained in Chapter XXIVB. PO 00000 Frm 00055 Fmt 4703 Sfmt 4703 18331 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 On January 28, 2010, the Exchange received approval of a rule change that, among other things, established a pilot program regarding permissible exercise settlement values for FLEX Index Options.6 The Exchange has extended the pilot period six times, which is currently set to expire on the earlier of May 3, 2017 or the date on which the pilot program is approved on a permanent basis.7 The purpose of this 6 Securities Exchange Act Release No. 61439 (January 28, 2010), 75 FR 5831 (February 4, 2010) (SR–CBOE–2009–087) (‘‘Approval Order’’). The initial pilot period was set to expire on March 28, 2011, which date was added to the rules in 2010. See Securities Exchange Act Release No. 61676 (March 9, 2010), 75 FR 13191 (March 18, 2010) (SR– CBOE–2010–026). 7 See Securities Exchange Act Release Nos. 64110 (March 23, 2011), 76 FR 17463 (March 29, 2011) (SR–CBOE–2011–024) (extending the pilot program through the earlier of March 30, 2012 or the date on which the pilot program is approved on the permanent basis); 66701 (March 30, 2012), 77 FR 20673 (April 5, 2012) (SR–CBOE–2012–027) (extending the pilot through the earlier of November 2, 2012 or the date on which the pilot program is approved on a permanent basis); 68145 (November 2, 2012), 77 FR 67044 (November 8, 2012) (SR–CBOE–2012–102) (extending the pilot program through the earlier of November 2, 2013 or the date on which the pilot program is approved on a permanent basis); 70752 (October 24, 2013), 78 FR 65023 (October 30, 2013) (SR–CBOE–2013–099) (extending the pilot program through the earlier of November 3, 2014 or the date on which the pilot program is approved on a permanent basis); 73460 (October 29, 2014), 79 FR 65464 (November 4, 2014) (SR–CBOE–2014–080) (extending the pilot program through the earlier of May 3, 2016 or the date on which the pilot program is approved on a permanent basis); and 77742 (April 29, 2016), 81 FR 26857 (May 4, 2016) (SR–CBOE–2016–032) (extending the pilot program through the earlier of May 3, 2017 or the date on which the pilot program is approved on a permanent basis). At the same time the permissible exercise settlement values pilot was established for FLEX Index Options, the Exchange also established a pilot program eliminating the minimum value size requirements for all FLEX Options. See Approval Order, supra E:\FR\FM\18APN1.SGM Continued 18APN1

Agencies

[Federal Register Volume 82, Number 73 (Tuesday, April 18, 2017)]
[Notices]
[Pages 18329-18331]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-07750]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80438; File No. SR-ISE-2017-31]


Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend 
Supplementary Material .03 to Rule 713 To Change the Allocation 
Entitlement for Preferred PMMs

April 12, 2017.
    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 April 5, 2017, Nasdaq ISE, LLC (``ISE'' or ``Exchange'' ) \3\ filed 
with the Securities and Exchange Commission (``SEC'' or ``Commission'') 
the proposed rule change as described in Items I, II, and III, 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.
    \3\ ISE was renamed Nasdaq ISE, LLC in a rule change that became 
operative on April 3, 2017. See Securities Exchange Act Release No. 
80325 (March 29, 2017) (SR-ISE-2017-25).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Supplementary Material .03 to Rule 
713 to change the allocation entitlement for Preferred PMMs.
    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
    Supplementary Material .03 to Rule 713 allows an Electronic Access 
Member (``EAM'') to designate a ``Preferred Market Maker'' on orders it 
enters into the System (``Preferenced Orders''). A Preferred Market 
Maker may be the Primary Market Maker (``PMM'') appointed to the 
options class or any Competitive Market Maker (``CMM'') appointed to 
the options class.\4\ The purpose of the proposed rule change is to 
amend Supplementary Material .03 to Rule 713 to change the allocation 
entitlement for PMMs that receive Preferenced Orders (i.e., ``Preferred 
PMMs''), consistent with allocation entitlements for PMM equivalents on 
another options exchange.
---------------------------------------------------------------------------

    \4\ See Supplementary Material .03(a) to Rule 713.
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    Currently, a Preferred Market Maker that is quoting at the national 
best bid of offer (``NBBO'') at the time the Preferenced Order is 
received,\5\ is entitled to participation rights equal to the greater 
of: (i) The proportion of the total size at the best price represented 
by the size of its quote, or (ii) sixty percent (60%) of the contracts 
to be allocated if there is only one (1) other Professional Order or 
market maker quotation at the best price and forty percent (40%) if 
there are two (2) or more other Professional Orders and/or market maker 
quotes at the best price.\6\ This allocation entitlement is in lieu of 
the regular allocation provided in Supplementary Material .01 to Rule 
713, and applies regardless of whether the Preferred Market Maker is a 
PMM or CMM. In some instances where the Preferred Market Maker is the 
PMM appointed to the options class this results in a preferenced 
allocation that is worse than the market maker's regular allocation 
entitlement. Specifically, Supplementary Material .01(c) to Rule 713 
provides a small order entitlement whereby orders of five contracts or 
fewer are executed first by the PMM. A PMM that normally receives an 
allocation entitlement for orders of five contracts or fewer,\7\ would 
not receive this allocation entitlement if it were designated as the 
Preferred Market Maker.
---------------------------------------------------------------------------

    \5\ If the Preferred Market Maker is not quoting at a price 
equal to the NBBO at the time the Preferenced Order is received, the 
Exchange's regular allocation procedure applies to the execution of 
the Preferenced Order. See Supplementary Material .03(b) to Rule 
713.
    \6\ See Supplementary Material .03(c) to Rule 713.
    \7\ See Supplementary Material .01(c) to Rule 713.
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    The Exchange now proposes to amend the participation rights of 
Preferred PMMs such that the PMM appointed in an option class will 
receive participation rights that are consistent with the higher 
allocation entitlement given to PMM equivalents on the MIAX Options 
Exchange (``MIAX''). In particular, the Exchange proposes to amend 
Supplementary Material .03(c) to Rule 713 to provide that, the 
Preferred Market Maker has participation rights equal to the greater 
of: (i) The proportion of the total size at the best price represented 
by the size of its quote, (ii) sixty percent (60%) of the contracts to 
be allocated if there is only one (1) other Professional Order or 
market maker quotation at the best price and forty percent (40%) if 
there are two (2) or more other Professional Orders and/or market maker 
quotes at the best price, or (iii) the full size of a Preferenced Order 
for five (5) contracts or fewer if the Primary Market Maker appointed 
to the options class is designated as the Preferred Market Maker--i.e., 
the small order allocation entitlement contained in Supplementary 
Material .01(c) to Rule 713. Thus, the PMM appointed to an options 
class would receive an allocation entitlement for orders of five 
contracts or fewer, regardless of whether that order is submitted as a 
Preferenced Order. The Exchange believes that this is appropriate since 
the PMMs obligations to the market are the same regardless of whether 
an order happens to be submitted with a preference instruction. PMM 
equivalents on MIAX currently receive this participation right when 
preferenced, in addition to the regular 60% or 40% preferenced 
allocation currently provided in the rule.\8\ Preferred CMMs will 
continue to receive the same allocation entitlement that they receive 
today.
---------------------------------------------------------------------------

    \8\ See MIAX Rule 514(g), (i). The proposed allocation 
entitlement is also the same as allocation entitlements recently 
adopted by the Exchange's affiliate, ISE Gemini, LLC. See Securities 
Exchange Act Release No. 80239 (March 14, 2017), 82 FR 14413 (March 
20, 2017) (SR-ISEGemini-2017-14).
---------------------------------------------------------------------------

    Pursuant to Supplementary Material .01(c) to Rule 713 the Exchange 
evaluates on a quarterly basis what percentage of the volume executed 
on the Exchange is comprised of orders for five (5) contracts or fewer 
executed by PMMs. The Exchange represents that this review will extend 
to the small order entitlement for Preferred PMMs.

[[Page 18330]]

Thus, consistent with Supplementary Material .01(c) to Rule 713, the 
Exchange will reduce the size of the orders included in the small order 
entitlement if such percentage is over forty percent (40%).
Implementation
    The proposed rule change will be implemented on the Exchange's new 
INET trading system, which is scheduled to launch in Q2 2017,\9\ 
provided that the Exchange will provide notice of this change in a 
circular to be distributed to members prior to implementing the new 
allocation entitlement on INET. The INET migration will take place on a 
symbol by symbol basis as specified by the Exchange in a notice to be 
provided to Members. The Exchange is proposing to implement this rule 
change on the INET platform as the symbols migrate to that platform. As 
such, PMMs will begin receiving the small order entitlement in symbols 
as they migrate to the INET platform.
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    \9\ See Securities Exchange Act Release No. 80075 (February 21, 
2017), 82 FR 11975 (February 27, 2017) (SR-ISE-2017-03).
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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.\10\ In 
particular, the proposal is consistent with Section 6(b)(5) of the 
Act,\11\ because it is designed to promote just and equitable 
principles of trade, remove impediments to and perfect the mechanisms 
of a free and open market and a national market system and, in general, 
to protect investors and the public interest.
---------------------------------------------------------------------------

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

    The Exchange believes that the proposed rule change is consistent 
with the protection of investors and the public interest as it will 
allow EAMs to send Preferenced Orders to the PMM appointed in an 
options class without inadvertently disadvantaging the PMM compared to 
if the order was not preferenced. The regular allocation entitlements 
for PMMs, including the small order entitlement, are designed to 
balance the obligations that the PMM has to the market with 
corresponding benefits. The Exchange believes that it is appropriate to 
provide the small order entitlement also when the PMM is designated as 
a Preferred Market Maker as the obligations that the PMM has to the 
market are not diminished when it receives a Preferenced Order. MIAX 
similarly provides the small order entitlement to the PMM regardless of 
whether the order is submitted as a Preferenced Order.\12\ At the same 
time, the proposed rule change does not amend the current participation 
rights for Preferred CMMs, which is also consistent with allocation 
rules of MIAX. While the Exchange believes that it is appropriate to 
grant PMMs an allocation entitlement for small sized orders preferenced 
to them in recognition of the obligations that PMMs have to maintain 
fair and orderly markets, the Exchange does not believe that it is 
appropriate at this time to extend this entitlement to CMMs, 
preferenced or otherwise.
---------------------------------------------------------------------------

    \12\ See supra note 7. [sic]
---------------------------------------------------------------------------

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

    In accordance with Section 6(b)(8) of the Act,\13\ the Exchange 
does not believe that the proposed rule change will impose any burden 
on intermarket or intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The proposed 
rule change is designed to allow EAMs to send Preferenced Orders to the 
PMM appointed in an options class without inadvertently disadvantaging 
the PMM by reducing its participation rights. The proposed allocation 
entitlements are equivalent to those currently in effect on another 
options exchange.\14\ The proposed rule change is therefore not 
designed to impose any significant burden on competition.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78f(b)(8).
    \14\ See supra note 7. [sic]
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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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \15\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\16\
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    \15\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \16\ 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.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (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:

Electronic Comments

     Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-ISE-2017-31 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-ISE-2017-31. 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

[[Page 18331]]

Reference Room, 100 F Street NE., Washington, DC 20549, on official 
business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of 
the filing also will be available for inspection and copying at the 
principal office of the Exchange. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-ISE-2017-31 and should be submitted on or before May 9, 
2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-07750 Filed 4-17-17; 8:45 am]
 BILLING CODE 8011-01-P
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