Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Schedule of Fees To Decrease Member Order Routing Program Rebates, 24753-24755 [2017-10972]

Download as PDF Federal Register / Vol. 82, No. 102 / Tuesday, May 30, 2017 / Notices A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change [Release No. 34–80744; File No. SR–ISE– 2017–47] Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Schedule of Fees To Decrease Member Order Routing Program Rebates May 23, 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 May 16, 2017, Nasdaq ISE, LLC (‘‘ISE’’ 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.3 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 its Schedule of Fees to decrease rebates for members that participate in the Member Order Routing Program. 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 sradovich on DSK3GMQ082PROD with NOTICES 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. U.S.C. 78s(b)(1). CFR 240.19b–4. 3 The Exchange initially filed the proposed rule change as SR–ISE–2017–38 on April 27, 2017. On May 5, 2017, the Exchange withdrew SR–ISE–2017– 38 and submitted SR–ISE–2017–43 as a replacement. On May 16, 2017, the Exchange withdrew SR–ISE–2017–43 and submitted this filing. The Exchange has designated the proposed changes to be operative on May 1, 2017. 2 17 VerDate Sep<11>2014 19:59 May 26, 2017 Jkt 241001 for specific sessions rather than on a member-wide basis. 1. Purpose SECURITIES AND EXCHANGE COMMISSION 1 15 24753 Currently, an EAM that is MORP eligible receives a rebate for all unsolicited Crossing Orders of $0.065 per originating contract side, provided that the member executes a minimum average daily volume (‘‘ADV’’) in unsolicited Crossing Orders of at least 30,000 originating contract sides though their MORP designated sessions. This rebate is increased to $0.07 per originating contract side, provided that the member executes a higher ADV in unsolicited Crossing Orders of 100,000 originating contract sides.8 The Exchange proposes to decrease the MORP rebate for eligible members that execute from 30,000 to 99,999 originating contract sides to $0.05 per originating contract side. The MORP rebate for eligible members that execute 100,000 or more originating contract sides will remain $0.07 per originating contract side. The Exchange operates the Member Order Routing Program (‘‘MORP’’),4 which is a program that provides enhanced rebates to order routing firms that select the Exchange as the default routing destination for unsolicited Crossing Orders.5 On March 10, 2017, the Exchange made changes to the program to allow members to opt in to MORP for specific sessions rather than on a member-wide basis, and to increase MORP rebates for members that participate in the program.6 As described in more detail below, the Exchange now proposes to decrease MORP rebates consistent with the previous rebates provided prior to that proposed rule change.7 Members will continue to be able to opt in to MORP 4 See Securities Exchange Act Release No. 74706 (April 10, 2016), 80 FR 20522 (April 16, 2016) (SR– ISE–2015–11). 5 A ‘‘Crossing Order’’ is an order executed in the Exchange’s Facilitation Mechanism, Solicited Order Mechanism, Price Improvement Mechanism (‘‘PIM’’) or submitted as a Qualified Contingent Cross (‘‘QCC’’) order. For purposes of the fee schedule, orders executed in the Block Order Mechanism are also considered Crossing Orders. 6 See Securities Exchange Act Release No. 80267 (March 17, 2017), 82 FR 14929 (March 23, 2017) (SR–ISE–2017–24). As provided in the above filing, a member may designate one or more sessions to be eligible for MORP. A session is connection to the exchange over which a member submits orders. See Section V.C. of the Schedule of Fees. If a session is designated as eligible for MORP all requirements for the program must be met for that session. To be eligible to participate in MORP an EAM must: (1) Designate, in writing, to the Exchange which sessions are MORP eligible according to the criteria below; (2) provide to its clients, systems that enable the electronic routing of option orders to all of the U.S. options exchanges, including ISE; (3) interface with ISE to access the Exchange’s electronic options trading platform; (4) offer to its clients a customized interface and routing functionality such that ISE will be the default destination for all unsolicited Crossing Orders entered by the EAM, provided that market conditions allow the Crossing Order to be executed on ISE; (5) configure its own option order routing functionality such that ISE will be the default destination for all unsolicited Crossing Orders, provided that market conditions allow the Crossing Order to be executed on ISE, with respect to all option orders as to which the EAM has routing discretion; and (6) ensure that the default routing functionality permits users submitting option orders through such system to manually override the ISE as the default destination on an order-by-order basis. On the Schedule of Fees, the requirement to designate which sessions are MORP eligible ends in a period. As a non-substantive conforming change, the Exchange proposes to change this to a semicolon. 7 The Exchange initially filed the proposed pricing changes on April 27, 2017 (SR–ISE–2017– 38). On May 5, 2017, the Exchange withdrew that filing and submitted this filing [sic]. PO 00000 Frm 00095 Fmt 4703 Sfmt 4703 Rebate for Unsolicited Crossing Orders Facilitation and Solicitation Break-Up Rebate In addition, any EAM that qualifies for the MORP rebate by executing an ADV of 30,000 originating contract sides or more on their MORP designated sessions is also eligible for increased Facilitation and Solicitation break-up rebates 9 for their Non-ISE Market Maker,10 Firm Proprietary,11 BrokerDealer,12 Professional Customer,13 and 8 The rebate for the highest tier achieved is applied retroactively to all eligible contracts traded in a given month. For purposes of determining whether the member meets the above ADV thresholds, any day that the Exchange 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 such calculation; provided that the Exchange will only remove the day for members that would have a lower ADV with the day included. 9 Break-up rebates are provided for contracts that are submitted to the Facilitation and Solicited Order Mechanisms that do not trade with their contra order except when those contracts trade against pre-existing orders and quotes on the Exchange’s orderbooks. The applicable fee for Crossing Orders is applied to any contracts for which a rebate is provided. 10 A ‘‘Non-ISE 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. 11 A ‘‘Firm Proprietary’’ order is an order submitted by a member for its own proprietary account. 12 A ‘‘Broker-Dealer’’ order is an order submitted by a member for a broker-dealer account that is not its own proprietary account. 13 A ‘‘Professional Customer’’ is a person or entity that is not a broker/dealer and is not a Priority Customer. E:\FR\FM\30MYN1.SGM 30MYN1 24754 Federal Register / Vol. 82, No. 102 / Tuesday, May 30, 2017 / Notices Priority Customer orders.14 Currently, MORP eligible members that execute a qualifying ADV in unsolicited Crossing Orders of at least 30,000 originating contract sides, receive a Facilitation and Solicitation break-up rebate that is $0.42 per contract for regular and complex orders in Select Symbols,15 $0.20 per contract for regular orders in Non-Select Symbols,16 $1.08 per contract for complex orders in Non-Select Symbols, and $0.15 per contract for regular and complex orders in foreign exchange option classes (‘‘FX Options’’). The Exchange proposes to decrease these Facilitation and Solicitation break-up rebates for MORP-eligible members to $0.35 per contract for regular and complex orders in Select Symbols, $0.15 per contract for regular orders in NonSelect Symbols, and $0.80 per contract for complex orders in Non-Select Symbols. Regular and complex orders in FX Options will continue to receive a Facilitation and Solicitation break-up rebate of $0.15 per contract. sradovich on DSK3GMQ082PROD with NOTICES 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,17 in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,18 in particular, in that it provides for the equitable allocation of reasonable dues, fees, and other charges among members and issuers and other persons using any facility, and is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The Exchange believes the proposed decreases to MORP rebates, including the rebate for unsolicited Crossing Orders, and the Facilitation and Solicitation break-up rebate, are reasonable and equitable because the proposed rebates are set at amounts previously offered and will continue to be attractive to members that participate in the program.19 Under MORP, which is a voluntary rebate program, the Exchange currently provides enhanced rebates to EAMs that connect directly to the Exchange and provide their clients with order routing functionality that includes all U.S. options exchanges, 14 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), as defined in ISE Rule 100(a)(37A). 15 ‘‘Select Symbols’’ are options overlying all symbols listed on the ISE that are in the Penny Pilot Program. 16 ‘‘Non-Select Symbols’’ are options overlying all symbols excluding Select Symbols. 17 15 U.S.C. 78f(b). 18 15 U.S.C. 78f(b)(4) and (5). 19 See supra note 3. VerDate Sep<11>2014 19:59 May 26, 2017 Jkt 241001 including ISE. Although the Exchange proposes to decrease the rebates, the Exchange still believes that members will continue to be incentivized to participate in the program. The Exchange believes that the proposed rebates will be attractive to members to opt in to MORP. In addition, the Exchange believes that the proposed rebates are not unfairly discriminatory as they apply to all EAMs that meet the program requirements and opt in to the program. Any EAM that participates in the program will be provided the rebates on an equal and non-discriminatory basis based on the order flow executed on the Exchange. While MORP is targeted towards unsolicited Crossing Order flow, the Exchange offers other incentive programs to promote and encourage growth in other business areas, including, for example, rebates for Market Makers that routinely quote at the national best bid or offer,20 and volume-based Priority Customer complex order rebates.21 Furthermore, solicited Crossing Orders benefit from the QCC and Solicitation Rebate, which applies to all QCC and/or other solicited Crossing Orders, including solicited orders executed in the Solicitation, Facilitation or Price Improvement Mechanisms. The Exchange believes that MORP is appropriately tailored to the order flow that the Exchange is seeking to attract, and will benefit all market participants that trade on ISE by encouraging additional liquidity. B. Self-Regulatory Organization’s Statement on Burden on Competition In accordance with Section 6(b)(8) of the Act,22 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. Order routing firms that participate in MORP and select the Exchange as the default routing destination for unsolicited Crossing Orders will continue to receive enhanced rebates that are set at levels consistent with those previously offered on ISE. 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 competitive with other exchanges. For 20 See Schedule of Fees, Section I, Regular Order Fees and Rebates, Market Maker Plus. 21 See Schedule of Fees, Section II, Complex Order Fees and Rebates. 22 15 U.S.C. 78f(b)(8). PO 00000 Frm 00096 Fmt 4703 Sfmt 4703 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,23 and Rule 19b–4(f)(2) 24 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: Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– ISE–2017–47 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–2017–47. 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 (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent 23 15 24 17 E:\FR\FM\30MYN1.SGM U.S.C. 78s(b)(3)(A)(ii). CFR 240.19b–4(f)(2). 30MYN1 Federal Register / Vol. 82, No. 102 / Tuesday, May 30, 2017 / Notices amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–ISE– 2017–47 and should be submitted on or before June 20, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.25 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–10972 Filed 5–26–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–80745; File No. SR– NASDAQ–2017–033] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order Granting Approval of a Proposed Rule Change, as Modified by Amendments No. 1 and 2, To List and Trade Shares of the First Trust California Municipal High Income ETF sradovich on DSK3GMQ082PROD with NOTICES May 23, 2017. I. Introduction On March 24, 2017, The NASDAQ Stock Market LLC (‘‘Exchange’’ or ‘‘Nasdaq’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to list and trade shares (‘‘Shares’’) of the First Trust California Municipal High Income ETF (‘‘Fund’’) of First Trust ExchangeTraded Fund III (‘‘Trust’’) under Nasdaq 25 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 VerDate Sep<11>2014 19:59 May 26, 2017 Jkt 241001 Rule 5735. The proposed rule change was published for comment in the Federal Register on April 10, 2017.3 On May 12, 2017, the Exchange filed Amendment No. 1 to the proposed rule change.4 On May 16, 2017, the Exchange filed Amendment No. 2 to the proposed rule change.5 The Commission has received no comments on the proposal. The Commission is granting approval of the proposed rule change, as modified by Amendments No. 1 and 2. II. Exchange’s Description of the Proposed Rule Change The Exchange proposes to list and trade the Shares of the Fund under Nasdaq Rule 5735, which governs the listing and trading of Managed Fund Shares on the Exchange. The Fund will be an actively-managed exchange-traded fund (‘‘ETF’’). The Trust, which was established as a Massachusetts business trust on January 9, 2008 and is registered with the Commission as an investment company, has filed with the Commission a registration statement on Form N–1A (‘‘Registration Statement’’).6 3 See Securities Exchange Act Release No. 80369 (April 4, 2017), 82 FR 17314. 4 In Amendment No. 1, which amended and replaced the proposed rule change in its entirety, the Exchange: (a) Clarified the scope and definition of Municipal Securities (defined herein) and other municipal securities in which the Fund may invest; (b) represented that to the extent the Fund invests in Municipal Securities (as defined herein) that are asset-backed and mortgage-backed, those investments will not account, in the aggregate, for more than 20% of the fixed-income portion of the Fund’s portfolio; (c) stated that the Fund may invest up to 20% of its net assets in the aggregate in OTC Derivatives (as defined herein) and represented that the Fund will only enter into transactions in OTC Derivatives with counterparties that the Adviser reasonably believes are capable of performing under the applicable contract or agreement; and (d) made certain technical amendments. Because Amendment No. 1 makes clarifying changes and does not unique or novel regulatory issues, it is not subject to notice and comment. Amendment No. 1 to the proposed rule change is available at: https:// www.sec.gov/comments/sr-nasdaq-2017-033/ nasdaq2017033-1749423-151718.pdf. 5 In Amendment No. 2, which partially amended the proposed rule change, as modified by Amendment No. 1, the Exchange clarified that all statements and representations made in the filing regarding (a) the description of the portfolio or reference assets, (b) limitations on portfolio holdings or reference assets, (c) dissemination and availability of the reference asset or intraday indicative values, or (d) the applicability of Exchange listing rules shall constitute continued listing requirements for listing the Shares on the Exchange. Because Amendment No. 2 does not materially alter the substance of the proposed rule change or raise unique or novel regulatory issues, it is not subject to notice and comment. Amendment No. 2 to the proposed rule change is available at: https://www.sec.gov/comments/srnasdaq-2017-033/nasdaq2017033.htm. 6 See Post-Effective Amendment No. 65 to the Registration Statement for the Trust, dated March 24, 2017 (File Nos. 333–176976 and 811–22245). The Exchange represents that the Trust has obtained certain exemptive relief from the PO 00000 Frm 00097 Fmt 4703 Sfmt 4703 24755 First Trust Advisors L.P. will serve as the investment adviser (‘‘Adviser’’) to the Fund. First Trust Portfolios L.P. will serve as the principal underwriter and distributor (‘‘Distributor’’) of the Fund’s Shares.7 Brown Brothers Harriman & Co. will act as the administrator, accounting agent, custodian, and transfer agent to the Fund. The Exchange has made the following representations and statements in describing the Fund and its investment strategies, including the Fund’s portfolio holdings and investment restrictions.8 A. Exchange’s Description of the Fund’s Principal Investments According to the Exchange, the primary investment objective of the Fund will be to seek to provide current income that is exempt from regular federal income taxes and California income taxes, and its secondary objective will be long-term capital appreciation. Under normal market conditions,9 the Fund will seek to Commission under the Investment Company Act of 1940 (‘‘1940 Act’’). See Investment Company Act Release No. 30029 (April 10, 2002) (File No. 812– 13795). 7 The Exchange represents that, while the Adviser is not a broker dealer, it is affiliated with the Distributor, a broker dealer. The Exchange states that the Adviser has implemented and will maintain a fire wall between the Adviser and the Distributor with respect to access to information concerning the composition of, and changes to, the Fund’s portfolio. In the event (a) the Adviser or any sub adviser registers as a broker dealer or becomes newly affiliated with a broker dealer, or (b) any new adviser or sub adviser is a registered broker dealer or becomes affiliated with another broker dealer, it will implement and maintain a fire wall with respect to its relevant personnel and/or such broker dealer affiliate, as applicable, regarding access to information concerning the composition of, and/or changes to, the portfolio and will be subject to procedures designed to prevent the use and dissemination of material, non-public information regarding such portfolio. 8 The Commission notes that additional information regarding the Trust, the Fund, and the Shares, including investment strategies, risks, net asset value (‘‘NAV’’) calculation, creation and redemption procedures, fees, Fund holdings disclosure policies, distributions, and taxes, among other information, is included in the proposed rule change, as modified by Amendments No. 1 and 2, and the Registration Statement, as applicable. See Amendments No. 1 and 2 and Registration Statement, supra notes 4, 5, and 6, respectively, and accompanying text. 9 The term ‘‘under normal market conditions’’ for purposes of the filing, includes, but is not limited to, the absence of adverse market, economic, political or other conditions, including extreme volatility or trading halts in the fixed income markets or the financial markets generally; operational issues causing dissemination of inaccurate market information; or force majeure type events such as systems failure, natural or manmade disaster, act of God, armed conflict, act of terrorism, riot or labor disruption or any similar intervening circumstance. The Exchange represents that, on a temporary basis, including for defensive E:\FR\FM\30MYN1.SGM Continued 30MYN1

Agencies

[Federal Register Volume 82, Number 102 (Tuesday, May 30, 2017)]
[Notices]
[Pages 24753-24755]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-10972]



[[Page 24753]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80744; File No. SR-ISE-2017-47]


Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the 
Schedule of Fees To Decrease Member Order Routing Program Rebates

May 23, 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 May 16, 2017, Nasdaq ISE, LLC (``ISE'' 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.\3\ 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.
    \3\ The Exchange initially filed the proposed rule change as SR-
ISE-2017-38 on April 27, 2017. On May 5, 2017, the Exchange withdrew 
SR-ISE-2017-38 and submitted SR-ISE-2017-43 as a replacement. On May 
16, 2017, the Exchange withdrew SR-ISE-2017-43 and submitted this 
filing. The Exchange has designated the proposed changes to be 
operative on May 1, 2017.
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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 its Schedule of Fees to decrease 
rebates for members that participate in the Member Order Routing 
Program.
    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 operates the Member Order Routing Program 
(``MORP''),\4\ which is a program that provides enhanced rebates to 
order routing firms that select the Exchange as the default routing 
destination for unsolicited Crossing Orders.\5\ On March 10, 2017, the 
Exchange made changes to the program to allow members to opt in to MORP 
for specific sessions rather than on a member-wide basis, and to 
increase MORP rebates for members that participate in the program.\6\ 
As described in more detail below, the Exchange now proposes to 
decrease MORP rebates consistent with the previous rebates provided 
prior to that proposed rule change.\7\ Members will continue to be able 
to opt in to MORP for specific sessions rather than on a member-wide 
basis.
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    \4\ See Securities Exchange Act Release No. 74706 (April 10, 
2016), 80 FR 20522 (April 16, 2016) (SR-ISE-2015-11).
    \5\ A ``Crossing Order'' is an order executed in the Exchange's 
Facilitation Mechanism, Solicited Order Mechanism, Price Improvement 
Mechanism (``PIM'') or submitted as a Qualified Contingent Cross 
(``QCC'') order. For purposes of the fee schedule, orders executed 
in the Block Order Mechanism are also considered Crossing Orders.
    \6\ See Securities Exchange Act Release No. 80267 (March 17, 
2017), 82 FR 14929 (March 23, 2017) (SR-ISE-2017-24). As provided in 
the above filing, a member may designate one or more sessions to be 
eligible for MORP. A session is connection to the exchange over 
which a member submits orders. See Section V.C. of the Schedule of 
Fees. If a session is designated as eligible for MORP all 
requirements for the program must be met for that session. To be 
eligible to participate in MORP an EAM must: (1) Designate, in 
writing, to the Exchange which sessions are MORP eligible according 
to the criteria below; (2) provide to its clients, systems that 
enable the electronic routing of option orders to all of the U.S. 
options exchanges, including ISE; (3) interface with ISE to access 
the Exchange's electronic options trading platform; (4) offer to its 
clients a customized interface and routing functionality such that 
ISE will be the default destination for all unsolicited Crossing 
Orders entered by the EAM, provided that market conditions allow the 
Crossing Order to be executed on ISE; (5) configure its own option 
order routing functionality such that ISE will be the default 
destination for all unsolicited Crossing Orders, provided that 
market conditions allow the Crossing Order to be executed on ISE, 
with respect to all option orders as to which the EAM has routing 
discretion; and (6) ensure that the default routing functionality 
permits users submitting option orders through such system to 
manually override the ISE as the default destination on an order-by-
order basis.
    On the Schedule of Fees, the requirement to designate which 
sessions are MORP eligible ends in a period. As a non-substantive 
conforming change, the Exchange proposes to change this to a semi-
colon.
    \7\ The Exchange initially filed the proposed pricing changes on 
April 27, 2017 (SR-ISE-2017-38). On May 5, 2017, the Exchange 
withdrew that filing and submitted this filing [sic].
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Rebate for Unsolicited Crossing Orders
    Currently, an EAM that is MORP eligible receives a rebate for all 
unsolicited Crossing Orders of $0.065 per originating contract side, 
provided that the member executes a minimum average daily volume 
(``ADV'') in unsolicited Crossing Orders of at least 30,000 originating 
contract sides though their MORP designated sessions. This rebate is 
increased to $0.07 per originating contract side, provided that the 
member executes a higher ADV in unsolicited Crossing Orders of 100,000 
originating contract sides.\8\ The Exchange proposes to decrease the 
MORP rebate for eligible members that execute from 30,000 to 99,999 
originating contract sides to $0.05 per originating contract side. The 
MORP rebate for eligible members that execute 100,000 or more 
originating contract sides will remain $0.07 per originating contract 
side.
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    \8\ The rebate for the highest tier achieved is applied 
retroactively to all eligible contracts traded in a given month. For 
purposes of determining whether the member meets the above ADV 
thresholds, any day that the Exchange 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 such 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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Facilitation and Solicitation Break-Up Rebate
    In addition, any EAM that qualifies for the MORP rebate by 
executing an ADV of 30,000 originating contract sides or more on their 
MORP designated sessions is also eligible for increased Facilitation 
and Solicitation break-up rebates \9\ for their Non-ISE Market 
Maker,\10\ Firm Proprietary,\11\ Broker-Dealer,\12\ Professional 
Customer,\13\ and

[[Page 24754]]

Priority Customer orders.\14\ Currently, MORP eligible members that 
execute a qualifying ADV in unsolicited Crossing Orders of at least 
30,000 originating contract sides, receive a Facilitation and 
Solicitation break-up rebate that is $0.42 per contract for regular and 
complex orders in Select Symbols,\15\ $0.20 per contract for regular 
orders in Non-Select Symbols,\16\ $1.08 per contract for complex orders 
in Non-Select Symbols, and $0.15 per contract for regular and complex 
orders in foreign exchange option classes (``FX Options''). The 
Exchange proposes to decrease these Facilitation and Solicitation 
break-up rebates for MORP-eligible members to $0.35 per contract for 
regular and complex orders in Select Symbols, $0.15 per contract for 
regular orders in Non-Select Symbols, and $0.80 per contract for 
complex orders in Non-Select Symbols. Regular and complex orders in FX 
Options will continue to receive a Facilitation and Solicitation break-
up rebate of $0.15 per contract.
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    \9\ Break-up rebates are provided for contracts that are 
submitted to the Facilitation and Solicited Order Mechanisms that do 
not trade with their contra order except when those contracts trade 
against pre-existing orders and quotes on the Exchange's orderbooks. 
The applicable fee for Crossing Orders is applied to any contracts 
for which a rebate is provided.
    \10\ A ``Non-ISE 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.
    \11\ A ``Firm Proprietary'' order is an order submitted by a 
member for its own proprietary account.
    \12\ A ``Broker-Dealer'' order is an order submitted by a member 
for a broker-dealer account that is not its own proprietary account.
    \13\ A ``Professional Customer'' is a person or entity that is 
not a broker/dealer and is not a Priority Customer.
    \14\ 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), as defined in ISE Rule 100(a)(37A).
    \15\ ``Select Symbols'' are options overlying all symbols listed 
on the ISE that are in the Penny Pilot Program.
    \16\ ``Non-Select Symbols'' are options overlying all symbols 
excluding Select Symbols.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\17\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\18\ in particular, in that it 
provides for the equitable allocation of reasonable dues, fees, and 
other charges among members and issuers and other persons using any 
facility, and is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes the proposed decreases to MORP rebates, 
including the rebate for unsolicited Crossing Orders, and the 
Facilitation and Solicitation break-up rebate, are reasonable and 
equitable because the proposed rebates are set at amounts previously 
offered and will continue to be attractive to members that participate 
in the program.\19\ Under MORP, which is a voluntary rebate program, 
the Exchange currently provides enhanced rebates to EAMs that connect 
directly to the Exchange and provide their clients with order routing 
functionality that includes all U.S. options exchanges, including ISE. 
Although the Exchange proposes to decrease the rebates, the Exchange 
still believes that members will continue to be incentivized to 
participate in the program. The Exchange believes that the proposed 
rebates will be attractive to members to opt in to MORP.
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    \19\ See supra note 3.
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    In addition, the Exchange believes that the proposed rebates are 
not unfairly discriminatory as they apply to all EAMs that meet the 
program requirements and opt in to the program. Any EAM that 
participates in the program will be provided the rebates on an equal 
and non-discriminatory basis based on the order flow executed on the 
Exchange. While MORP is targeted towards unsolicited Crossing Order 
flow, the Exchange offers other incentive programs to promote and 
encourage growth in other business areas, including, for example, 
rebates for Market Makers that routinely quote at the national best bid 
or offer,\20\ and volume-based Priority Customer complex order 
rebates.\21\ Furthermore, solicited Crossing Orders benefit from the 
QCC and Solicitation Rebate, which applies to all QCC and/or other 
solicited Crossing Orders, including solicited orders executed in the 
Solicitation, Facilitation or Price Improvement Mechanisms. The 
Exchange believes that MORP is appropriately tailored to the order flow 
that the Exchange is seeking to attract, and will benefit all market 
participants that trade on ISE by encouraging additional liquidity.
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    \20\ See Schedule of Fees, Section I, Regular Order Fees and 
Rebates, Market Maker Plus.
    \21\ See Schedule of Fees, Section II, Complex Order Fees and 
Rebates.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\22\ 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. Order routing 
firms that participate in MORP and select the Exchange as the default 
routing destination for unsolicited Crossing Orders will continue to 
receive enhanced rebates that are set at levels consistent with those 
previously offered on ISE. 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 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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    \22\ 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,\23\ and Rule 19b-4(f)(2) \24\ 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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    \23\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \24\ 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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-ISE-2017-47 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-2017-47. 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 (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent

[[Page 24755]]

amendments, all written statements with respect to the proposed rule 
change that are filed with the Commission, and all written 
communications relating to the proposed rule change between the 
Commission and any person, other than those that may be withheld from 
the public in accordance with the provisions of 5 U.S.C. 552, will be 
available for Web site viewing and printing in the Commission's Public 
Reference Room, 100 F Street NE., Washington, DC 20549, on official 
business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of 
the filing also will be available for inspection and copying at the 
principal office of the Exchange. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-ISE-2017-47 and should be submitted on or before June 
20, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-10972 Filed 5-26-17; 8:45 am]
BILLING CODE 8011-01-P