80 FR 29136 - Self-Regulatory Organizations; ISE Gemini, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Schedule of Fees To Introduce a New “Retail” Designation for Priority Customer Orders

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 97 (May 20, 2015)

[Federal Register Volume 80, Number 97 (Wednesday, May 20, 2015)]
[Notices]
[Pages 29136-29138]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-12150]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74971; File No. SR-ISE Gemini-2015-09]


Self-Regulatory Organizations; ISE Gemini, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the 
Schedule of Fees To Introduce a New ``Retail'' Designation for Priority 
Customer Orders

May 14, 2015.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on April 29, 2015, ISE Gemini, LLC (the ``Exchange'' or the ``ISE 
Gemini'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change, as described in Items I, II, 
and III below, which items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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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

    ISE Gemini proposes to amend the Schedule of Fees to introduce a 
new ``Retail'' designation for Priority Customer orders. The text of 
the proposed rule change is available on the Exchange's Web site 
(http://www.ise.com), at the principal office of the Exchange, and at 
the Commission's Public Reference Room.

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

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of these statements may be examined at 
the places specified in Item IV below. The 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend the Schedule of Fees to introduce a 
new ``Retail'' designation for Priority Customer orders. 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 Rule 100(a)(37A). This market participant 
type is one of six currently recognized for purposes of determining 
applicable fees and rebates, along with: Market Maker,\3\ Non-ISE 
Gemini Market Maker,\4\ Firm Proprietary,\5\ Broker-Dealer,\6\ and 
Professional Customer.\7\ The Priority Customer designation was adopted 
by the Exchange to provide competitive pricing and market structure 
advantages to retail investors, and to level the playing field between 
retail investors and market professionals. As such, Priority Customer 
orders executed on the Exchange are generally afforded more favorable 
fees and rebates than other market participants, including Professional 
Customers. The Exchange now believes that it is appropriate to 
introduce a further distinction between market participants that fall 
within the definition of Priority Customer.
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    \3\ The term ``Market Makers'' refers to ``Competitive Market 
Makers'' and ``Primary Market Makers'' collectively. See Rule 
100(a)(25).
    \4\ 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. See Schedule of Fees, Preface.
    \5\ A ``Firm Proprietary'' order is an order submitted by a 
member for its own proprietary account. See Schedule of Fees, 
Preface.
    \6\ A ``Broker-Dealer'' order is an order submitted by a member 
for a broker-dealer account that is not its own proprietary account. 
See Schedule of Fees, Preface.
    \7\ A ``Professional Customer'' is a person or entity that is 
not a broker/dealer and is not a Priority Customer. See Schedule of 
Fees, Preface.
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    In particular, the Exchange proposes to introduce a new ``Retail'' 
designation for Priority Customer orders for the purpose of determining 
applicable fees and rebates. As proposed, a Retail order is a Priority 
Customer order that originates from a natural person, provided that no 
change is made to the terms of the order with respect to price or side 
of market and the order does not originate from a trading algorithm or 
any other computerized methodology. The proposed definition of a Retail 
order is designed to mirror a similar concept introduced by the New 
York Stock Exchange (``NYSE''), NYSE Amex (``Amex''), and other 
equities exchanges to promote price improvement for orders submitted by 
retail investors.\8\ The proposed rule change, however, is intended to 
provide benefits to retail options investors in the form of more 
favorable pricing rather than market structure changes.\9\ While the 
Exchange is not amending fees and rebates applicable to Priority 
Customer orders that are designated Retail at this time, the Exchange 
intends to introduce special fees and rebates for Retail orders at a 
later date, such that Retail orders will potentially be entitled to the 
most favorable fees and rebates available on the Exchange. Until such 
time, Retail orders will be charged the same fees and provided the same 
rebates as other Priority Customer orders.
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    \8\ See Securities Exchange Act Release No. 67347 (July 3, 
2012), 77 FR 40673 (July 10, 2012) (SR-NYSE-2011-55; SR-NYSEAmex-
2011-84) (Approval Order). See also NYSE and Amex Rule 107C(a)(3).
    NYSE and Amex define a ``Retail Order'' as an agency order or a 
riskless principal order that meets the criteria of FINRA Rule 
5320.03 that originates from a natural person and is submitted to 
the Exchange by a Retail Member Organization, provided that no 
change is made to the terms of the order with respect to price or 
side of market and the order does not originate from a trading 
algorithm or any other computerized methodology.
    \9\ In addition, the Exchange notes that unlike the related 
equities programs, all members will be eligible to mark orders as 
Retail provided that the orders meet the requirements discussed 
above.
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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 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.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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    Specifically, the proposed rule change will allow the Exchange to 
potentially offer more favorable fees and rebates to Retail orders that 
originate from natural

[[Page 29137]]

persons. Currently, the Exchange distinguishes between orders executed 
for two categories of Public Customer: \12\ Priority and Professional 
Customers. Priority Customers are distinguished from Professional 
Customers by the requirement that they not place more than 390 orders 
in listed options per day on average during a calendar month for its 
own beneficial account(s). Because of this limitation, Priority 
Customer orders are generally afforded more favorable fees and rebates 
than market professionals, including Professional Customers. The 
Exchange now believes that it is appropriate to distinguish further 
between orders that originate from a natural person (i.e., Retail 
orders) and other Priority Customer orders.
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    \12\ A ``Public Customer'' is a person or entity that is not a 
broker or dealer in securities. See Rule 100(a)(38).
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    The equities markets already provide benefits to order flow that 
originates from a natural person and not a trading algorithm or any 
other computerized methodology. The Exchange believes that the proposed 
definition of a Retail order is appropriate as it is substantially 
similar to the definition already used in the equities context, and is 
therefore already familiar to market participants. The Exchange notes, 
however, that unlike equities exchanges such as NYSE and Amex, it is 
not proposing any market structure changes at this time to accompany 
the introduction of a Retail designation for Priority Customer orders. 
All Priority Customer orders will continue to benefit from the current 
market structure benefits that they receive on the Exchange. In 
addition, Priority Customer orders other than Retail orders will 
continue to benefit from pricing that is generally more favorable than 
pricing adopted for Professional Customer and non-Customer orders.
    By adopting a definition of Retail order, the Exchange hopes to be 
able to offer potentially more favorable fees and rebates to retail 
investors. The Exchange believes that this will advance the goals 
identified when the Exchange first introduced the Priority Customer 
designation, by providing genuine retail investors with the best prices 
available on the Exchange. In this regard, the Exchange notes that the 
fees and rebates for Retail orders will initially be the same as fees 
and rebates for other Priority Customer orders; however, the Exchange 
will introduce additional pricing advantages for Retail orders at a 
later date pursuant to a proposed rule change filed with the 
Commission.

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

    In accordance with Section 6(b)(8) of the Act,\13\ the Exchange 
does not believe that the proposed rule change will impose any burden 
on intermarket or intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. To the contrary, 
the Exchange believes the proposed Retail designation is an innovative 
change that evidences strong competition between options markets. In 
particular, the proposed rule change is designed to allow the Exchange 
to potentially offer the most favorable fees and rebates available to 
Retail orders that originate from natural persons. 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 changes reflect this competitive environment.
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    \13\ 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

    The Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any unsolicited written comments from members or other interested 
parties.

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

    The Exchange believes that the foregoing proposed rule change may 
take effect upon filing with the Commission pursuant to 
Section19(b)(3)(A) \14\ of the Act and Rule 19b-4(f)(6) thereunder \15\ 
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 after its filing date, or such shorter time as the Commission 
may designate. The Exchange provided the Commission with written notice 
of its intent to file the proposed rule change, along with a brief 
description and text of the proposed rule change, at least five 
business days prior to the date of filing the proposed rule change.
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6).
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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 (http://www.sec.gov/rules/sro.shtml); or
     Send an Email to [email protected]. Please include 
File Number SR-ISE Gemini-2015-09 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 Gemini-2015-09. 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 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 such filing also will be available 
for inspection and copying at the principal office of ISE Gemini. All 
comments received will be posted without change;

[[Page 29138]]

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 
Gemini-2015-09 and should be submitted by June 10, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-12150 Filed 5-19-15; 8:45 am]
BILLING CODE 8011-01-P