80 FR 64033 - Self-Regulatory Organizations; ISE Gemini, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Schedule of Fees
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 80, Issue 204 (October 22, 2015)
Federal Register Volume 80, Issue 204 (October 22, 2015)
| Page Range | 64033-64037 | |
| FR Document | 2015-26805 |
[Federal Register Volume 80, Number 204 (Thursday, October 22, 2015)] [Notices] [Pages 64033-64037] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-26805] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-76172; File No. SR-ISE Gemini-2015-20] Self-Regulatory Organizations; ISE Gemini, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Schedule of Fees October 16, 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 October 1, 2015, ISE Gemini, LLC (the ``Exchange'' or ``ISE Gemini'') filed with the Securities and Exchange 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. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- 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 as described in more detail below. The text of the proposed rule change is available on the Exchange's Internet Web site at 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 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 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 its Schedule of Fees to increase the fees charged to subscribers of the ISE Gemini Order Feed. The Order Feed provides real-time updates to subscribers every time a new limit order that is not immediately executable at the BBO is placed on the ISE Gemini order book. The Order Feed also announces the commencement of auctions including Flash, Facilitation, Solicitation, Block Order and Price Improvement Mechanisms, as well as Directed Orders, but does not include Immediate or Cancel (``IOC'') or Fill or Kill (``FOK'') orders, quotes, or any non-displayed interest. The information included on the Order Feed includes auction type, order side (i.e., buy/sell), order price, order size, and a market participant (e.g., priority customer) indicator, as well as details for each instrument series, including the symbols (series and underlying security), put or call indicator, the expiration date, and the strike price of the series. The Order Feed provides each individual limit order, not including quote traffic, resulting in lower bandwidth usage and less data for subscribers to process. Currently, the Exchange charges distributors $500 per month for subscriptions to the Order Feed and will not charge distributors a monthly fee [[Page 64034]] per controlled device as long the feed is for internal use only.\3\ For subscribers that redistribute the Order Feed externally, or redistribute the Order Feed internally and externally, the Exchange charges each distributor an additional fee of $5 per month per controlled device with a combined maximum fee capped at $625 per month. --------------------------------------------------------------------------- \3\ A distributor is any firm that receives one of the market data feeds directly from ISE Gemini or indirectly through a redistributor and then distributes it either internally or externally. A redistributor includes market data vendors and connectivity providers such as extranets and private network providers. --------------------------------------------------------------------------- The Exchange now propose to increase the fee charged to distributors to $750 per month. The Exchange will not charge distributors a monthly fee per controlled device as long the feed is for internal use only. For subscribers that redistribute the Order Feed externally, or redistribute the Order Feed internally and externally, the Exchange is not changing distributor fee per controlled device,\4\ however the Exchange proposes to increase the combined maximum fee cap to $1,000 per month. For example, a firm that subscribes to the Order Feed and then redistributes it via a controlled device to 50 clients pays $1,000 per month ($750 for the feed and $250 for the controlled devices ($5 x 50)). If that same firm redistributes the data via a controlled device to 150 clients, the fee for that firm is capped at $1,000 per month, resulting in a savings of $500. --------------------------------------------------------------------------- \4\ The controlled device fee is currently $5 per device. --------------------------------------------------------------------------- 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,\5\ in general, and furthers the objectives of Section 6(b)(4) of the Act,\6\ in particular, in that it provides for an equitable allocation of reasonable fees and other charges among Exchange members and other persons using its facilities. --------------------------------------------------------------------------- \5\ 15 U.S.C. 78f(b). \6\ 15 U.S.C. 78f(b)(4). --------------------------------------------------------------------------- The Exchange believes that the proposed rule change is also consistent with Section 6(b)(8) of the Act,\7\ in that it does not impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. The proposed fees are the same for all similarly-situated market participants, and therefore do not unreasonably discriminate among market participants. Moreover, the Exchange notes that the proposed fees are lower than fees currently charged by ISE Gemini's sister exchange, the International Securities Exchange, LLC (``ISE''), which offers its own market data feeds that provide comparable information to that provided by the ISE Gemini order feeds.\8\ --------------------------------------------------------------------------- \7\ 15 U.S.C. 78f(b)(8). \8\ See ISE Schedule of Fees, Section VIII, Market Data. --------------------------------------------------------------------------- In adopting Regulation NMS, the Commission granted self-regulatory organizations and broker-dealers increased authority and flexibility to offer new and unique market data to the public. It was believed that this authority would expand the amount of data available to consumers, and also spur innovation and competition for the provision of market data. The Commission concluded that Regulation NMS--by deregulating the market in proprietary data--would itself further the Act's goals of facilitating efficiency and competition: [E]fficiency is promoted when broker-dealers who do not need the data beyond the prices, sizes, market center identifications of the NBBO and consolidated last sale information are not required to receive (and pay for) such data. The Commission also believes that efficiency is promoted when broker-dealers may choose to receive (and pay for) additional market data based on their own internal analysis of the need for such data.\9\ \9\ See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496 (June 29, 2005). By removing ``unnecessary regulatory restrictions'' on the ability of exchanges to sell their own data, Regulation NMS advanced the goals of the Act and the principles reflected in its legislative history. If the free market should determine whether proprietary data is sold to broker-dealers at all, it follows that the price at which such data is sold should be set by the market as well. On July 21, 2010, President Barak Obama signed into law H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (``Dodd-Frank Act''), which amended Section 19 of the Act. Among other things, Section 916 of the Dodd-Frank Act amended paragraph (A) of Section 19(b)(3) of the Act by inserting the phrase ``on any person, whether or not the person is a member of the self-regulatory organization'' after ``due, fee or other charge imposed by the self- regulatory organization.'' As a result, all SRO rule proposals establishing or changing dues, fees, or other charges are immediately effective upon filing regardless of whether such dues, fees, or other charges are imposed on members of the SRO, non-members, or both. Section 916 further amended paragraph (C) of Section 19(b)(3) of the Act to read, in pertinent part, ``At any time within the 60-day period beginning on the date of filing of such a proposed rule change in accordance with the provisions of paragraph (1) [of Section 19(b)], the Commission summarily may temporarily suspend the change in the rules of the self-regulatory organization made thereby, if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of this title. If the Commission takes such action, the Commission shall institute proceedings under paragraph (2)(B) [of Section 19(b)] to determine whether the proposed rule should be approved or disapproved.'' The decision of the United States Court of Appeals for the District of Columbia Circuit in NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010), although reviewing a Commission decision made prior to the effective date of the Dodd-Frank Act, upheld the Commission's reliance upon competitive markets to set reasonable and equitably allocated fees for market data. ``In fact, the legislative history indicates that the Congress intended that the market system `'evolve through the interplay of competitive forces as unnecessary regulatory restrictions are removed' and that the SEC wield its regulatory power `in those situations where competition may not be sufficient,' such as in the creation of a `consolidated transactional reporting system.' '' \10\ --------------------------------------------------------------------------- \10\ NetCoalition, at 535 (quoting H.R. Rep. No. 94-229, at 92 (1975), as reprinted in 1975 U.S.C.C.A.N. 321, 323). --------------------------------------------------------------------------- The court's conclusions about Congressional intent are therefore reinforced by the Dodd-Frank Act amendments, which create a presumption that exchange fees, including market data fees, may take effect immediately, without prior Commission approval, and that the Commission should take action to suspend a fee change and institute a proceeding to determine whether the fee change should be approved or disapproved only where the Commission has concerns that the change may not be consistent with the Act. The Exchange believes that the proposed fees for the ISE Gemini market data offering is consistent with the requirements of the Act because competition provides an effective constraint on the market data fees that the Exchange has the ability and the incentive to charge. ISE Gemini has a compelling need to attract order flow from market participants in order to [[Page 64035]] maintain its share of trading volume. This compelling need to attract order flow imposes significant pressure on the Exchange to act reasonably in setting the fees for its market data offerings, particularly given that the market participants that will pay such fees often will be the same market participants from whom the Exchange must attract order flow. These market participants include broker-dealers that control the handling of a large volume of customer and proprietary order flow. Given the portability of order flow from one exchange to another, any exchange that sought to charge unreasonably high market data fees would risk alienating many of the same customers on whose orders it depends for competitive survival. ISE Gemini currently competes with 11 other options exchanges for order flow. The Exchange is constrained in pricing its market data offerings by the availability to market participants of alternatives to purchasing these products. The Exchange must consider the extent to which market participants would choose one or more alternatives instead of purchasing the Exchange's data. For the reasons cited above, the Exchange believes that the proposed fees for the ISE Gemini data feed are equitable, fair, reasonable and not unreasonably discriminatory. The Exchange further believes that the continued availability of each of the ISE Gemini data feeds enhances transparency, fosters competition among orders and markets, and enables buyers and sellers to obtain better prices. In addition, the Exchange believes that no substantial countervailing basis exists to support a finding that the proposed terms and fees for these products fail to meet the requirements of the Act. B. Self-Regulatory Organization's Statement on Burden on Competition In accordance with Section 6(b)(8) of the Act,\11\ 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. Notwithstanding its determination that the Commission may rely upon competition to establish fair and equitably allocated fees for market data, the NetCoaltion court found that the Commission had not, in that case, compiled a record that adequately supported its conclusion that the market for the data at issue in the case was competitive. The Exchange believes that a record may readily be established to demonstrate the competitive nature of the market in question. --------------------------------------------------------------------------- \11\ 15 U.S.C. 78f(b)(8). --------------------------------------------------------------------------- For the reasons discussed above, the Exchange believes that the Dodd-Frank Act amendments to Section 19 materially alter the scope of the Commission's review of future market data filings, by creating a presumption that all fees may take effect immediately, without prior analysis by the Commission of the competitive environment. Even in the absence of this important statutory change, however, the Exchange believes that a record may readily be established to demonstrate the competitive nature of the market in question. There is intense competition between trading platforms that provide transaction execution and routing services and proprietary data products. Transaction execution and proprietary data products are complementary in that market data is both an input and a byproduct of the execution service. In fact, market data and trade execution are a paradigmatic example of joint products with joint costs. The decision whether and on which platform to post an order will depend on the attributes of the platform where the order can be posted, including the execution fees, data quality and price and distribution of its data products. Without the prospect of a taking order seeing and reacting to a posted order on a particular platform, the posting of the order would accomplish little. Without trade executions, exchange data products cannot exist. Data products are valuable to many end users only insofar as they provide information that end users expect will assist them or their customers in making trading decisions. The costs of producing market data include not only the costs of the data distribution infrastructure, but also the costs of designing, maintaining, and operating the exchange's transaction execution platform and the cost of regulating the exchange to ensure its fair operation and maintain investor confidence. The total return that a trading platform earns reflects the revenues it receives from both products and the joint costs it incurs. Moreover, an exchange's customers view the costs of transaction executions and of data as a unified cost of doing business with the exchange. A broker-dealer will direct orders to a particular exchange only if the expected revenues from executing trades on the exchange exceed net transaction execution costs and the cost of data that the broker-dealer chooses to buy to support its trading decisions (or those of its customers). The choice of data products is, in turn, a product of the value of the products in making profitable trading decisions. If the cost of the product exceeds its expected value, the broker-dealer will choose not to buy it. Moreover, as a broker-dealer chooses to direct fewer orders to a particular exchange, the value of the product to that broker-dealer decrease, for two reasons. First, the product will contain less information, because executions of the broker-dealer's orders will not be reflected in it. Second, and perhaps more important, the product will be less valuable to that broker-dealer because it does not provide information about the venue to which it is directing its orders. Data from the competing venue to which the broker-dealer is directing orders will become correspondingly more valuable. Thus, a super-competitive increase in the fees charged for either transactions or data has the potential to impair revenues from both products. ``No one disputes that competition for order flow is `fierce'.'' \12\ However, the existence of fierce competition for order flow implies a high degree of price sensitivity on the part of broker-dealers with order flow, since they may readily reduce costs by directing orders toward the lowest-cost trading venues. A broker-dealer that shifted its order flow from one platform to another in response to order execution price differentials would both reduce the value of that platform's market data and reduce its own need to consume data from the disfavored platform. Similarly, if a platform increases its market data fees, the change will affect the overall cost of doing business with the platform, and affected broker-dealers will assess whether they can lower their trading costs by directing orders elsewhere and thereby lessening the need for the more expensive data. --------------------------------------------------------------------------- \12\ NetCoalition, at 24. --------------------------------------------------------------------------- Analyzing the cost of market data distribution in isolation from the cost of all of the inputs supporting the creation of market data will inevitably underestimate the cost of the data. Thus, because it is impossible to create data without a fast, technologically robust, and well-regulated execution system, system costs and regulatory costs affect the price of market data. It would be equally misleading, however, to attribute all of the exchange's costs to the market data portion of an exchange's joint product. Rather, all of the exchange's costs are incurred for the unified purposes of attracting order flow, executing and/or routing orders, and generating and selling data about market activity. The total return that an [[Page 64036]] exchange earns reflects the revenues it receives from the joint products and the total costs of the joint products. Competition among trading platforms can be expected to constrain the aggregate return each platform earns from the sale of its joint products, but different platforms may choose from a range of possible, and equally reasonable, pricing strategies as the means of recovering total costs. For example, some platform may choose to pay rebates to attract orders, charge relatively low prices for market information (or provide information free of charge) and charge relatively high prices for accessing posted liquidity. Other platforms may choose a strategy of paying lower rebates (or no rebates) to attract orders, setting relatively high prices for market information, and setting relatively low prices for accessing posted liquidity. In this environment, there is no economic basis for regulating maximum prices for one of the joint products in an industry in which suppliers face competitive constraints with regard to the joint offering. The market for market data products is competitive and inherently contestable because there is fierce competition for the inputs necessary to the creation of proprietary data and strict pricing discipline for the proprietary products themselves. Numerous exchanges compete with each other for listings, trades, and market data itself, providing virtually limitless opportunities for entrepreneurs who wish to produce and distribute their own market data. This proprietary data is produced by each individual exchange, as well as other entities, in a vigorously competitive market. Broker-dealers currently have numerous alternative venues for their order flow, including numerous self-regulatory organization (``SRO'') markets, as well as internalizing broker-dealers (``BDs'') and various forms of alternative trading systems (``ATSs''), including dark pools and electronic communication networks (``ECNs''). Each SRO market competes to produce transaction reports via trade executions, and two FINRA-regulated Trade Reporting Facilities (``TRFs'') compete to attract internalized transaction reports. Competitive markets for order flow, executions, and transaction reports provide pricing discipline for the inputs of proprietary data products. The large number of SROs, TRFs, BDs, and ATSs that currently produce proprietary data or are currently capable of producing it provides further pricing discipline for proprietary data products. Each SRO, TRF, ATS, and BD is currently permitted to produce proprietary data products, and many currently do. Any ATS or BD can combine with any other ATS, BD, or multiple ATSs or BDs to produce joint proprietary data products. Additionally, order routers and market data vendors can facilitate single or multiple broker-dealers' production of proprietary data products. The potential sources of proprietary products are virtually limitless. The fact that proprietary data from ATSs, BDs, and vendors can by- pass SROs is significant in two respects. First, non-SROs can compete directly with SROs for the production and sale of proprietary data products, as BATS and Arca did before registering as exchanges by publishing proprietary book data on the Internet. Second, because a single order or transaction report can appear in an SRO proprietary product, a non-SRO proprietary product, or both, the data available in proprietary products is exponentially greater than the actual number of orders and transaction reports that exist in the marketplace. Market data vendors provide another form of price discipline for proprietary data products because they control the primary means of access to end users. Vendors impose price restraints based upon their business models. For example, vendors such as Bloomberg and Reuters that assess a surcharge on data they sell may refuse to offer proprietary products that end users will not purchase in sufficient numbers. Internet portals, such as Google, impose a discipline by providing only data that will enable them to attract ``eyeballs'' that contribute to their advertising revenue. Retail broker-dealers, such as Schwab and Fidelity, offer their customers proprietary data only if it promotes trading and generates sufficient commission revenue. Although the business models may differ, these vendors' pricing discipline is the same: They can simply refuse to purchase any proprietary data product that fails to provide sufficient value. The Exchange and other producers of proprietary data products must understand and respond to these varying business models and pricing disciplines in order to market proprietary data products successfully. 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 foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act,\13\ and subparagraph (f)(2) of Rule 19b-4 thereunder,\14\ because it establishes a due, fee, or other charge imposed by ISE Gemini. --------------------------------------------------------------------------- \13\ 15 U.S.C. 78s(b)(3)(A)(ii). \14\ 17 CFR 240.19b-4(f)(2). --------------------------------------------------------------------------- At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic CommentsUse 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 No. SR-ISE Gemini-2015-20 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-2015-20. 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 [[Page 64037]] 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 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 Gemini-2015-20 and should be submitted by November 12, 2015. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\15\ --------------------------------------------------------------------------- \15\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Brent J. Fields, Secretary. [FR Doc. 2015-26805 Filed 10-21-15; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 80, No. 204 / Thursday, October 22, 2015 / Notices 64033
Extension Order again solicited public necessary or appropriate in the public I. Self-Regulatory Organization’s
comment on issues raised in connection interest and consistent with the Statement of the Terms of Substance of
with the extra-territorial application of protection of investors to extend the the Proposed Rule Change
Rule 17g–5(a)(3). No comments were conditional temporary exemption ISE Gemini proposes to amend the
received. exempting NRSROs from complying Schedule of Fees as described in more
Given the continued concerns about with Rule 17g–5(a)(3) with respect to detail below. The text of the proposed
potential disruptions of local rating covered transactions until rule change is available on the
securitization markets, and because the December 2, 2017. Exchange’s Internet Web site at http://
Commission’s consideration of the Accordingly, www.ise.com, at the principal office of
issues raised will benefit from the Exchange, and at the Commission’s
It is hereby ordered, pursuant to
additional time to engage in further Public Reference Room.
Section 36 of the Exchange Act, that a
dialogue with interested parties and to
nationally recognized statistical rating II. Self-Regulatory Organization’s
monitor market and regulatory
organization is exempt until December Statement of the Purpose of, and
developments, the Commission believes
2, 2017 from the requirements in Rule Statutory Basis for, the Proposed Rule
extending the conditional temporary
17g–5(a)(3) (17 CFR 240.17g–5(a)(3)) for Change
exemption until December 2, 2017 is
credit ratings where:
necessary or appropriate in the public In its filing with the Commission, the
interest, and is consistent with the (1) The issuer of the security or Exchange included statements
protection of investors. money market instrument is not a U.S. concerning the purpose of, and basis for,
person (as defined under Securities Act the proposed rule change and discussed
IV. Request for Comment Rule 902(k)); and any comments it received on the
The Commission believes that it (2) The nationally recognized proposed rule change. The text of these
would be useful to continue to provide statistical rating organization has a statements may be examined at the
interested parties opportunity to reasonable basis to conclude that the places specified in Item IV below. The
comment. Comments may be submitted structured finance product will be self-regulatory organization has
by any of the following methods: offered and sold upon issuance, and that prepared summaries, set forth in
Electronic Comments any arranger linked to the structured Sections A, B and C below, of the most
finance product will effect transactions significant aspects of such statements.
• Use the Commission’s Internet of the structured finance product after
comment form (http://www.sec.gov/ issuance, only in transactions that occur A. Self-Regulatory Organization’s
rules/exorders.shtml); or outside the U.S. Statement of the Purpose of, and
• Send an email to rule-comments@ Statutory Basis for, the Proposed Rule
sec.gov. Please include File Number S7– By the Commission. Change
04–09 on the subject line; or Brent J. Fields,
1. Purpose
• Use the Federal eRulemaking Portal Secretary.
(http://www.regulations.gov). Follow the [FR Doc. 2015–26820 Filed 10–21–15; 8:45 am] The Exchange proposes to amend its
instructions for submitting comments. BILLING CODE 8011–01–P Schedule of Fees to increase the fees
charged to subscribers of the ISE Gemini
Paper Comments Order Feed. The Order Feed provides
• Send paper comments in triplicate SECURITIES AND EXCHANGE real-time updates to subscribers every
to Brent J. Fields, Secretary, Securities COMMISSION time a new limit order that is not
and Exchange Commission, 100 F St. immediately executable at the BBO is
NE., Washington, DC 20549–1090. [Release No. 34–76172; File No. SR–ISE placed on the ISE Gemini order book.
All submissions should refer to File Gemini–2015–20] The Order Feed also announces the
Number S7–04–09. This file number commencement of auctions including
should be included on the subject line Self-Regulatory Organizations; ISE Flash, Facilitation, Solicitation, Block
if email is used. To help us process and Gemini, LLC; Notice of Filing and Order and Price Improvement
review your comments more efficiently, Immediate Effectiveness of Proposed Mechanisms, as well as Directed Orders,
please use only one method. The Rule Change To Amend the Schedule but does not include Immediate or
Commission will post all comments on of Fees Cancel (‘‘IOC’’) or Fill or Kill (‘‘FOK’’)
the Commission’s Internet Web site orders, quotes, or any non-displayed
October 16, 2015. interest. The information included on
(http://www.sec.gov/rules/
exorders.shtml). Comments are also Pursuant to Section 19(b)(1) of the the Order Feed includes auction type,
available for Web site viewing and Securities Exchange Act of 1934 (the order side (i.e., buy/sell), order price,
printing in the Commission’s Public ‘‘Act’’),1 and Rule 19b–4 thereunder,2 order size, and a market participant
Reference Room, 100 F St. NE., notice is hereby given that on October (e.g., priority customer) indicator, as
Washington, DC 20549 on official 1, 2015, ISE Gemini, LLC (the well as details for each instrument
business days between the hours of 10 ‘‘Exchange’’ or ‘‘ISE Gemini’’) filed with series, including the symbols (series and
a.m. and 3 p.m. All comments received the Securities and Exchange underlying security), put or call
will be posted without change; the Commission the proposed rule change, indicator, the expiration date, and the
Commission does not edit personal as described in Items I, II, and III below, strike price of the series. The Order
identifying information from which Items have been prepared by the Feed provides each individual limit
tkelley on DSK3SPTVN1PROD with NOTICES
submissions. You should submit only self-regulatory organization. The order, not including quote traffic,
information that you wish to make Commission is publishing this notice to resulting in lower bandwidth usage and
available publicly. solicit comments on the proposed rule less data for subscribers to process.
change from interested persons. Currently, the Exchange charges
V. Conclusion distributors $500 per month for
For the foregoing reasons, the 1 15 U.S.C. 78s(b)(1). subscriptions to the Order Feed and will
Commission believes it would be 2 17 CFR 240.19b–4. not charge distributors a monthly fee
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![64034 Federal Register / Vol. 80, No. 204 / Thursday, October 22, 2015 / Notices
per controlled device as long the feed is International Securities Exchange, LLC the 60-day period beginning on the date
for internal use only.3 For subscribers (‘‘ISE’’), which offers its own market of filing of such a proposed rule change
that redistribute the Order Feed data feeds that provide comparable in accordance with the provisions of
externally, or redistribute the Order information to that provided by the ISE paragraph (1) [of Section 19(b)], the
Feed internally and externally, the Gemini order feeds.8 Commission summarily may
Exchange charges each distributor an In adopting Regulation NMS, the temporarily suspend the change in the
additional fee of $5 per month per Commission granted self-regulatory rules of the self-regulatory organization
controlled device with a combined organizations and broker-dealers made thereby, if it appears to the
maximum fee capped at $625 per increased authority and flexibility to Commission that such action is
month. offer new and unique market data to the necessary or appropriate in the public
The Exchange now propose to public. It was believed that this interest, for the protection of investors,
increase the fee charged to distributors authority would expand the amount of or otherwise in furtherance of the
to $750 per month. The Exchange will data available to consumers, and also purposes of this title. If the Commission
not charge distributors a monthly fee spur innovation and competition for the takes such action, the Commission shall
per controlled device as long the feed is provision of market data. institute proceedings under paragraph
for internal use only. For subscribers The Commission concluded that (2)(B) [of Section 19(b)] to determine
that redistribute the Order Feed Regulation NMS—by deregulating the whether the proposed rule should be
externally, or redistribute the Order market in proprietary data—would itself approved or disapproved.’’
Feed internally and externally, the further the Act’s goals of facilitating The decision of the United States
Exchange is not changing distributor fee efficiency and competition: Court of Appeals for the District of
per controlled device,4 however the [E]fficiency is promoted when broker- Columbia Circuit in NetCoalition v.
Exchange proposes to increase the dealers who do not need the data beyond the SEC, 615 F.3d 525 (D.C. Cir. 2010),
combined maximum fee cap to $1,000 prices, sizes, market center identifications of although reviewing a Commission
per month. For example, a firm that the NBBO and consolidated last sale decision made prior to the effective date
subscribes to the Order Feed and then information are not required to receive (and of the Dodd-Frank Act, upheld the
redistributes it via a controlled device to pay for) such data. The Commission also Commission’s reliance upon
50 clients pays $1,000 per month ($750 believes that efficiency is promoted when competitive markets to set reasonable
for the feed and $250 for the controlled broker-dealers may choose to receive (and and equitably allocated fees for market
devices ($5 × 50)). If that same firm pay for) additional market data based on their
own internal analysis of the need for such
data. ‘‘In fact, the legislative history
redistributes the data via a controlled indicates that the Congress intended
data.9
device to 150 clients, the fee for that that the market system ‘’evolve through
firm is capped at $1,000 per month, By removing ‘‘unnecessary regulatory the interplay of competitive forces as
resulting in a savings of $500. restrictions’’ on the ability of exchanges unnecessary regulatory restrictions are
to sell their own data, Regulation NMS removed’ and that the SEC wield its
2. Statutory Basis advanced the goals of the Act and the regulatory power ‘in those situations
The Exchange believes that its principles reflected in its legislative where competition may not be
proposal is consistent with Section 6(b) history. If the free market should sufficient,’ such as in the creation of a
of the Act,5 in general, and furthers the determine whether proprietary data is ‘consolidated transactional reporting
objectives of Section 6(b)(4) of the Act,6 sold to broker-dealers at all, it follows system.’ ’’ 10
in particular, in that it provides for an that the price at which such data is sold The court’s conclusions about
equitable allocation of reasonable fees should be set by the market as well. Congressional intent are therefore
and other charges among Exchange On July 21, 2010, President Barak reinforced by the Dodd-Frank Act
members and other persons using its Obama signed into law H.R. 4173, the amendments, which create a
facilities. Dodd-Frank Wall Street Reform and presumption that exchange fees,
The Exchange believes that the Consumer Protection Act of 2010 including market data fees, may take
proposed rule change is also consistent (‘‘Dodd-Frank Act’’), which amended effect immediately, without prior
with Section 6(b)(8) of the Act,7 in that Section 19 of the Act. Among other Commission approval, and that the
it does not impose any burden on things, Section 916 of the Dodd-Frank Commission should take action to
competition not necessary or Act amended paragraph (A) of Section suspend a fee change and institute a
appropriate in furtherance of the 19(b)(3) of the Act by inserting the proceeding to determine whether the fee
purposes of the Act. The proposed fees phrase ‘‘on any person, whether or not change should be approved or
are the same for all similarly-situated the person is a member of the self-
market participants, and therefore do disapproved only where the
regulatory organization’’ after ‘‘due, fee Commission has concerns that the
not unreasonably discriminate among or other charge imposed by the self-
market participants. Moreover, the change may not be consistent with the
regulatory organization.’’ As a result, all Act.
Exchange notes that the proposed fees SRO rule proposals establishing or The Exchange believes that the
are lower than fees currently charged by changing dues, fees, or other charges are proposed fees for the ISE Gemini market
ISE Gemini’s sister exchange, the immediately effective upon filing data offering is consistent with the
regardless of whether such dues, fees, or requirements of the Act because
3 A distributor is any firm that receives one of the
other charges are imposed on members competition provides an effective
market data feeds directly from ISE Gemini or
indirectly through a redistributor and then of the SRO, non-members, or both. constraint on the market data fees that
distributes it either internally or externally. A Section 916 further amended paragraph the Exchange has the ability and the
tkelley on DSK3SPTVN1PROD with NOTICES
redistributor includes market data vendors and (C) of Section 19(b)(3) of the Act to read, incentive to charge. ISE Gemini has a
connectivity providers such as extranets and private in pertinent part, ‘‘At any time within
network providers. compelling need to attract order flow
4 The controlled device fee is currently $5 per from market participants in order to
8 See ISE Schedule of Fees, Section VIII, Market
device.
5 15 U.S.C. 78f(b). Data. 10 NetCoalition, at 535 (quoting H.R. Rep. No. 94–
6 15 U.S.C. 78f(b)(4). 9 See Securities Exchange Act Release No. 51808 229, at 92 (1975), as reprinted in 1975 U.S.C.C.A.N.
7 15 U.S.C. 78f(b)(8). (June 9, 2005), 70 FR 37496 (June 29, 2005). 321, 323).
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![Federal Register / Vol. 80, No. 204 / Thursday, October 22, 2015 / Notices 64037
Commission and any person, other than below. The text of the proposed rule to provide for the equitable allocation of
those that may be withheld from the change is available on the Exchange’s reasonable dues, fees, and other charges
public in accordance with the Internet Web site at http://www.ise.com, among its members and other persons
provisions of 5 U.S.C. 552, will be at the principal office of the Exchange, using its facilities.
available for Web site viewing and and at the Commission’s Public In particular, the Exchange believes
printing in the Commission’s Public Reference Room. the proposed route-out fee is reasonable
Reference Room, 100 F Street NE., and equitable because it offsets costs
II. Self-Regulatory Organization’s incurred by the Exchange in connection
Washington, DC 20549 on official
Statement of the Purpose of, and with using unaffiliated broker-dealers to
business days between the hours of
Statutory Basis for, the Proposed Rule route Priority Customer orders to other
10:00 a.m. and 3:00 p.m. Copies of such
Change exchanges for linkage executions.
filing also will be available for
inspection and copying at the principal In its filing with the Commission, the Furthermore, the Exchange believes that
office of the Exchange. All comments Exchange included statements the proposed fee is not unfairly
received will be posted without change; concerning the purpose of, and basis for, discriminatory because the route-out fee
the Commission does not edit personal the proposed rule change and discussed for Priority Customer orders in Non-
identifying information from any comments it received on the Select Symbols, as has historically been
submissions. You should submit only proposed rule change. The text of these the case, remains lower than fees for
information that you wish to make statements may be examined at the orders from other market participants,
available publicly. All submissions places specified in Item IV below. The including Professional Customer and
should refer to File Number SR–ISE self-regulatory organization has Non-Customer orders.
Gemini–2015–20 and should be prepared summaries, set forth in The Exchange believes that it is
submitted by November 12, 2015. Sections A, B and C below, of the most equitable and not unfairly
significant aspects of such statements. discriminatory to charge a lower route-
For the Commission, by the Division of
Trading and Markets, pursuant to delegated out fee applicable to Priority Customer
A. Self-Regulatory Organization’s
authority.15 orders than Professional Customer and
Statement of the Purpose of, and
Brent J. Fields, Non-Customer orders because a Priority
Statutory Basis for, the Proposed Rule
Customer is by definition not a broker
Secretary. Change
or dealer in securities, and does not
[FR Doc. 2015–26805 Filed 10–21–15; 8:45 am]
1. Purpose place more than 390 orders in listed
BILLING CODE 8011–01–P
The purpose of this proposed rule options per day on average during a
change is to amend the Schedule of Fees calendar month for its own beneficial
SECURITIES AND EXCHANGE to modify the route-out fee applicable to account(s). Further, the Exchange
COMMISSION Priority Customer3 orders in Non-Select believes that the proposed fees are not
Symbols.4 The Exchange presently unfairly discriminatory because these
[Release No. 34–76173; File No. SR–ISE– charges Priority Customers route-out fees would be uniformly applied to all
2015–32] Priority Customer orders. As fees to
fees for orders routed to away markets
pursuant to the Options Order access liquidity for Priority Customer
Self-Regulatory Organizations;
Protection and Locked/Crossed Market orders have risen at other exchanges, it
International Securities Exchange,
Plan (the ‘‘Plan’’). Specifically, Priority has become necessary for the Exchange
LLC; Notice of Filing and Immediate
Customer orders pay a route-out fee of to raise routing fees in order to recoup
Effectiveness of Proposed Rule
$0.48 per contract in Select Symbols the higher costs.
Change To Amend the Schedule of
Fees (including SPY),5 and $0.48 per contract B. Self-Regulatory Organization’s
in Non-Select Symbols. Statement on Burden on Competition
October 16, 2015. The Exchange now proposes to charge
Pursuant to Section 19(b)(1) of the Priority Customers a route-out fee of In accordance with Section 6(b)(8) of
Securities Exchange Act of 1934 (the $0.70 per contract for orders in Non- the Act,8 the Exchange does not believe
‘‘Act’’),1 and Rule 19b–4 thereunder,2 Select Symbols. The route-out fee that the proposed rule change will
notice is hereby given that on October applicable to Priority Customer orders impose any burden on intermarket or
1, 2015, the International Securities in Select Symbols (including SPY) is not intramarket competition that is not
Exchange, LLC (the ‘‘Exchange’’ or being changed. necessary or appropriate in furtherance
‘‘ISE’’) filed with the Securities and of the purposes of the Act as it simply
2. Statutory Basis increases fees for routing Priority
Exchange Commission the proposed
rule change, as described in Items I, II, The Exchange believes that the Customer orders in Non-Select Symbols
and III below, which Items have been proposed rule change is consistent with and will uniformly apply to all Priority
prepared by the self-regulatory the provisions of Section 6 of the Act,6 Customer orders that are routed out to
organization. The Commission is in general, and Section 6(b)(4) of the other exchanges for linkage executions.
publishing this notice to solicit Act,7 in particular, in that it is designed Furthermore, the fee change does not
comments on the proposed rule change impact intra-market competition as the
from interested persons.
3 A Priority Customer is defined in ISE Rule route out fee applies to orders routed to
100(a)(37A) as a person or entity that (i) is not a away markets.
I. Self-Regulatory Organization’s broker or dealer in securities, and (ii) does not place
more than 390 orders in listed options per day on
The Exchange notes that members can
Statement of the Terms of Substance of average during a calendar month for its own and do route these orders to other
tkelley on DSK3SPTVN1PROD with NOTICES
the Proposed Rule Change beneficial account(s). markets or specify that ISE not route
ISE proposes to amend the Schedule
4 ‘‘Non- Select Symbols’’ are options overlying all
orders away on their behalf. As such,
symbols excluding Select Symbols. the Exchange operates in a highly
of Fees as described in more detail 5 ‘‘Select Symbols’’ are options overlying all
symbols listed on ISE that are in the Penny Pilot
competitive market in which market
15 17 CFR 200.30–3(a)(12). Program. participants can readily direct their
1 15 U.S.C. 78s(b)(1). 6 15 U.S.C. 78f.
2 17 CFR 240.19b–4. 7 15 U.S.C. 78f(b)(4). 8 15 U.S.C. 78f(b)(8).
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Document Created: 2015-12-14 15:33:52
Document Modified: 2015-12-14 15:33:52
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 80 FR 64033 |
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