80 FR 65830 - 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 207 (October 27, 2015)

[Federal Register Volume 80, Number 207 (Tuesday, October 27, 2015)]
[Notices]
[Pages 65830-65832]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-27224]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76214; File No. SR-ISEGemini-2015-21]


Self-Regulatory Organizations; ISE Gemini, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the 
Schedule of Fees

October 21, 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 7, 2015, ISE Gemini, LLC (the ``Exchange'' or ``ISE 
Gemini'') filed with the Securities and Exchange Commission 
(``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 to adjust the 
maker rebates provided to Non-ISE Gemini Market Maker, Firm 
Proprietary/Broker-Dealer, and Professional Customer orders by adopting 
a new Performance Routing Program 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.

[[Page 65831]]

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

1. Purpose
    Currently, the Exchange provides maker rebates to Firm Proprietary 
\3\/Broker-Dealer \4\ and Professional Customer \5\ orders in four 
tiers based on the member's maker average daily volume (``ADV'') in 
Firm Proprietary/Broker-Dealer and Professional Customer orders. 
Members must execute an ADV of 9,999 contracts or fewer for Tier 1, 
from 10,000-24,999 contracts for Tier 2, from 25,000-39,999 contracts 
for Tier 3, and 40,000 or more contracts for Tier 4. Based on the tier 
achieved, Firm Proprietary/Broker-Dealer and Professional Customer 
orders in Penny Symbols \6\ are entitled to a maker rebate of $0.25 per 
contract for Tier 1, $0.30 per contract for Tier 2, $0.35 per contract 
for Tier 3, and $0.40 per contract for Tier 4. In Non-Penny Symbols,\7\ 
this maker rebate is $0.35 per contract for Tier 1, $0.45 per contract 
for Tier 2, $0.55 per contract for Tier 3, and $0.65 per contract for 
Tier 4. In order to attract additional order flow, Exchange proposes to 
eliminate the current tiers, and replace them with a new Performance 
Routing Program (``PRP'') that the Exchange believes will be more 
attractive to members.
---------------------------------------------------------------------------

    \3\ A ``Firm Proprietary'' order is an order submitted by a 
member for its own proprietary account.
    \4\ A ``Broker-Dealer'' order is an order submitted by a member 
for a broker-dealer account that is not its own proprietary account.
    \5\ A ``Professional Customer'' is a person or entity that is 
not a broker/dealer and is not a Priority Customer.
    \6\ ``Penny Symbols'' are options overlying all symbols listed 
on ISE Gemini that are in the Penny Pilot Program.
    \7\ ``Non-Penny Symbols'' are options overlying all symbols 
excluding Penny Symbols.
---------------------------------------------------------------------------

    The proposed rebates under the PRP will be based on each member's 
maker ADV in Non-ISE Gemini Market Maker,\8\ Firm Proprietary/Broker-
Dealer and Professional Customer orders that improve the national best 
bid or offer (``NBBO'') in a series at the time of order entry (``PRP 
eligible contracts''). As proposed, members that execute an ADV of 
9,999 PRP eligible contracts or fewer will be entitled to a maker 
rebate of $0.25 per contract in both Penny Symbols and Non-Penny 
Symbols for their Non-ISE Gemini Market Maker, Firm Proprietary/Broker-
Dealer and Professional Customer orders. Members that execute an ADV of 
10,000 or more PRP eligible contracts will be entitled to a maker 
rebate of $0.47 per contract in Penny Symbols and $0.71 per contract in 
Non-Penny Symbols for the above market participant types if the order 
improves the NBBO in the series at the time it is entered.\9\ As an 
additional incentive, members that qualify for the higher tier of PRP 
rebates by executing an ADV of 10,000 or more PRP eligible contracts 
will also be entitled to a maker rebate of $0.40 per contract in Penny 
Symbols and $0.65 per contract in Non-Penny Symbols for their Non-ISE 
Gemini Market Maker, Firm Proprietary/Broker-Dealer, and Professional 
Customer orders that do not improve the NBBO at the time of order 
entry.
---------------------------------------------------------------------------

    \8\ 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. Non-ISE Gemini Market Makers currently earn a flat maker 
rebate of $0.25 per contract for all tiers in Penny and Non-Penny 
Symbols. The PRP introduces tiered maker rebates for Non-ISE Gemini 
Market Makers for the first time.
    \9\ As is the case today, all eligible volume from affiliated 
members will be aggregated in determining applicable tiers, provided 
there is at least 75% common ownership between the members as 
reflected on each member's Form BD, Schedule A. Members that achieve 
the higher tier threshold will be eligible for the enhanced rebates 
for all eligible orders executed during the month.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\10\ in general, and 
Section 6(b)(4) of the Act,\11\ in particular, in that it is designed 
to provide for the equitable allocation of reasonable dues, fees, and 
other charges among its members and other persons using its facilities.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f.
    \11\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange believes that it is reasonable and equitable to 
eliminate the current standalone tiers for Firm Proprietary/Broker-
Dealer and Professional Customer orders as this rebate program being 
replaced with a new rebate program that is designed to be more 
attractive to members. The PRP is similar to a program offered on the 
BATS Options Exchange (``BATS''),\12\ and will benefit the members that 
qualify for enhanced rebates as well as other members that can trade in 
a tighter and more liquid market. With the proposed changes, Non-ISE 
Gemini Market Maker, Firm Proprietary/Broker-Dealer, and Professional 
Customer orders in the lowest tier will be entitled to a maker rebate 
in Penny and Non-Penny Symbols that is the same as the rebate currently 
provided as a ``Tier 1'' rebate for Firm Proprietary/Broker-Dealer and 
Professional Customer orders in Penny Symbols as well as the flat 
rebate provided to Non-ISE Gemini Market Maker orders in both Penny and 
Non-Penny Symbols. Members that execute a larger volume of PRP eligible 
contracts will receive higher rebates that compare favorably to the 
rebates provided on the Exchange today. In particular, the proposed 
maker rebates for non-NBBO setting orders in Penny and Non-Penny 
Symbols executed by members that meet the volume requirements for the 
higher PRP tier are equivalent to the rebates provided today based on 
the highest volume tier of Firm Proprietary/Broker-Dealer and 
Professional Customer orders, and significantly higher than the current 
flat maker rebate for Non-ISE Gemini Market Maker orders.\13\ For 
orders executed by these members that improve the NBBO, the proposed 
maker rebate is higher than anything offered on the Exchange today for 
these market participants. The Exchange believes that introducing a PRP 
rebate program will encourage members to enter orders that improve the 
NBBO, which will create more trading opportunities at better prices for 
all market participants that trade on the Exchange.
---------------------------------------------------------------------------

    \12\ See BATS Fee Schedule, NBBO Setter Tiers.
    \13\ The Exchange notes that members that achieve the PRP volume 
threshold will be entitled to enhanced rebates on all orders, not 
just orders that improve the NBBO. The Exchange believes that it is 
reasonable and equitable to provide enhanced rebates on all orders 
as this creates an added incentive for members to qualify for PRP. 
However, the Exchange believes that it is important to offer the 
highest level of rebate specifically to those orders that improve 
the NBBO.
---------------------------------------------------------------------------

    The Exchange further believes that the proposed fee change is not 
unfairly discriminatory as it provides equal rebates to Non-ISE Gemini 
Market Maker, Firm Proprietary/Broker-Dealer, and Professional Customer 
orders. The Exchange notes that, with the proposed fee change, Non-ISE 
Gemini Market Makers will now be entitled to tiered rebates similar to 
other market participants. Priority Customer \14\ and Market Maker \15\ 
rebates, which have been successful in attracting that order flow to 
the Exchange, will remain at current levels. The Exchange does not 
believe that it is unfairly discriminatory to provide higher rebates to 
Priority Customer orders. As has historically been the case, Priority 
Customer orders remain entitled to more favorable fees and rebates than 
other market participants in order to encourage this order flow. A 
Priority Customer is by

[[Page 65832]]

definition not a broker or dealer in securities, and does not place 
more than 390 orders in listed options per day on average during a 
calendar month for its own beneficial account(s). This limitation does 
not apply to participants whose behavior is substantially similar to 
that of market professionals, including Professional Customers, who 
will generally submit a higher number of orders (many of which do not 
result in executions) than Priority Customers. Similarly, while Market 
Maker orders may receive higher or lower rebates depending on the tier 
achieved, the Exchange does not believe that this is unfairly 
discriminatory as it reflects the different mix of benefits and 
obligations applicable to Market Makers that trade on the Exchange. 
Market Makers currently receive tiered rebates based on their volume 
executed on the Exchange, without the additional requirement that those 
orders improve the NBBO. As such, the Exchange believes that it is not 
unfairly discriminatory to provide potentially higher rebates to other 
market participants that have demonstrated a high level of commitment 
to the Exchange by entering orders that improve the NBBO.
---------------------------------------------------------------------------

    \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 Rule 100(a)(37A).
    \15\ The term Market Maker refers to ``Competitive Market 
Makers'' and ``Primary Market Makers'' collectively. See Rule 
100(a)(25).
---------------------------------------------------------------------------

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

    In accordance with Section 6(b)(8) of the Act,\16\ the Exchange 
does not believe that the proposed rule change will impose any burden 
on intermarket or intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The proposed fee 
change is designed to provide more attractive rebates to ISE Gemini 
members, and will compete with rebate programs offered by competitor 
exchanges such as BATS. 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.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

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,\17\ and subparagraph (f)(2) of Rule 19b-4 
thereunder,\18\ because it establishes a due, fee, or other charge 
imposed by ISE Gemini.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \18\ 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 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-ISEGemini-2015-21 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-ISEGemini-2015-21. 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 the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-ISEGemini-2015-21, and 
should be submitted on or before November 17, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
---------------------------------------------------------------------------

    \19\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2015-27224 Filed 10-26-15; 8:45 am]
BILLING CODE 8011-01-P