80 FR 74824 - Self-Regulatory Organizations; ISE Gemini, LLC; Notice of Filing of Proposed Rule Change To Amend Rule 804(g)

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 229 (November 30, 2015)

Page Range		74824-74825
FR Document		2015-30241

Federal Register, Volume 80 Issue 229 (Monday, November 30, 2015)

[Federal Register Volume 80, Number 229 (Monday, November 30, 2015)]
[Notices]
[Pages 74824-74825]
From the Federal Register Online [www.thefederalregister.org]
[FR Doc No: 2015-30241]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76505; File No. SR-ISE Gemini-2015-17]

Self-Regulatory Organizations; ISE Gemini, LLC; Notice of Filing
of Proposed Rule Change To Amend Rule 804(g)

November 23, 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 November 12, 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 and II 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

The Exchange proposes to amend Rule 804(g) to require Clearing
Member approval for market makers to resume trading after a market-wide
speed bump is triggered. 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 purpose of the proposed rule change is to amend Rule 804(g) on
``Automated Quotation Adjustments'' to require Clearing Member \3\
approval for Primary Market Makers (``PMMs'') and Competitive Market
Makers (``CMMs'') (collectively, ``market makers'') to resume trading
after a market-wide speed bump is triggered. The Exchange offers market
makers functionality whereby the Exchange will automatically remove a
market maker's quote in all series in an options class if a
``curtailment event'' occurs based on parameters set by the market
maker on a class-by-class basis.\4\ In particular, the Exchange will
automatically remove a market maker's quote in a class when, during a
time period established by the market maker, the market maker exceeds:
(i) The specified number of total contracts in the class, (ii) the
specified percentage of the total size of the market maker's quotes in
the class, (iii) the specified absolute value of the net between
contracts bought and contracts sold in the class, or (iv) the specified
absolute value of the net between (a) calls purchased plus puts sold in
the class, and (b) calls sold plus puts purchased in the class.\5\ In
addition, the Exchange provides market-wide functionality whereby a
market maker's quote in all options classes are automatically cancelled
if, during a configurable time period, the total number of curtailment
events exceeds a market-wide parameter set by the market maker.\6\ This
market-wide functionality, which is available for ISE Gemini only or
across both ISE Gemini and ISE Gemini's affiliate, the International
Securities Exchange, LLC,\7\ is useful to members as numerous
curtailment events triggered across multiple options classes, and if
chosen, multiple exchanges, may signify a larger problem being
experienced by the market maker that warrants its quotes being removed
from the market. Currently, the Exchange only requires that a market
maker notify Market Operations of its intention to reenter the market
to resume trading after the market-wide speed bump has been activated.
Due to the significant nature of events that may trigger this market-
wide speed bump functionality, the Exchange now proposes also to
require Clearing Member approval prior to allowing the market maker to
resume quoting. Pursuant to the proposed rule change, a market maker
must notify its Clearing Member(s) when it is ready to resume trading
following a market-wide speed bump. Exchange staff may also notify the
Clearing Member(s) when the market maker's quotes have been removed, to
facilitate a better response time. Each Clearing Member must then
contact the Exchange directly to give their authorization for the
market maker to resume trading.\8\
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\3\ The term ``Clearing Member'' means a Member that is self-
clearing or an Electronic Access Member that clears Exchange
Transactions for other Members of the Exchange. See Rule 100(a)(8).
\4\ See Rule 804(g)(i).
\5\ Id.
\6\ See Rule 804(g)(ii). This functionality is known as
``market-wide speed bump'' and is the subject of this filing.
\7\ Id.
\8\ If a market maker has multiple Clearing Members, it must
receive approval from each Clearing Member to resume trading.
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Each market maker authorized to trade on the Exchange must obtain
from a Clearing Member a ``Market Maker Letter of Guarantee'' wherein
the Clearing Member accepts financial responsibility for all Exchange
transactions made by the market maker.\9\ The Exchange believes that it
is appropriate to require Clearing Member approval before a market
maker can reenter the market after the market-wide speed bump has been
triggered as the Clearing Member guarantees the market makers trades,
and therefore bears ultimate financial risk associated with those
transactions. The Exchange notes that while not all market makers are
Clearing Members, all market makers require a Clearing Member's consent
to clear transactions on their behalf in

[[Page 74825]]

order to conduct business on the Exchange. As the Clearing Member
ultimately bears the risk for a trade they clear on any market makers
behalf, the Exchange believes it is reasonable to require that the
Clearing Member authorize the market maker to continue trading after
the market-wide speed bump is triggered.
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\9\ See Rule 808.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder that are applicable to a national securities exchange, and,
in particular, with the requirements of Section 6(b) of the Act.\10\ In
particular, the proposal is consistent with Section 6(b)(5) of the
Act,\11\ because it is designed to promote just and equitable
principles of trade, to 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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The Exchange believes that the proposed rule change removes
impediments to and perfects the mechanism of a free and open market by
requiring that Clearing Members authorize continued trading by a market
maker after that market maker triggers a market-wide speed bump. The
Exchange believes that the proposed rule change is consistent with the
protection of investors and the public interest because it will permit
Clearing Members with a financial interest in a market maker's risk
management to better monitor and manage the potential risks assumed by
that market maker. The Exchange already shares market makers' risk
settings with their Clearing Members in order to assist those Clearing
Members in monitoring risks at firms on whose behalf they clear
trades.\12\ The proposed rule change would further assist Clearing
Members in monitoring risk, and provide these Clearing Members with
greater control and flexibility over their risk tolerance and exposure.
Because the Clearing Member guarantees all of the market maker's trades
it is in a unique position to objectively evaluate the risk of a market
maker reentering the market following a serious systems or other issue.
While in some cases this may result in a minimal delay for a market
maker that wants to reenter the market quickly following a market-wide
speed bump, the Exchange believes that Clearing Member approval is
appropriate to ensure that the market maker does not prematurely enter
the market without adequate safeguards in place.
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\12\ See Securities Exchange Act Release No. 74622 (April 1,
2015), 80 FR 18665 (April 7, 2015) (SR-ISE Gemini-2015-08).
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B. Self-Regulatory Organization's Statement on Burden on Competition

The Exchange believes the proposal is consistent with Section
6(b)(8) of the Act \13\ in that it does not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. The proposed rule change is not designed to
address any aspect of competition, but is rather intended to provide
additional safeguards by requiring Clearing Member approval before
market makers are allowed to reenter the market following a market-wide
speed bump. The Exchange believes that this would allow Clearing
Members to better monitor and manage the potential risks assumed by
market makers on whose behalf they have executed a Market Maker Letter
of Guarantee, and does not impose any unnecessary burden on
competition.
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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

Within 45 days of the publication date of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be 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 Gemini-2015-17 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-2015-17. 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 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 Gemini-2015-17 and
should be submitted on or before December 21, 2015.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-30241 Filed 11-27-15; 8:45 am]
BILLING CODE 8011-01-P

74824 Federal Register / Vol. 80, No. 229 / Monday, November 30, 2015 / Notices

communications relating to the trading after a market-wide speed bump wide functionality whereby a market
proposed rule change between the is triggered. The text of the proposed maker’s quote in all options classes are
Commission and any person, other than rule change is available on the automatically cancelled if, during a
those that may be withheld from the Exchange’s Web site (http:// configurable time period, the total
public in accordance with the www.ise.com), at the principal office of number of curtailment events exceeds a
provisions of 5 U.S.C. 552, will be the Exchange, and at the Commission’s market-wide parameter set by the
available for Web site viewing and Public Reference Room. market maker.6 This market-wide
printing in the Commission’s Public functionality, which is available for ISE
II. Self-Regulatory Organization’s
Reference Room, 100 F Street NE., Gemini only or across both ISE Gemini
Statement of the Purpose of, and
Washington, DC 20549 on official and ISE Gemini’s affiliate, the
Statutory Basis for, the Proposed Rule
business days between the hours of International Securities Exchange, LLC,7
10:00 a.m. and 3:00 p.m. Copies of such Change is useful to members as numerous
filing also will be available for In its filing with the Commission, the curtailment events triggered across
inspection and copying at the principal self-regulatory organization included multiple options classes, and if chosen,
office of the Exchange. All comments statements concerning the purpose of, multiple exchanges, may signify a larger
received will be posted without change; and basis for, the proposed rule change problem being experienced by the
the Commission does not edit personal and discussed any comments it received market maker that warrants its quotes
identifying information from on the proposed rule change. The text being removed from the market.
submissions. You should submit only of these statements may be examined at Currently, the Exchange only requires
information that you wish to make the places specified in Item IV below. that a market maker notify Market
available publicly. All submissions The self-regulatory organization has Operations of its intention to reenter the
should refer to File Number SR–ISE– prepared summaries, set forth in market to resume trading after the
2015–41 and should be submitted by sections A, B and C below, of the most market-wide speed bump has been
December 21, 2015. significant aspects of such statements. activated. Due to the significant nature
For the Commission, by the Division of of events that may trigger this market-
A. Self-Regulatory Organization’s
Trading and Markets, pursuant to delegated wide speed bump functionality, the
Statement of the Purpose of, and
authority.12 Exchange now proposes also to require
Statutory Basis for, the Proposed Rule
Robert W. Errett, Clearing Member approval prior to
Change
Deputy Secretary. allowing the market maker to resume
[FR Doc. 2015–30243 Filed 11–27–15; 8:45 am] 1. Purpose quoting. Pursuant to the proposed rule
BILLING CODE 8011–01–P The purpose of the proposed rule change, a market maker must notify its
change is to amend Rule 804(g) on Clearing Member(s) when it is ready to
‘‘Automated Quotation Adjustments’’ to resume trading following a market-wide
SECURITIES AND EXCHANGE require Clearing Member 3 approval for speed bump. Exchange staff may also
COMMISSION Primary Market Makers (‘‘PMMs’’) and notify the Clearing Member(s) when the
Competitive Market Makers (‘‘CMMs’’) market maker’s quotes have been
[Release No. 34–76505; File No. SR–ISE removed, to facilitate a better response
Gemini–2015–17] (collectively, ‘‘market makers’’) to
resume trading after a market-wide time. Each Clearing Member must then
Self-Regulatory Organizations; ISE speed bump is triggered. The Exchange contact the Exchange directly to give
Gemini, LLC; Notice of Filing of offers market makers functionality their authorization for the market maker
Proposed Rule Change To Amend Rule whereby the Exchange will to resume trading.8
Each market maker authorized to
804(g) automatically remove a market maker’s
trade on the Exchange must obtain from
quote in all series in an options class if
November 23, 2015. a Clearing Member a ‘‘Market Maker
a ‘‘curtailment event’’ occurs based on Letter of Guarantee’’ wherein the
Pursuant to Section 19(b)(1) of the parameters set by the market maker on
Securities Exchange Act of 1934 (the Clearing Member accepts financial
a class-by-class basis.4 In particular, the responsibility for all Exchange
‘‘Act’’),1 and Rule 19b–4 thereunder,2 Exchange will automatically remove a
notice is hereby given that on November transactions made by the market
market maker’s quote in a class when, maker.9 The Exchange believes that it is
12, 2015, ISE Gemini, LLC (the during a time period established by the
‘‘Exchange’’ or ‘‘ISE Gemini’’) filed with appropriate to require Clearing Member
market maker, the market maker approval before a market maker can
the Securities and Exchange exceeds: (i) The specified number of
Commission the proposed rule change, reenter the market after the market-wide
total contracts in the class, (ii) the speed bump has been triggered as the
as described in Items I and II below, specified percentage of the total size of
which Items have been prepared by the Clearing Member guarantees the market
the market maker’s quotes in the class, makers trades, and therefore bears
self-regulatory organization. The (iii) the specified absolute value of the
Commission is publishing this notice to ultimate financial risk associated with
net between contracts bought and those transactions. The Exchange notes
solicit comments on the proposed rule contracts sold in the class, or (iv) the
change from interested persons. that while not all market makers are
specified absolute value of the net Clearing Members, all market makers
I. Self-Regulatory Organization’s between (a) calls purchased plus puts require a Clearing Member’s consent to
Statement of the Terms of Substance of sold in the class, and (b) calls sold plus clear transactions on their behalf in
the Proposed Rule Change puts purchased in the class.5 In
jstallworth on DSK7TPTVN1PROD with NOTICES

The Exchange proposes to amend addition, the Exchange provides market- 6 See Rule 804(g)(ii). This functionality is known

as ‘‘market-wide speed bump’’ and is the subject of
Rule 804(g) to require Clearing Member 3 The term ‘‘Clearing Member’’ means a Member this filing.
approval for market makers to resume that is self-clearing or an Electronic Access Member 7 Id.

that clears Exchange Transactions for other 8 If a market maker has multiple Clearing
12 17 CFR 200.30–3(a)(12). Members of the Exchange. See Rule 100(a)(8). Members, it must receive approval from each
1 15 U.S.C. 78s(b)(1). 4 See Rule 804(g)(i). Clearing Member to resume trading.
2 17 CFR 240.19b–4. 5 Id. 9 See Rule 808.

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Federal Register / Vol. 80, No. 229 / Monday, November 30, 2015 / Notices 74825

order to conduct business on the bump, the Exchange believes that Comments may be submitted by any of
Exchange. As the Clearing Member Clearing Member approval is the following methods:
ultimately bears the risk for a trade they appropriate to ensure that the market
clear on any market makers behalf, the maker does not prematurely enter the Electronic Comments
Exchange believes it is reasonable to market without adequate safeguards in • Use the Commission’s Internet
require that the Clearing Member place. comment form (http://www.sec.gov/
authorize the market maker to continue rules/sro.shtml); or
B. Self-Regulatory Organization’s
trading after the market-wide speed
bump is triggered.
Statement on Burden on Competition • Send an email to rule-comments@
The Exchange believes the proposal is sec.gov. Please include File Number SR–
2. Statutory Basis ISE Gemini–2015–17 on the subject line.
consistent with Section 6(b)(8) of the
The Exchange believes that the Act 13 in that it does not impose any Paper Comments
proposed rule change is consistent with burden on competition that is not
the requirements of the Act and the necessary or appropriate in furtherance • Send paper comments in triplicate
rules and regulations thereunder that of the purposes of the Act. The to Secretary, Securities and Exchange
are applicable to a national securities proposed rule change is not designed to Commission, 100 F Street NE.,
exchange, and, in particular, with the address any aspect of competition, but Washington, DC 20549–1090.
requirements of Section 6(b) of the is rather intended to provide additional
Act.10 In particular, the proposal is safeguards by requiring Clearing All submissions should refer to File
consistent with Section 6(b)(5) of the Member approval before market makers Number SR–ISE Gemini–2015–17. This
Act,11 because it is designed to promote are allowed to reenter the market file number should be included on the
just and equitable principles of trade, to following a market-wide speed bump. subject line if email is used. To help the
remove impediments to and perfect the The Exchange believes that this would Commission process and review your
mechanisms of a free and open market allow Clearing Members to better comments more efficiently, please use
and a national market system and, in monitor and manage the potential risks only one method. The Commission will
general, to protect investors and the assumed by market makers on whose post all comments on the Commission’s
public interest. behalf they have executed a Market Internet Web site (http://www.sec.gov/
The Exchange believes that the Maker Letter of Guarantee, and does not rules/sro.shtml). Copies of the
proposed rule change removes impose any unnecessary burden on submission, all subsequent
impediments to and perfects the competition. amendments, all written statements
mechanism of a free and open market by with respect to the proposed rule
requiring that Clearing Members C. Self-Regulatory Organization’s change that are filed with the
authorize continued trading by a market Statement on Comments on the Commission, and all written
maker after that market maker triggers a Proposed Rule Change Received From communications relating to the
market-wide speed bump. The Exchange Members, Participants or Others proposed rule change between the
believes that the proposed rule change The Exchange has not solicited, and Commission and any person, other than
is consistent with the protection of does not intend to solicit, comments on those that may be withheld from the
investors and the public interest this proposed rule change. The public in accordance with the
because it will permit Clearing Members Exchange has not received any provisions of 5 U.S.C. 552, will be
with a financial interest in a market unsolicited written comments from available for Web site viewing and
maker’s risk management to better members or other interested parties. printing in the Commission’s Public
monitor and manage the potential risks Reference Room, 100 F Street NE.,
assumed by that market maker. The III. Date of Effectiveness of the
Washington, DC 20549, on official
Exchange already shares market makers’ Proposed Rule Change and Timing for
business days between the hours of
risk settings with their Clearing Commission Action
10:00 a.m. and 3:00 p.m. Copies of the
Members in order to assist those Within 45 days of the publication date filing also will be available for
Clearing Members in monitoring risks at of this notice in the Federal Register or inspection and copying at the principal
firms on whose behalf they clear within such longer period up to 90 days office of the Exchange. All comments
trades.12 The proposed rule change (i) as the Commission may designate if received will be posted without change;
would further assist Clearing Members it finds such longer period to be the Commission does not edit personal
in monitoring risk, and provide these appropriate and publishes its reasons identifying information from
Clearing Members with greater control for so finding or (ii) as to which the self- submissions. You should submit only
and flexibility over their risk tolerance regulatory organization consents, the information that you wish to make
and exposure. Because the Clearing Commission will: available publicly. All submissions
Member guarantees all of the market (A) By order approve or disapprove should refer to File Number SR–ISE
maker’s trades it is in a unique position such proposed rule change, or Gemini–2015–17 and should be
to objectively evaluate the risk of a (B) institute proceedings to determine submitted on or before December 21,
market maker reentering the market whether the proposed rule change 2015.
following a serious systems or other should be disapproved.
issue. While in some cases this may For the Commission, by the Division of
IV. Solicitation of Comments Trading and Markets, pursuant to delegated
result in a minimal delay for a market
jstallworth on DSK7TPTVN1PROD with NOTICES

authority.14
maker that wants to reenter the market Interested persons are invited to
quickly following a market-wide speed Robert W. Errett,
submit written data, views, and
arguments concerning the foregoing, Deputy Secretary.
10 15 U.S.C. 78f(b). including whether the proposed rule [FR Doc. 2015–30241 Filed 11–27–15; 8:45 am]
11 15 U.S.C. 78f(b)(5).
12 See Securities Exchange Act Release No. 74622
change is consistent with the Act. BILLING CODE 8011–01–P

(April 1, 2015), 80 FR 18665 (April 7, 2015) (SR–
ISE Gemini–2015–08). 13 15 U.S.C. 78f(b)(8). 14 17 CFR 200.30–3(a)(12).

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Document Created: 2018-03-01 11:13:00
Document Modified: 2018-03-01 11:13:00

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 74824