81 FR 16240 - Self-Regulatory Organizations; ISE Mercury, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Schedule of Fees
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 58 (March 25, 2016)
Federal Register Volume 81, Issue 58 (March 25, 2016)
| Page Range | 16240-16245 | |
| FR Document | 2016-06744 |
[Federal Register Volume 81, Number 58 (Friday, March 25, 2016)] [Notices] [Pages 16240-16245] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-06744] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-77409; File No. SR-ISEMercury-2016-05] Self-Regulatory Organizations; ISE Mercury, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Schedule of Fees March 21, 2016. 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 March 10, 2016, ISE Mercury, LLC (the ``Exchange'' or ``ISE Mercury'') 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 Mercury proposes to amend its Schedule of Fees by adopting volume-based tiered rebates and fees. These tiers are determined by a member's average daily volume of Priority Customer orders traded on the Exchange. 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 ISE Mercury is proposing to amend its Schedule of Fees to establish volume-based tiered rebates and fees (the ``Member Volume Program'' or ``MVP''). The MVP tiers are determined by a member's average daily volume (``ADV'') of Priority Customer \3\ Regular Orders,\4\ in Penny and Non-Penny Pilot Symbols,\5\ traded on the Exchange. The Exchange will also aggregate the trading activity of affiliated members in determining this ADV.\6\ ISE Mercury believes the proposed fee and rebate tiers will incentivize firms to increase Priority Customer order flow to the Exchange. The Exchange is also proposing Penny and Non- Penny Symbol fees for both Crossing Orders and Responses to Crossing Orders. Finally, the Exchange proposes to offer Market Makers \7\ a per contract discount when trading against Non-Priority Customer orders. --------------------------------------------------------------------------- \3\ 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). \4\ A Regular Order is an order that consists of only a single option series and is not submitted with a stock leg. \5\ Under the Penny Pilot, the minimum price variation for all participating options classes, except for the Nasdaq-100 Index Tracking Stock (``QQQ''), the SPDR S&P 500 Exchange Traded Fund (``SPY'') and the iShares Russell 2000 Index Fund (``IWM''), is $0.01 for all quotations in options series that are quoted at less than $3 per contract and $0.05 for all quotations in options series that are quoted at $3 per contract or greater. The proposed fees and rebates for Penny Pilot symbols apply to all classes in the Penny Pilot, i.e., to series that are quoted at less than $3 that have a minimum price variation of $0.01 and to series that are quoted at $3 or more that have an minimum price variation of $0.05. QQQ, SPY, and IWM are quoted in $0.01 increments for all options series. \6\ Aggregation is necessary and appropriate because certain members conduct customer and market maker trading activity through separate but related broker-dealers. \7\ The term Market Makers refers to ``Competitive Market Makers'' and ``Primary Market Makers'' collectively. Market Maker orders sent to the Exchange by an Electronic Access Member are assessed fees at the same level as Market Maker orders. --------------------------------------------------------------------------- The Member Volume Program Currently, the fees and rebates assessed for Regular Orders in standard options that are in the Penny Pilot are: (1) $0.20 per contract for Market Maker orders,\8\ (2) $0.47 per contract for Non-ISE Mercury Market Maker,\9\ Firm Proprietary \10\/Broker-Dealer,\11\ and Professional Customer \12\ orders; and (3) ($0.18) per contract for Priority Customer orders. The transaction fees and rebates assessed for Regular Orders that are not in the Penny Pilot are: (1) $0.20 per contract for Market Maker orders; (2) $0.90 per contract for Non-ISE Mercury Market Maker, Firm Proprietary/Broker-Dealer, and Professional Customer orders; and (3) ($0.18) per contract for Priority Customer orders. --------------------------------------------------------------------------- \8\ This fee applies to ISE Mercury Market Maker orders sent to the Exchange by Electronic Access Members. \9\ A Non-ISE Mercury Market Maker, or Far Away Market Maker (``FARMM''), is a market maker as defined in Section 3(a)(38) of the Securities Exchange Act of 1934, as amended (``Exchange Act''), registered in the same options class on another options exchange. \10\ A Firm Proprietary order is an order submitted by a member for its own proprietary account. \11\ A Broker-Dealer order is an order submitted by a member for a non-member broker-dealer account. \12\ A Professional Customer is a person who is not a broker/ dealer and is not a Priority Customer. --------------------------------------------------------------------------- The Exchange proposes to amend the above fees and rebates so that they will be based on a member's ADV of Priority Customer orders traded in a given month and the highest tier threshold attained applies retroactively in a given month to all eligible traded contracts and applies to all eligible market participants. This Priority Customer ADV includes all Priority Customer volume executed on the Exchange in all symbols and order types, including volume executed in the Price Improvement Mechanism (``PIM'') and the Facilitation and Qualified Contingent Cross mechanisms. Further, the Exchange will aggregate the trading activity of separate members in calculating Priority Customer ADV provided there is at least 75% common ownership between the firms as reflected on each firm's Form BD, Schedule A. The Exchange believes that aggregating this volume across members that share at least 75% common ownership will allow members to continue to execute trades on the Exchange through separate broker-dealer entities for different types of [[Page 16241]] volume, while receiving rebates based on the aggregate volume being executed across such entities. The Exchange now proposes fees and rebates based on five volume tier levels as described in the table below. These fees and rebates will be based on the highest tier that a member reaches in a given month, and these tiered rates will apply retroactively to all eligible traded contracts for all client categories. Qualifying Tier Thresholds ------------------------------------------------------------------------ Total affiliated Tier priority customer ADV ------------------------------------------------------------------------ Tier 1............................................... 0-19,999 Tier 2............................................... 20,000-39,999 Tier 3............................................... 40,000-59,999 Tier 4............................................... 60,000-79,999 Tier 5............................................... 80,000+ ------------------------------------------------------------------------ Additionally, the Exchange proposes to amend the Schedule of Fees to include language related to excluding days from the ADV calculations used to determine applicable fee and rebate tiers. Specifically, the Exchange proposes to (1) exclude from its ADV calculations any trading day on which the Exchange is closed early for holiday observance; (2) exclude days where the Exchange declares a trading halt in all securities or honors a market-wide trading halt declared by another market; and (3) permit days to be excluded from its ADV calculations where the Exchange is technically open for the entire trading day, but has instructed members to route away due to a systems or other error that ultimately does not impact trading on the Exchange. The Exchange also notes, however, that if it has a systems issue in the morning before the market opens, it may instruct members to route away to other markets. If the systems issue continues into trading hours, the Exchange is permitted to exclude the day for all members that would have a lower ADV with the day included. If, however, the systems issue is resolved prior to the opening of trading, the Exchange is not permitted to exclude the day from its ADV calculations. This is the case regardless of the fact that many members would have already made arrangements to route away in accordance with the Exchange's instructions. To prevent this undesirable result, and preserve the Exchange's intent behind adopting volume-based pricing, the Exchange proposes to allow days to be excluded from its ADV calculation whenever all members are instructed, in writing, to route their orders to other markets. Because the days the Exchange proposes to exclude from its ADV calculation generally have artificially lower trading volume, the Exchange believes that it is reasonable and equitable to not include such days in determining fee and rebate tiers. If the Exchange did not have the ability to exclude aberrant low volume days when calculating ADV for the month, as a result of the decreased trading volume, the numerator for the calculation (e.g., trading volume) would be correspondingly lower, but the denominator for the threshold calculations (e.g., the number of trading days) would not be decreased. This could result in an unintended cost increase. Absent the authority to exclude days that the market is not open for the entire trading day, members will experience an effective decrease in rebates. The artificially low volumes of trading on such days could reduce the trading activity of members both daily and monthly. Accordingly, excluding such days from the monthly calculation will diminish the likelihood of an effective increase in the cost of trading on the Exchange, a result that is unintended and undesirable to the Exchange and its members. The Exchange notes that the fees charged to Non-ISE Mercury Market Maker, Firm Proprietary/Broker Dealer and Professional Customer in Penny and Non-Penny Symbols are the same as the current fees charged, regardless of the tier level reached. However, the tiered fees and rebates for both Priority Customers and Market Makers have changed. The proposed fees and rebates for each tier and participant type are as follows: Penny Symbol Fees and Rebates [Per contract] ---------------------------------------------------------------------------------------------------------------- Firm proprietary, B/D, FarMM & Tier Priority customer Market maker professional customer ---------------------------------------------------------------------------------------------------------------- Tier 1................................................. ($0.05) $0.25 $0.47 Tier 2................................................. ($0.10) $0.22 $0.47 Tier 3................................................. ($0.15) $0.18 $0.47 Tier 4................................................. ($0.21) $0.15 $0.47 Tier 5................................................. ($0.24) $0.10 $0.47 ---------------------------------------------------------------------------------------------------------------- Non-Penny Symbol Fees and Rebates [Per contract] ---------------------------------------------------------------------------------------------------------------- Firm proprietary, B/D, FarMM & Tier Priority customer Market maker professional customer ---------------------------------------------------------------------------------------------------------------- Tier 1................................................. ($0.05) $0.25 $0.90 Tier 2................................................. ($0.10) $0.22 $0.90 Tier 3................................................. ($0.15) $0.18 $0.90 Tier 4................................................. ($0.21) $0.15 $0.90 Tier 5................................................. ($0.24) $0.10 $0.90 ---------------------------------------------------------------------------------------------------------------- [[Page 16242]] Crossing Orders The Exchange proposes Penny and Non-Penny Symbol fees for Crossing Orders. The Exchange currently charges a fee of $0.20 per contract for Crossing Orders \13\ in all symbols traded on the Exchange for all market participants, except Priority Customers who are charged $0.00 per contract for Crossing Orders. A Crossing Order is an order executed in the Exchange's Facilitation Mechanism, Solicited Order Mechanism, PIM, or submitted as a Qualified Contingent Cross order. Orders executed in the Block Order Mechanism are also considered Crossing Orders. The fees for Crossing Orders, except for PIM Orders of 500 or Fewer Contracts, in both Penny and Non-Penny Symbols have not changed from current levels. --------------------------------------------------------------------------- \13\ These fees apply to both originating and contra orders. --------------------------------------------------------------------------- As an exception to the fees charged for Crossing Orders, the Exchange charges a fee of $0.05 per contract for PIM Orders of 500 or Fewer Contracts in all symbols traded on the Exchange for all market participants, except that Priority Customer orders on the originating side of a PIM auction receive a rebate of ($0.13) per contract. Priority Customer orders on the contra-side of a PIM auction pay no fee and receive no rebate. PIM orders greater than 500 contracts pay the Crossing Order fee, described above. The Exchange now proposes to offer tiered fees and rebates based on Priority Customer volume, as described above, for PIM Orders of 500 or Fewer Contracts. The Exchange notes that the fees for Non-Priority Customer orders have not changed from current levels, but the fees for Priority Customer orders have changed as described in the table, below. All Symbols Fee/Rebate for PIM Orders of 500 or Fewer Contracts ---------------------------------------------------------------------------------------------------------------- Firm proprietary, B/D, FarMM & Tier Priority customer Market maker professional customer ---------------------------------------------------------------------------------------------------------------- Tier 1................................................. ($0.11) $0.05 $0.05 Tier 2................................................. ($0.11) $0.05 $0.05 Tier 3................................................. ($0.13) $0.05 $0.05 Tier 4................................................. ($0.13) $0.05 $0.05 Tier 5................................................. ($0.13) $0.05 $0.05 ---------------------------------------------------------------------------------------------------------------- Responses to Crossing Orders The Exchange proposes Penny and Non-Penny Symbol fees for Responses to Crossing Orders. A Response to a Crossing Order is any contra-side interest (i.e., orders and quotes) submitted after the commencement of an auction in the Exchange's Facilitation Mechanism, Solicited Order Mechanism, Block Order Mechanism, or PIM. Currently, the Exchange charges a fee of (1) $0.20 per contract for Market Maker orders and (2) $0.50 per contract for Non-ISE Mercury Market Maker, Firm Proprietary/ Broker-Dealer, Professional Customer, and Priority Customer orders in all symbols. For Responses to Crossing Orders in Penny Symbols, the Exchange proposes to charge Market Makers the corresponding tiered fees in the chart titled Penny Symbol Fees and Rebates, above. For Non-ISE Mercury Market Maker, Firm Proprietary/Broker-Dealer, Professional Customer, and Priority Customer orders in Penny Symbols, the fees have not changed from current levels. For Responses to Crossing Orders in Non-Penny Symbols, the Exchange proposes to charge Market Makers the corresponding tiered fees in the chart titled Non-Penny Symbol Fees and Rebates, above. For Non-ISE Mercury Market Maker, Firm Proprietary/ Broker-Dealer, Professional Customer, and Priority Customer orders in Non-Penny Symbols, the Exchange proposes to charge a fee of $0.95 per contract. With respect to the proposed MVP, described above, the Exchange notes that the fees and rebates currently being paid on ISE Mercury are in the range of fees and rebates in the new structure. During the initial rollout of symbols on ISE Mercury, the Exchange did not adopt the proposed tiered structure due to the difficulty of calculating appropriate ADV thresholds for each tier when symbols were being listed on the Exchange each week. The Exchange, therefore, opted to provide attractive introductory rates and Priority Customer order rebates in order to attract Priority Customer orders to the Exchange during the initial rollout phase. By adopting the proposed tiered structure now, the Exchange seeks to incentivize members to send additional order flow to the Exchange in order to qualify for lower fees and higher rebates. Market Maker Discount The Exchange is also proposing a $0.05 per contract discount to Market Maker fees when the Market Maker trades against Non-Priority Customer orders. We believe this will incentivize Market Makers to provide competitive markets. This discount does not apply to Crossing Orders. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,\14\ in general, and Section 6(b)(4) of the Act,\15\ 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. --------------------------------------------------------------------------- \14\ 15 U.S.C. 78f. \15\ 15 U.S.C. 78f(b)(4). --------------------------------------------------------------------------- The Exchange believes the fees proposed for transactions on ISE Mercury are reasonable. ISE Mercury will operate within a highly competitive market in which market participants can readily send order flow to any of the thirteen other competing venues if they deem fees at a particular venue to be excessive. The proposed MVP is intended to attract order flow to ISE Mercury by offering certain market participants incentives to submit their orders to ISE Mercury. Member Volume Program The Exchange believes the proposed fees and rebates in the MVP are reasonable and equitably allocated because ISE Mercury has already established fees for members trading on the Exchange, and is merely proposing to adopt volume-based tiers designed to incentivize members to send additional Priority Customer order flow to the Exchange. Further, the language permitting aggregation of volume amongst corporate affiliates for purposes [[Page 16243]] of the ADV calculation is intended to avoid disparate treatment of firms that have divided their various business activities between separate corporate entities as compared to firms that operate those business activities within a single corporate entity. For example, many firms that are members of the Exchange operate several different business lines within the same corporate entity. In contrast, other firms may be part of a corporate structure that separates those business lines into different corporate affiliates, either for business, compliance, or historical reasons. Those corporate affiliates, in turn, are required to maintain separate memberships with the Exchange in order to access the Exchange. The Exchange believes that corporate affiliates should continue to be aggregated and is clarifying when members will be considered affiliated. The Exchange notes that the proposed definition of ``affiliate'' to be used to aggregate affiliated member ADV is consistent with definitions used by other options exchanges, including MIAX.\16\ --------------------------------------------------------------------------- \16\ See MIAX Fee Schedule, (1) Transaction Fees, (a) Exchange Fees, (iii) Priority Customer Rebate Program at https://www.miaxoptions.com/sites/default/files/MIAX_Options_Fee_Schedule_02012016B.pdf. --------------------------------------------------------------------------- The Exchange believes that it is equitable and reasonable to permit the Exchange to eliminate from the calculation days on which the market is not open the entire trading day, either due to a holiday or trading halt, because it preserves the Exchange's intent behind adopting volume-based pricing. The proposed change is non-discriminatory because it applies equally to all members and to all volume tiers. Additionally, the Exchange believes that it is reasonable and equitable to exclude a day from its ADV calculations when members are instructed to route their orders to other markets as this preserves the Exchange's intent behind adopting volume-based pricing, and avoids penalizing members that follow this instruction. Without this change, members that route away in accordance with the Exchange's instructions may be negatively impacted, resulting in an effective cost increase for those members. The Exchange further believes that the proposed rule change is not unfairly discriminatory because it applies equally to all members and ADV calculations. As is the Exchange's current practice, the Exchange will inform members of any day to be excluded from its ADV calculations by sending members a notice and posting such notice on the Exchange's Web site. The Exchange further believes that its proposal to provide rebates for Priority Customer orders is reasonable and equitable because the proposed rebates are competitive with the rebates offered by other exchanges employing similar tiered rebate structures based on Priority Customer volume. For example, MIAX Options Exchange (``MIAX'') and NASDAQ OMX PHLX (``PHLX'') have Priority Customer, tiered rebate programs.\17\ MIAX offers a per contract rebate of $0.00 for its base tier and a per contract rebate of $0.24 for its highest rebate tier in select symbols. Similarly, PHLX offers a per contract rebate of $0.00 for its base tier and a per contract rebate of $0.21 for its highest tier in customer simple orders.\18\ As proposed, ISE Mercury's Priority Customer order rebates are not unfairly discriminatory because they would apply uniformly to all similarly situated market participants and they are competitive with the rebates offered by MIAX's and PHLX's Priority Customer rebate programs. --------------------------------------------------------------------------- \17\ See MIAX Fee Schedule, (1) Transaction Fees, (a) Exchange Fees, (iii) Priority Customer Rebate Program at https://www.miaxoptions.com/sites/default/files/MIAX_Options_Fee_Schedule_03012016.pdf and PHLX Fee Schedule, B. Customer Rebate Program at http://www.nasdaqtrader.com/Micro.aspx?id=phlxpricing. \18\ PHLX Fee Schedule, B. Customer Rebate Program, Category A at http://www.nasdaqtrader.com/Micro.aspx?id=phlxpricing. --------------------------------------------------------------------------- The Exchange believes that providing higher rebates for Priority Customer orders, and creating ADV thresholds specifically for members that send such orders to ISE Mercury, attracts that order flow to the Exchange and thereby creates liquidity to the benefit of all market participants who trade on the Exchange. Further, the Exchange believes that it is equitable and not unfairly discriminatory to provide higher rebates to Priority Customer orders than to Professional Customer orders. A Priority Customer is by 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 on the Exchange 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. Further, Professional Customers engage in trading activity similar to that conducted by Market Makers and proprietary traders. The Exchange believes that its proposal to assess a per contract fee for Market Maker orders is reasonable and equitable because the proposed fees are within the range of fees assessed by other exchanges employing similar tiered rebate structures such as MIAX, which offers tiered fees for Market Makers. In Penny Symbols, MIAX generally charges Market Makers a per contract fee as high as $0.25 for its base tier and a per contract fee of $0.05 for its highest tier.\19\ In Non-Penny Symbols, MIAX charges a per contract fee of $0.29 for its base tier and a per contract fee of $0.09 for its highest tier.\20\ Thus, MIAX's tiered Market Maker fees are competitive with ISE Mercury's fees. The Exchange believes that the price differentiation between Market Makers and other Non-Priority Customers is appropriate and not unfairly discriminatory because Market Makers have different requirements and obligations to the Exchange that other market participants do not (such as quoting requirements). The Exchange believes that it is equitable and not unfairly discriminatory to provide lower fees to Market Makers because they would apply uniformly to similarly situated market participants. --------------------------------------------------------------------------- \19\ See MIAX Fee Schedule, (1) Transaction Fees, (a) Exchange Fees, (i) Market Maker Transaction Fees, Market Maker Sliding Scale at https://www.miaxoptions.com/sites/default/files/MIAX_Options_Fee_Schedule_03012016.pdf. \20\ Id. --------------------------------------------------------------------------- Crossing Orders The Exchange believes the proposed rebates for PIM Orders of 500 or Fewer Contracts \21\ are reasonable and equitably allocated because the proposed fees are within the range of fees assessed by other exchanges such as MIAX, which offers a rebate for PRIME Agency orders.\22\ For example, MIAX offers a per contract rebate of $0.10 for each Priority Customer order and also offers an additional per contract rebate of $0.02 for members that qualify for MIAX's Priority Customer Rebate Program's volume tiers 3 and 4.\23\ While ISE Mercury's tiered rebate is specifically targeted towards Priority Customer orders, the Exchange does not believe that this is unfairly discriminatory. As discussed above, [[Page 16244]] Priority Customer orders on the Exchange are generally entitled to lower fees and higher rebates, and the Exchange believes that attracting more liquidity from Priority Customers will benefit all market participants that trade on ISE Mercury. Further, the Exchange believes that it is equitable and not unfairly discriminatory to provide lower fees to Priority Customers because they would apply uniformly to similarly situated market participants. --------------------------------------------------------------------------- \21\ The level is set at 500 or fewer contracts because Priority Customer orders are typically less than 500 contracts. \22\ See MIAX Fee Schedule, (1) Transaction Fees, (a) Exchange Fees, (iii) Priority Customer Rebate Program at https://www.miaxoptions.com/sites/default/files/MIAX_Options_Fee_Schedule_03012016.pdf. \23\ Id. --------------------------------------------------------------------------- Responses to Crossing Orders The Exchange's proposal to assess Penny and Non-Penny Symbol fees for Responses to Crossing Orders is reasonable and equitably allocated because they are within the range of fees assessed by other exchanges. Specifically, the Exchange proposes to keep fees for Responses to Crossing Orders in Penny Symbols the same and to increase fees for Responses to Crossing Orders in Non-Penny Symbols so that these fees are competitive with similar fees charged on other exchanges. For example, ISE Gemini's Fees for Responses to Crossing Orders \24\ in both Penny and Non-Penny Symbols are competitive with those proposed by ISE Mercury. Further, the Exchange believes the proposed Fees for Responses to Crossing Orders are not unfairly discriminatory because they would uniformly apply to all similarly situated market participants. --------------------------------------------------------------------------- \24\ See ISE Gemini Fee Schedule, I. Regular Order Fees and Rebates, Fee for Crossing Orders at http://www.ise.com/assets/gemini/documents/OptionsExchange/legal/fee/Gemini_Fee_Schedule.pdf. --------------------------------------------------------------------------- With respect to the Responses to Crossing Orders' tiered fees for Market Maker orders, the Exchange believes that the proposed fees are fair, equitable, and not unfairly discriminatory because the proposed fees are consistent with the fees charged at other exchanges. For example, ISE Gemini charges Market Makers a Fee for Responses to Crossing Orders of $0.49 per contract in Penny Symbols and $0.89 per contract in Non-Penny Symbols. Similarly, ISE Mercury's proposal would charge per contract fees ranging from $0.50 (Tier 1 fee plus Marketing Fee) to $0.35 (Tier 5 fee plus Marketing Fee) in Penny Symbols and per contract fees ranging from $0.95 (Tier 1 fee plus Marketing Fee) to $0.80 (Tier 5 fee plus marketing fee) in Non-Penny Symbols. As discussed above, the Exchange believes that the price differentiation between Market Makers and the other market participants is appropriate and not unfairly discriminatory because they have requirements and obligations to the Exchange that the other market participants do not. Market Makers also incur Marketing Fees, which the other market participants do not. Thus, the Exchange believes that it is equitable and not unfairly discriminatory to assess a higher fee to certain market participants that do not have such requirements and obligations that Exchange Market Makers do. Market Maker Discount The Exchange believes the proposed Market Maker discount is reasonable, equitable, and not unfairly discriminatory because Market Makers have different requirements and obligations to the Exchange that other market participants do not and they incur Marketing Fees. The Exchange notes that when trading against a Priority Customer the exchange pays a rebate for Priority Customer orders, but the Exchange charges a fee for executions of Non-Priority Customer orders. The Exchange believes that offering a discount on the fees charged to Market Makers will encourage Market Maker to make better markets and execute more trades. Furthermore, charging Market Makers lower fees for trading against a Non-Priority Customer order is not a new concept in the industry. For example, BOX Options Exchange, in Non-Penny Pilot Symbols, charges Market Makers a maker fee of $0.85 per contract for trading against a Priority Customer order and a maker fee of $0.00 for trading against a Professional Customer/Broker Dealer order.\25\ Finally, [sic] --------------------------------------------------------------------------- \25\ See BOX Options Exchange Fee Schedule, Section I. Exchange Fees, A. Non-Auction Transactions at http://boxexchange.com/assets/BOX-Exchange-Fee-Schedule-as-of-February-26-2016.pdf. --------------------------------------------------------------------------- The Exchange notes that the proposed rule filing is intended to further establish ISE Mercury as an attractive venue for market participants to direct their order flow as the proposed fees and rebates are competitive with those established by other exchanges. The Exchange operates in a highly competitive market in which market participants can readily direct order flow to another exchange if they deem rebates at a particular exchange to be too low. For the reasons noted above, the Exchange believes that the proposed rebates are fair, equitable and not unfairly discriminatory. B. Self-Regulatory Organization's Statement on Burden on Competition In accordance with Section 6(b)(8) of the Act,\26\ 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 tiered rebate structure that the Exchange proposes to adopt is similar to those currently in effect on other options exchanges such as MIAX and PHLX, and will increase competition between ISE Mercury and these markets. --------------------------------------------------------------------------- \26\ 15 U.S.C. 78f(b)(8). --------------------------------------------------------------------------- In establishing the MVP, the Exchange is not imposing any burden on competition. The established volume tiers are transparent and offer members a simple way to reach different levels of fees and rebates on the exchange, similar to levels and differentials these same participants are familiar with on several other exchanges. Volume tiers are not new to the options industry and generally reward members for submitting additional volume to the Exchange, with ISE Mercury now seeking to introduce a similar structure. The Exchange also notes that other exchanges have substantially similar requirements for aggregating affiliated member ADV in determining applicable tiered rebates. Finally, in establishing a Market Maker discount for Market Makers trading against Non-Priority Customer orders, the Exchange is not imposing any burden on competition not necessary or appropriate in furtherance of the purposes of the Act because other exchanges offer lower fees to Market Makers trading against Non-Priority Customers. Additionally, the Exchange notes that when trading against a Priority Customer the exchange pays a rebate for Priority Customer orders, but the Exchange charges a fee for executions of Non-Priority Customer orders. The Exchange believes that offering a discount on the fees charged to Market Makers will encourage Market Maker to make better markets and execute more trades. 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. 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 [[Page 16245]] 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,\27\ and subparagraph (f)(2) of Rule 19b-4 thereunder,\28\ because it establishes a due, fee, or other charge imposed by ISE Mercury. --------------------------------------------------------------------------- \27\ 15 U.S.C. 78s(b)(3)(A)(ii). \28\ 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 [email protected]. Please include File Number SR-ISEMercury-2016-05 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-ISEMercury-2016-05. 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-ISEMercury-2016-05, and should be submitted on or before April 15, 2016. --------------------------------------------------------------------------- \29\ 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\29\ Brent J. Fields, Secretary. [FR Doc. 2016-06744 Filed 3-24-16; 8:45 am] BILLING CODE 8011-01-P
![16240 Federal Register / Vol. 81, No. 58 / Friday, March 25, 2016 / Notices
10:00 a.m. and 3:00 p.m. Copies of such II. Self-Regulatory Organization’s when trading against Non-Priority
filing also will be available for Statement of the Purpose of, and Customer orders.
inspection and copying at the principal Statutory Basis for, the Proposed Rule
The Member Volume Program
office of the Exchange. All comments Change
received will be posted without change; Currently, the fees and rebates
In its filing with the Commission, the
the Commission does not edit personal assessed for Regular Orders in standard
Exchange included statements
identifying information from options that are in the Penny Pilot are:
concerning the purpose of, and basis for,
submissions. You should submit only (1) $0.20 per contract for Market Maker
the proposed rule change and discussed
information that you wish to make orders,8 (2) $0.47 per contract for Non-
any comments it received on the
available publicly. All submissions ISE Mercury Market Maker,9 Firm
proposed rule change. The text of these
should refer to File Number SR– Proprietary 10/Broker-Dealer,11 and
statements may be examined at the
ISEMercury–2016–06, and should be Professional Customer 12 orders; and (3)
places specified in Item IV below. The
submitted on or before April 15, 2016. ($0.18) per contract for Priority
self-regulatory organization has
Customer orders. The transaction fees
For the Commission, by the Division of prepared summaries, set forth in
and rebates assessed for Regular Orders
Trading and Markets, pursuant to delegated Sections A, B and C below, of the most
authority.17
that are not in the Penny Pilot are: (1)
significant aspects of such statements.
$0.20 per contract for Market Maker
Brent J. Fields,
A. Self-Regulatory Organization’s orders; (2) $0.90 per contract for Non-
Secretary. Statement of the Purpose of, and ISE Mercury Market Maker, Firm
[FR Doc. 2016–06746 Filed 3–24–16; 8:45 am] Statutory Basis for, the Proposed Rule Proprietary/Broker-Dealer, and
BILLING CODE 8011–01–P Change Professional Customer orders; and (3)
($0.18) per contract for Priority
1. Purpose
Customer orders.
SECURITIES AND EXCHANGE ISE Mercury is proposing to amend its The Exchange proposes to amend the
COMMISSION Schedule of Fees to establish volume- above fees and rebates so that they will
based tiered rebates and fees (the be based on a member’s ADV of Priority
[Release No. 34–77409; File No. SR– ‘‘Member Volume Program’’ or ‘‘MVP’’).
ISEMercury–2016–05]
Customer orders traded in a given
The MVP tiers are determined by a month and the highest tier threshold
Self-Regulatory Organizations; ISE member’s average daily volume attained applies retroactively in a given
Mercury, LLC; Notice of Filing and (‘‘ADV’’) of Priority Customer 3 Regular month to all eligible traded contracts
Immediate Effectiveness of Proposed Orders,4 in Penny and Non-Penny Pilot and applies to all eligible market
Rule Change To Amend the Schedule Symbols,5 traded on the Exchange. The participants. This Priority Customer
of Fees Exchange will also aggregate the trading ADV includes all Priority Customer
activity of affiliated members in volume executed on the Exchange in all
March 21, 2016. determining this ADV.6 ISE Mercury symbols and order types, including
Pursuant to Section 19(b)(1) of the believes the proposed fee and rebate volume executed in the Price
Securities Exchange Act of 1934 (the tiers will incentivize firms to increase Improvement Mechanism (‘‘PIM’’) and
‘‘Act’’),1 and Rule 19b–4 thereunder,2 Priority Customer order flow to the the Facilitation and Qualified
notice is hereby given that on March 10, Exchange. The Exchange is also Contingent Cross mechanisms.
2016, ISE Mercury, LLC (the proposing Penny and Non-Penny Further, the Exchange will aggregate
‘‘Exchange’’ or ‘‘ISE Mercury’’) filed Symbol fees for both Crossing Orders the trading activity of separate members
with the Securities and Exchange and Responses to Crossing Orders. in calculating Priority Customer ADV
Commission (‘‘Commission’’) the Finally, the Exchange proposes to offer provided there is at least 75% common
proposed rule change, as described in Market Makers 7 a per contract discount ownership between the firms as
Items I, II, and III below, which Items reflected on each firm’s Form BD,
3 A Priority Customer is a person or entity that is
have been prepared by the self- Schedule A. The Exchange believes that
not a broker/dealer in securities, and does not place
regulatory organization. The more than 390 orders in listed options per day on
aggregating this volume across members
Commission is publishing this notice to average during a calendar month for its own that share at least 75% common
solicit comments on the proposed rule beneficial account(s). ownership will allow members to
4 A Regular Order is an order that consists of only
change from interested persons. continue to execute trades on the
a single option series and is not submitted with a
stock leg.
Exchange through separate broker-
I. Self-Regulatory Organization’s dealer entities for different types of
5 Under the Penny Pilot, the minimum price
Statement of the Terms of Substance of
variation for all participating options classes, except
the Proposed Rule Change for the Nasdaq-100 Index Tracking Stock (‘‘QQQ’’), collectively. Market Maker orders sent to the
ISE Mercury proposes to amend its the SPDR S&P 500 Exchange Traded Fund (‘‘SPY’’) Exchange by an Electronic Access Member are
and the iShares Russell 2000 Index Fund (‘‘IWM’’), assessed fees at the same level as Market Maker
Schedule of Fees by adopting volume- is $0.01 for all quotations in options series that are orders.
based tiered rebates and fees. These tiers quoted at less than $3 per contract and $0.05 for 8 This fee applies to ISE Mercury Market Maker
are determined by a member’s average all quotations in options series that are quoted at orders sent to the Exchange by Electronic Access
$3 per contract or greater. The proposed fees and
daily volume of Priority Customer rebates for Penny Pilot symbols apply to all classes
Members.
9 A Non-ISE Mercury Market Maker, or Far Away
orders traded on the Exchange. The text in the Penny Pilot, i.e., to series that are quoted at
Market Maker (‘‘FARMM’’), is a market maker as
asabaliauskas on DSK3SPTVN1PROD with NOTICES
of the proposed rule change is available less than $3 that have a minimum price variation
defined in Section 3(a)(38) of the Securities
on the Exchange’s Internet Web site at of $0.01 and to series that are quoted at $3 or more
that have an minimum price variation of $0.05. Exchange Act of 1934, as amended (‘‘Exchange
http://www.ise.com, at the principal QQQ, SPY, and IWM are quoted in $0.01 Act’’), registered in the same options class on
office of the Exchange, and at the increments for all options series. another options exchange.
10 A Firm Proprietary order is an order submitted
Commission’s Public Reference Room. 6 Aggregation is necessary and appropriate
because certain members conduct customer and by a member for its own proprietary account.
11 A Broker-Dealer order is an order submitted by
market maker trading activity through separate but
17 17 CFR 200.30–3(a)(12). related broker-dealers. a member for a non-member broker-dealer account.
1 15 U.S.C. 78s(b)(1). 7 The term Market Makers refers to ‘‘Competitive 12 A Professional Customer is a person who is not
2 17 CFR 240.19b–4. Market Makers’’ and ‘‘Primary Market Makers’’ a broker/dealer and is not a Priority Customer.
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![Federal Register / Vol. 81, No. 58 / Friday, March 25, 2016 / Notices 16241
volume, while receiving rebates based its ADV calculations where the Exchange did not have the ability to
on the aggregate volume being executed Exchange is technically open for the exclude aberrant low volume days when
across such entities. entire trading day, but has instructed calculating ADV for the month, as a
The Exchange now proposes fees and members to route away due to a systems result of the decreased trading volume,
rebates based on five volume tier levels or other error that ultimately does not the numerator for the calculation (e.g.,
as described in the table below. These impact trading on the Exchange. The trading volume) would be
fees and rebates will be based on the Exchange also notes, however, that if it correspondingly lower, but the
highest tier that a member reaches in a has a systems issue in the morning denominator for the threshold
given month, and these tiered rates will before the market opens, it may instruct calculations (e.g., the number of trading
apply retroactively to all eligible traded members to route away to other markets. days) would not be decreased. This
contracts for all client categories. If the systems issue continues into could result in an unintended cost
trading hours, the Exchange is permitted increase. Absent the authority to
QUALIFYING TIER THRESHOLDS to exclude the day for all members that exclude days that the market is not open
would have a lower ADV with the day for the entire trading day, members will
Total included. If, however, the systems issue experience an effective decrease in
Tier affiliated priority is resolved prior to the opening of rebates. The artificially low volumes of
customer ADV
trading, the Exchange is not permitted trading on such days could reduce the
Tier 1 .............................. 0–19,999 to exclude the day from its ADV trading activity of members both daily
Tier 2 .............................. 20,000–39,999 calculations. This is the case regardless and monthly. Accordingly, excluding
Tier 3 .............................. 40,000–59,999 of the fact that many members would such days from the monthly calculation
Tier 4 .............................. 60,000–79,999 have already made arrangements to will diminish the likelihood of an
Tier 5 .............................. 80,000+ route away in accordance with the effective increase in the cost of trading
Exchange’s instructions. To prevent this on the Exchange, a result that is
Additionally, the Exchange proposes undesirable result, and preserve the unintended and undesirable to the
to amend the Schedule of Fees to Exchange’s intent behind adopting Exchange and its members.
include language related to excluding volume-based pricing, the Exchange The Exchange notes that the fees
days from the ADV calculations used to proposes to allow days to be excluded charged to Non-ISE Mercury Market
determine applicable fee and rebate from its ADV calculation whenever all Maker, Firm Proprietary/Broker Dealer
tiers. Specifically, the Exchange members are instructed, in writing, to and Professional Customer in Penny and
proposes to (1) exclude from its ADV route their orders to other markets. Non-Penny Symbols are the same as the
calculations any trading day on which Because the days the Exchange current fees charged, regardless of the
the Exchange is closed early for holiday proposes to exclude from its ADV tier level reached. However, the tiered
observance; (2) exclude days where the calculation generally have artificially fees and rebates for both Priority
Exchange declares a trading halt in all lower trading volume, the Exchange Customers and Market Makers have
securities or honors a market-wide believes that it is reasonable and changed. The proposed fees and rebates
trading halt declared by another market; equitable to not include such days in for each tier and participant type are as
and (3) permit days to be excluded from determining fee and rebate tiers. If the follows:
PENNY SYMBOL FEES AND REBATES
[Per contract]
Firm proprietary,
B/D, FarMM &
Tier Priority customer Market maker professional
customer
Tier 1 .......................................................................................................................... ($0.05) $0.25 $0.47
Tier 2 .......................................................................................................................... ($0.10) $0.22 $0.47
Tier 3 .......................................................................................................................... ($0.15) $0.18 $0.47
Tier 4 .......................................................................................................................... ($0.21) $0.15 $0.47
Tier 5 .......................................................................................................................... ($0.24) $0.10 $0.47
NON-PENNY SYMBOL FEES AND REBATES
[Per contract]
Firm proprietary,
B/D, FarMM &
Tier Priority customer Market maker professional
customer
Tier 1 .......................................................................................................................... ($0.05) $0.25 $0.90
asabaliauskas on DSK3SPTVN1PROD with NOTICES
Tier 2 .......................................................................................................................... ($0.10) $0.22 $0.90
Tier 3 .......................................................................................................................... ($0.15) $0.18 $0.90
Tier 4 .......................................................................................................................... ($0.21) $0.15 $0.90
Tier 5 .......................................................................................................................... ($0.24) $0.10 $0.90
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![16244 Federal Register / Vol. 81, No. 58 / Friday, March 25, 2016 / Notices
Priority Customer orders on the participants do not. Market Makers also intramarket competition that is not
Exchange are generally entitled to lower incur Marketing Fees, which the other necessary or appropriate in furtherance
fees and higher rebates, and the market participants do not. Thus, the of the purposes of the Act. The tiered
Exchange believes that attracting more Exchange believes that it is equitable rebate structure that the Exchange
liquidity from Priority Customers will and not unfairly discriminatory to proposes to adopt is similar to those
benefit all market participants that trade assess a higher fee to certain market currently in effect on other options
on ISE Mercury. Further, the Exchange participants that do not have such exchanges such as MIAX and PHLX,
believes that it is equitable and not requirements and obligations that and will increase competition between
unfairly discriminatory to provide lower Exchange Market Makers do. ISE Mercury and these markets.
fees to Priority Customers because they In establishing the MVP, the Exchange
Market Maker Discount is not imposing any burden on
would apply uniformly to similarly
situated market participants. The Exchange believes the proposed competition. The established volume
Market Maker discount is reasonable, tiers are transparent and offer members
Responses to Crossing Orders equitable, and not unfairly a simple way to reach different levels of
The Exchange’s proposal to assess discriminatory because Market Makers fees and rebates on the exchange,
Penny and Non-Penny Symbol fees for have different requirements and similar to levels and differentials these
Responses to Crossing Orders is obligations to the Exchange that other same participants are familiar with on
reasonable and equitably allocated market participants do not and they several other exchanges. Volume tiers
because they are within the range of fees incur Marketing Fees. The Exchange are not new to the options industry and
assessed by other exchanges. notes that when trading against a generally reward members for
Specifically, the Exchange proposes to Priority Customer the exchange pays a submitting additional volume to the
keep fees for Responses to Crossing rebate for Priority Customer orders, but Exchange, with ISE Mercury now
Orders in Penny Symbols the same and the Exchange charges a fee for seeking to introduce a similar structure.
to increase fees for Responses to executions of Non-Priority Customer The Exchange also notes that other
Crossing Orders in Non-Penny Symbols orders. The Exchange believes that exchanges have substantially similar
so that these fees are competitive with offering a discount on the fees charged requirements for aggregating affiliated
similar fees charged on other exchanges. to Market Makers will encourage Market member ADV in determining applicable
For example, ISE Gemini’s Fees for Maker to make better markets and tiered rebates.
Responses to Crossing Orders 24 in both execute more trades. Furthermore, Finally, in establishing a Market
Penny and Non-Penny Symbols are charging Market Makers lower fees for Maker discount for Market Makers
competitive with those proposed by ISE trading against a Non-Priority Customer trading against Non-Priority Customer
Mercury. Further, the Exchange believes order is not a new concept in the orders, the Exchange is not imposing
the proposed Fees for Responses to industry. For example, BOX Options any burden on competition not
Crossing Orders are not unfairly Exchange, in Non-Penny Pilot Symbols, necessary or appropriate in furtherance
discriminatory because they would charges Market Makers a maker fee of of the purposes of the Act because other
uniformly apply to all similarly situated $0.85 per contract for trading against a exchanges offer lower fees to Market
market participants. Priority Customer order and a maker fee Makers trading against Non-Priority
With respect to the Responses to of $0.00 for trading against a Customers. Additionally, the Exchange
Crossing Orders’ tiered fees for Market Professional Customer/Broker Dealer notes that when trading against a
Maker orders, the Exchange believes order.25 Finally, [sic] Priority Customer the exchange pays a
that the proposed fees are fair, equitable, The Exchange notes that the proposed rebate for Priority Customer orders, but
and not unfairly discriminatory because rule filing is intended to further the Exchange charges a fee for
the proposed fees are consistent with establish ISE Mercury as an attractive executions of Non-Priority Customer
the fees charged at other exchanges. For venue for market participants to direct orders. The Exchange believes that
example, ISE Gemini charges Market their order flow as the proposed fees offering a discount on the fees charged
Makers a Fee for Responses to Crossing and rebates are competitive with those to Market Makers will encourage Market
Orders of $0.49 per contract in Penny established by other exchanges. The Maker to make better markets and
Symbols and $0.89 per contract in Non- Exchange operates in a highly execute more trades.
Penny Symbols. Similarly, ISE competitive market in which market The Exchange operates in a highly
Mercury’s proposal would charge per participants can readily direct order competitive market in which market
contract fees ranging from $0.50 (Tier 1 flow to another exchange if they deem participants can readily direct their
fee plus Marketing Fee) to $0.35 (Tier 5 rebates at a particular exchange to be too order flow to competing venues. In such
fee plus Marketing Fee) in Penny low. For the reasons noted above, the an environment, the Exchange must
Symbols and per contract fees ranging Exchange believes that the proposed continually review, and consider
from $0.95 (Tier 1 fee plus Marketing rebates are fair, equitable and not adjusting, its fees and rebates to remain
Fee) to $0.80 (Tier 5 fee plus marketing unfairly discriminatory. competitive with other exchanges. For
fee) in Non-Penny Symbols. As the reasons described above, the
discussed above, the Exchange believes B. Self-Regulatory Organization’s
Statement on Burden on Competition Exchange believes that the proposed fee
that the price differentiation between changes reflect this competitive
Market Makers and the other market In accordance with Section 6(b)(8) of environment.
participants is appropriate and not the Act,26 the Exchange does not believe
asabaliauskas on DSK3SPTVN1PROD with NOTICES
unfairly discriminatory because they that the proposed rule change will C. Self-Regulatory Organization’s
have requirements and obligations to impose any burden on intermarket or Statement on Comments on the
the Exchange that the other market Proposed Rule Change Received From
25 See BOX Options Exchange Fee Schedule, Members, Participants, or Others
24 SeeISE Gemini Fee Schedule, I. Regular Order Section I. Exchange Fees, A. Non-Auction The Exchange has not solicited, and
Fees and Rebates, Fee for Crossing Orders at Transactions at http://boxexchange.com/assets/
http://www.ise.com/assets/gemini/documents/ BOX-Exchange-Fee-Schedule-as-of-February-26- does not intend to solicit, comments on
OptionsExchange/legal/fee/Gemini_Fee_ 2016.pdf. this proposed rule change. The
Schedule.pdf. 26 15 U.S.C. 78f(b)(8). Exchange has not received any
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![Federal Register / Vol. 81, No. 58 / Friday, March 25, 2016 / Notices 16245
unsolicited written comments from proposed rule change between the Framework. These revisions do not
members or other interested parties. Commission and any person, other than require any changes to the ICC Clearing
those that may be withheld from the Rules.
III. Date of Effectiveness of the
public in accordance with the
Proposed Rule Change and Timing for II. Self-Regulatory Organization’s
provisions of 5 U.S.C. 552, will be
Commission Action Statement of the Purpose of, and
available for Web site viewing and
The foregoing rule change has become Statutory Basis for, the Proposed Rule
printing in the Commission’s Public
effective pursuant to Section Change
Reference Room, 100 F Street NE.,
19(b)(3)(A)(ii) of the Act,27 and Washington, DC 20549 on official In its filing with the Commission, ICC
subparagraph (f)(2) of Rule 19b–4 business days between the hours of included statements concerning the
thereunder,28 because it establishes a 10:00 a.m. and 3:00 p.m. Copies of such purpose of and basis for the proposed
due, fee, or other charge imposed by ISE filing also will be available for rule change and discussed any
Mercury. inspection and copying at the principal comments it received on the proposed
At any time within 60 days of the office of the Exchange. All comments rule change. The text of these statements
filing of such proposed rule change, the received will be posted without change; may be examined at the places specified
Commission summarily may the Commission does not edit personal in Item IV below. ICC has prepared
temporarily suspend such rule change if identifying information from summaries, set forth in sections A, B,
it appears to the Commission that such submissions. You should submit only and C below, of the most significant
action is necessary or appropriate in the information that you wish to make aspects of these statements.
public interest, for the protection of available publicly. All submissions A. Self-Regulatory Organization’s
investors, or otherwise in furtherance of should refer to File Number SR– Statement of the Purpose of, and
the purposes of the Act. If the ISEMercury–2016–05, and should be Statutory Basis for, the Proposed Rule
Commission takes such action, the submitted on or before April 15, 2016. Change
Commission shall institute proceedings For the Commission, by the Division of
to determine whether the proposed rule ICC proposes updates to the ICC
Trading and Markets, pursuant to delegated
should be approved or disapproved. authority.29
Operational Risk Management
Framework. ICC believes such revisions
IV. Solicitation of Comments Brent J. Fields,
will facilitate the prompt and accurate
Secretary. clearance and settlement of securities
Interested persons are invited to
[FR Doc. 2016–06744 Filed 3–24–16; 8:45 am] transactions and derivative agreements,
submit written data, views, and
arguments concerning the foregoing, BILLING CODE 8011–01–P contracts, and transactions for which it
including whether the proposed rule is responsible. The proposed revisions
change is consistent with the Act. are described in detail as follows.
SECURITIES AND EXCHANGE The ICC Operational Risk
Comments may be submitted by any of COMMISSION
the following methods: Management Framework details ICC’s
[Release No. 34–77413; File No. SR–ICC– dynamic and independent program of
Electronic Comments 2016–003] risk assessment and oversight, managed
• Use the Commission’s Internet by the Operational Risk Manager
comment form (http://www.sec.gov/ Self-Regulatory Organizations; ICE (‘‘ORM’’), which aims to reduce
rules/sro.shtml); or Clear Credit LLC; Notice of Filing of operational incidents, encourage
• Send an email to rule-comments@ Proposed Rule Change To Revise the process and control improvement, bring
sec.gov. Please include File Number SR– ICC Operational Risk Management transparency to operational performance
ISEMercury–2016–05 on the subject Framework standard monitoring, and fulfill
line. March 21, 2016. regulatory obligations. ICC proposes
Pursuant to Section 19(b)(1) of the organizational changes to its
Paper Comments Operational Risk Management
Securities Exchange Act of 1934
• Send paper comments in triplicate (‘‘Act’’) 1 and Rule 19b–4 thereunder 2 Framework related to its operational
to Brent J. Fields, Secretary, Securities notice is hereby given that on March 10, risk management processes.
and Exchange Commission, 100 F Street ICC has revised the Operational Risk
2016, ICE Clear Credit LLC (‘‘ICC’’) filed
NE., Washington, DC 20549–1090. Management Framework to frame its
with the Securities and Exchange
All submissions should refer to File existing operational risk program and
Commission (‘‘Commission’’) the
Number SR–ISEMercury–2016–05. This processes around an operational risk
proposed rule change as described in
file number should be included on the lifecycle, designed to highlight certain
Items I, II, and III below, which Items
subject line if email is used. To help the aspects of the processes and present the
have been prepared primarily by ICC.
Commission process and review your processes in a more efficient manner.
The Commission is publishing this
comments more efficiently, please use The operational risk lifecycle utilized by
notice to solicit comments on the
only one method. The Commission will ICC has five components: Identify,
proposed rule change from interested
post all comments on the Commission’s assess, monitor, mitigate and report.
persons.
Internet Web site (http://www.sec.gov/ Each of these lifecycle components are
rules/sro.shtml). Copies of the I. Self-Regulatory Organization’s first defined generally in the document
Statement of the Terms of Substance of then applied to each of ICC’s two
asabaliauskas on DSK3SPTVN1PROD with NOTICES
submission, all subsequent
amendments, all written statements the Proposed Rule Change operational risk processes: Risk
with respect to the proposed rule The principal purpose of the assessment; and performance objectives
change that are filed with the proposed rule change is to update ICC’s setting and monitoring. Specifically, the
Commission, and all written Operational Risk Management content for each risk process has been
communications relating to the reorganized to fall into each of the
29 17 CFR 200.30–3(a)(12). operational risk lifecycle components
27 15 U.S.C. 78s(b)(3)(A)(ii). 1 15 U.S.C. 78s(b)(1). (i.e., identify, assess, monitor, mitigate,
28 17 CFR 240.19b–4(f)(2). 2 17 CFR 240.19b–4. and report). For completion purposes,
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Document Created: 2018-02-02 15:18:05
Document Modified: 2018-02-02 15:18:05
| 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 | 81 FR 16240 |
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