81 FR 27485 - Self-Regulatory Organizations; International Securities Exchange, 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 88 (May 6, 2016)

[Federal Register Volume 81, Number 88 (Friday, May 6, 2016)]
[Notices]
[Pages 27485-27486]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-10608]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77754; File No. SR-ISE-2016-10]


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

May 2, 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 April 18, 2016, the International Securities Exchange, LLC (the 
``Exchange'' or the ``ISE'') filed with the Securities and Exchange 
Commission (the ``Commission'') the proposed rule change, as described 
in Items I, II, and III below, which items have been prepared by the 
self-regulatory organization. The Commission is publishing this notice 
to solicit comments on the proposed rule change from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The ISE proposes to amend its Market Maker API fees as described in 
more detail below. The text of the proposed rule change is available on 
the Exchange's Web site (http://www.ise.com), at the principal office 
of the Exchange, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of these statements may be examined at 
the places specified in Item IV below. The self-regulatory organization 
has prepared summaries, set forth in sections A, B and C below, of the 
most significant aspects of such statements.

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

1. Purpose
    The Exchange charges application programming interface (``API'') 
fees to Market Makers \3\ for connecting to the Exchange. Each Market 
Maker session enabled for quoting is billed at a rate of $1,000 per 
month, and allows the Market Maker to submit an average of up to 1.5 
million quotes per day.\4\ Market Makers must pay for a minimum of two 
of these sessions, and incremental usage above 1.5 million quotes per 
day results in the Market Maker being charged for an additional 
session. Due to recent increases in quoting activity, Market Makers 
that aggressively quote on the Exchange are being billed for an 
increasing number of quoting sessions. The Exchange therefore proposes 
to introduce a cap on the API fees charged to Market Makers that meet 
specified performance criteria. In particular, Market Makers that 
achieve any tier of Market Maker Plus \5\ by routinely quoting at the 
national best bid or offer in 200 or more symbols (other than SPY) will 
have their API fees capped at 200 quoting sessions per month.\6\ In 
addition, the Exchange proposes to offer certain other incentives for 
Market Makers based on quoting activity in other symbols. Market Makers 
that achieve Market Maker Plus in SPY will receive credit for five 
quoting sessions. Market Makers that quote in all FX option products 
\7\ will not have their FX option quotes counted towards the 1.5 
million quote threshold, and will receive additional credit for twelve 
quoting sessions. All credited sessions will be applied after the 200 
API session cap. For example, a member that uses 220 quoting sessions 
and achieves Market Maker Plus in SPY and 200 or more non-SPY symbols, 
will be billed for 195 quoting sessions--i.e., a cap of 200 sessions 
for achieving Market Maker Plus in 200 non-SPY symbols minus the 5 
credited sessions for achieving Market Maker Plus in SPY.
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    \3\ The term ``Market Makers'' refers to ``Competitive Market 
Makers'' and ``Primary Market Makers'' collectively. See ISE Rule 
100(a)(25).
    \4\ Quoting sessions also support order entry and listening. The 
Exchange separately offers Market Maker API sessions for listening 
only ($175 per month per API), and order entry and listening ($750 
per month per API). The Exchange is not proposing any changes to the 
API fees charged for non-quoting sessions.
    \5\ A Market Maker Plus is a Market Maker who is on the National 
Best Bid or National Best Offer a specified percentage of the time 
for series trading between $0.03 and $3.00 (for options whose 
underlying stock's previous trading day's last sale price was less 
than or equal to $100) and between $0.10 and $3.00 (for options 
whose underlying stock's previous trading day's last sale price was 
greater than $100) in premium in each of the front two expiration 
months. The specified percentage is at least 80% but lower than 85% 
of the time for Tier 1, at least 85% but lower than 95% of the time 
for Tier 2, and at least 95% of the time for Tier 3. A Market 
Maker's single best and single worst quoting days each month based 
on the front two expiration months, on a per symbol basis, will be 
excluded in calculating whether a Market Maker qualifies for Market 
Maker Plus, if doing so will qualify a Market Maker for Market Maker 
Plus.
    \6\ The Exchange notes that ``Trading Application Software'' 
fees contained in Section V of the Schedule of Fees are currently 
billed on the 15th of each month. The Exchange will be moving its 
billing cycle for these fees to the beginning of the calendar month 
to coincide with the billing cycle for transaction fees so that API 
session fees can be appropriately mapped to Market Maker Plus 
status. As such, each member's next monlth bill will cover the full 
month of May. Members will not be billed for the period of April 18, 
2016 to April 30, 2016.
    \7\ The complete set of FX option products offered is: NZD, PZO, 
SKA, BRB, AUX, BPX, CDD, EUI, YUK, SFC, AUM, GBP, EUU and NDO.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\8\ in general, and Section 
6(b)(4) of the Act,\9\ 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.
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    \8\ 15 U.S.C. 78f.
    \9\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that the proposed fee change is reasonable 
and equitable because the proposed changes will reduce the impact of 
increased quoting activity on Market Maker API charges, and will 
encourage Market Makers to maintain quality markets in order to qualify 
for the proposed incentives. As noted above, Market Makers are 
currently facing increased API charges due to increases in quoting 
activity for members that quote aggressively. The Exchange believes 
that a cap in API fees is appropriate for Market Makers that 
consistently maintain quality markets as demonstrated by achieving 
Market Maker Plus in a number of symbols. The Exchange also believes 
that it is appropriate to grant free API sessions to members that 
achieve Market Maker Plus in SPY, which is the most actively traded 
name on the Exchange. Similarly, the Exchange believes that it is 
appropriate to grant an additional quoting allowance as well as free 
API

[[Page 27486]]

sessions to members that support the Exchange's proprietary FX option 
products. Furthermore, the Exchange does not believe that the proposed 
fee changes are unfairly discriminatory as all Market Makers that meet 
the specified performance criteria are eligible for the proposed 
incentives. The Exchange also does not believe it is unfairly 
discriminatory to only offer API incentives to Market Makers. As 
explained above, the proposed fee changes are targeted towards Market 
Makers as Market Maker API fees have been increasing due to increased 
quoting activity on the Exchange. Electronic Access Members (``EAMs'') 
already pay significantly lower connectivity charges for their API or 
Financial Information eXchange (``FIX'') sessions.\10\ Moreover, each 
of the proposed changes are geared towards reducing Market Maker API 
fees in exchange for actively maintaining quality markets, which will 
benefit all market participants that trade on the Exchange.
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    \10\ EAM Options APIs are billed at a rate of $250 per session 
per month for the first five sessions, and $100 per session per 
month for the sixth and additional sessions. EAM Options FIX 
Sessions are billed at a rate of $250 per month for the first and 
second session, and $50 per session per month for the third and 
additional sessions. See ISE Schedule of Fees, V. Trading 
Application Software, C. FIX Session/API Session Fees. The 
connectivity provided to EAMs under this section provides 
connectivity to both ISE and ISE Gemini, LLC. Id.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\11\ the Exchange 
does not believe that the proposed rule change will impose any burden 
on intermarket or intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. To the contrary, 
the Exchange believes that the proposed fee change is pro-competitive 
as it is designed to lower the fees charged to Market Makers that 
assist the Exchange in maintaining quality markets in a number of 
different products. 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.
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    \11\ 15 U.S.C. 78f(b)(8).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

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

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act \12\ and subparagraph (f)(2) of Rule 19b-4 
thereunder,\13\ because it establishes a due, fee, or other charge 
imposed by ISE.
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    \12\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \13\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File No. SR-ISE-2016-10 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-2016-10. 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 ISE. 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-2016-10 and should be 
submitted by May 27, 2016.

    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. 2016-10608 Filed 5-5-16; 8:45 am]
 BILLING CODE 8011-01-P