81 FR 91974 - Self-Regulatory Organizations; ISE Gemini, LLC; Notice of Filing of Proposed Rule Change To Amend ISE Gemini Rule 723 and To Make Pilot Program Permanent

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 243 (December 19, 2016)

Page Range		91974-91979
FR Document		2016-30394
Federal Register, Volume 81 Issue 243 (Monday, December 19, 2016)
[Federal Register Volume 81, Number 243 (Monday, December 19, 2016)]
[Notices]
[Pages 91974-91979]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-30394]



[[Page 91974]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79541; File No. SR-ISEGemini-2016-23]


Self-Regulatory Organizations; ISE Gemini, LLC; Notice of Filing 
of Proposed Rule Change To Amend ISE Gemini Rule 723 and To Make Pilot 
Program Permanent

December 13, 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 December 12, 2016, ISE Gemini, LLC (the ``Exchange'' or ``ISE 
Gemini'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. 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 ISE Gemini Rule 723, concerning its 
Price Improvement Mechanism (``PIM''). Certain aspects of PIM are 
currently operating on a pilot basis (``Pilot''), which is set to 
expire on January 18, 2017.\3\ The Pilot concerns (i) the termination 
of the exposure period by unrelated orders; and (ii) no minimum size 
requirement of orders eligible for PIM. ISE Gemini seeks to make the 
Pilot permanent, and also proposes to change the requirements for 
providing price improvement for Agency Orders of less than 50 option 
contracts.
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    \3\ See Securities Exchange Act Release No. 78343 (July 15, 
2016), 81 FR 47483 (July 21, 2016) (SR-ISEGemini-2016-07).
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    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaq.cchwallstreet.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 Exchange 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 this proposed rule change is to make permanent 
certain pilots within Rule 723, relating to PIM. Paragraph .03 of the 
Supplementary Material to Rule 723 provides that there is no minimum 
size requirement for orders to be eligible for PIM. Paragraph .05 
concerns the termination of the exposure period by unrelated orders. In 
addition, ISE Gemini proposes to modify the requirements for PIM 
auctions involving less than 50 contracts where the National Best Bid 
and Offer (``NBBO'') is only $0.01 wide.
Background
    The Exchange adopted PIM as part of its application to be 
registered as a national securities exchange under its previous name of 
Topaz Exchange, LLC (``Topaz'').\4\ In approving PIM, the Commission 
noted that it was largely based on a similar functionality offered by 
the International Securities Exchange, LLC (``ISE'').\5\ The PIM is a 
process that allows Electronic Access Members (``EAM'') to provide 
price improvement opportunities for a transaction wherein the Member 
seeks to execute an agency order as principal or execute an agency 
order against a solicited order (a ``Crossing Transaction''). A 
Crossing Transaction is comprised of the order the EAM represents as 
agent (the ``Agency Order'') and a counter-side order for the full size 
of the Agency Order (the ``Counter-Side Order''). The Counter-Side 
Order may represent interest for the Member's own account, or interest 
the Member has solicited from one or more other parties, or a 
combination of both.
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    \4\ See Securities Exchange Act Release No. 70050 (July 26, 
2013), 78 FR 46622 (August 1, 2013) (File No. 10-209) (``Exchange 
Approval Order''). The Exchange subsequently changed its name to ISE 
Gemini. See Securities Exchange Act Release No. 71586 (February 20, 
2014), 79 FR 10861 (February 26, 2014) (SR-Topaz-2014-06). In 
addition to the Exchange Approval Order and the filings cited above, 
the following proposed rule changes have been submitted in 
connection with PIM. See Securities Exchange Act Release Nos. 79253 
(November 7, 2016), 81 FR 79540 (ISEGemini-2016-13); 78343 (July 15, 
2016), 81 FR 47483 (July 21, 2016) (SR-ISE Gemini-2016-07); 75481 
(July 17, 2015), 80 FR 43826 (July 23, 2015) (SR-ISE Gemini-2015-
13); 73317 (October 8, 2014), 79 FR 61911 (October 15, 2014) (SR-
ISEGemini-2014-26); 72553 (July 8, 2014), 79 FR 40813 (July 8, 2014) 
(SR-ISE Gemini-2014-19); 72466 (June 25, 2014), 79 FR 37378 (July 1, 
2014) (SR-ISE Gemini-2014-17); 70636 (October 9, 2013), 78 FR 62838 
(October 22, 2013) (SR-Topaz-2013-05).
    \5\ See Exchange Approval Order, supra note 4.
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    Rule 723 sets forth the criteria pursuant to which the PIM is 
initiated. Specifically, a Crossing Transaction must be entered only at 
a price that is equal to or better than the national best bid or offer 
(``NBBO'') and better than the limit order or quote on the Exchange 
order book on the same side of the Agency Order. The Crossing 
Transaction may be priced in one-cent increments. The Crossing 
Transaction may not be canceled, but the price of the Counter-Side 
Order may be improved during the exposure period.
    Rule 723 also sets forth requirements relating to the exposure of 
orders in PIM and the termination of the exposure period. Upon entry of 
a Crossing Transaction into the Price Improvement Mechanism, a 
broadcast message that includes the series, price and size of the 
Agency Order, and whether it is to buy or sell, will be sent to all 
Members. This broadcast message will not be included in the ISE 
disseminated best bid or offer and will not be disseminated through 
OPRA. Members will be given 500 milliseconds to indicate the size and 
price at which they want to participate in the execution of the Agency 
Order (``Improvement Orders''). Improvement Orders may be entered by 
all Members for their own account or for the account of a Public 
Customer in one-cent increments at the same price as the Crossing 
Transaction or at an improved price for the Agency Order, and for any 
size up to the size of the Agency Order. During the exposure period, 
Improvement Orders may not be canceled, but may be modified to (1) 
increase the size at the same price, or (2) improve the price of the 
Improvement Order for any size up to the size of the Agency Order. 
During the exposure period, responses (including the Counter Side 
Order, Improvement Orders, and any changes to either) submitted by 
Members shall not be visible to other auction participants. The 
exposure period will automatically terminate (i) at the end of the 500 
millisecond period, (ii) upon the receipt of a market or marketable 
limit order on the Exchange in the same series, or (iii) upon the 
receipt of a nonmarketable limit order in the same series on the same 
side of the market as the Agency Order that would cause the price of 
the Crossing Transaction to be outside of the best bid or offer on the 
Exchange.
    Rule 723 also describes how orders will be executed at the end of 
the

[[Page 91975]]

exposure period. Specifically, at the end of the exposure period, the 
Agency Order will be executed in full at the best prices available, 
taking into consideration orders and quotes in the Exchange market, 
Improvement Orders, and the Counter-Side Order. The Agency Order will 
receive executions at multiple price levels if there is insufficient 
size to execute the entire order at the best price. At a given price, 
Priority Customer interest is executed in full before Professional 
Orders and any other interest of Members (i.e., proprietary interest 
from Electronic Access Members and Exchange market makers).
    After Priority Customer interest at a given price, Professional 
Orders and Members' interest will participate in the execution of the 
Agency Order based upon the percentage of the total number of contracts 
available at the price that is represented by the size of the Members' 
interest.
    In the case where the Counter-Side Order is at the same price as 
Members' interest (after Priority Customer interest at a given price), 
the Counter-Side order will be allocated the greater of one (1) 
contract or forty percent (40%) of the initial size of the Agency Order 
before other Member interest is executed. Upon entry of Counter-Side 
orders, Members can elect to automatically match the price and size of 
orders, quotes and responses received during the exposure period up to 
a specified limit price or without specifying a limit price. In this 
case, the Counter-Side order will be allocated its full size at each 
price point, or at each price point within its limit price if a limit 
is specified, until a price point is reached where the balance of the 
order can be fully executed. At such price point, the Counter-Side 
order shall be allocated the greater of one contract or forty percent 
(40%) of the original size of the Agency Order, but only after Priority 
Customer Orders at such price point are executed in full. Thereafter, 
all other orders, Responses, and quotes at the price point will 
participate in the execution of the Agency Order based upon the 
percentage of the total number of contracts available at the price that 
is represented by the size of the order, Response or quote. An election 
to automatically match better prices cannot be cancelled or altered 
during the exposure period.
    When a market order or marketable limit order on the opposite side 
of the market from the Agency Order ends the exposure period, it will 
participate in the execution of the Agency Order at the price that is 
mid-way between the best counter-side interest and the NBBO, so that 
both the market or marketable limit order and the Agency Order receive 
price improvement. Transactions will be rounded, when necessary, to the 
$.01 increment that favors the Agency Order.
The Pilot
    As described above, two components of PIM are currently operating 
on a pilot basis: (i) The termination of the exposure period by 
unrelated orders; and (ii) no minimum size requirement of orders 
entered into PIM. The pilot has been extended until January 18, 
2017.\6\
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    \6\ See note 3 above.
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    As described in greater detail below, during the pilot period the 
Exchange has been required to submit, and has been submitting, certain 
data periodically as required by the Commission, to provide supporting 
evidence that, among other things, there is meaningful competition for 
all size orders within the PIM, that there is significant price 
improvement for all orders executed through the PIM, and that there is 
an active and liquid market functioning on the Exchange both within PIM 
and outside of the Auction mechanism. The Exchange has also analyzed 
the impact of certain aspects of the Pilot; for example, situation in 
which PIM is terminated prematurely by an unrelated order.
    The Exchange now seeks to have the Pilot approved on a permanent 
basis. In addition, the Exchange proposes to modify the scope of PIM so 
that, with respect to PIM orders for less than 50 option contracts, 
members will be required to receive price improvement of at least one 
minimum price improvement increment over the NBBO if the NBBO is only 
$0.01 wide. For orders of 50 contracts or more, or if the difference in 
the NBBO is greater than $0.01, the requirements for price improvement 
remain the same.
Price Improvement for Orders Under 50 Contracts
    Currently, the PIM may be initiated if all of the following 
conditions are met. A Crossing Transaction must be entered only at a 
price that is equal to or better than the NBBO and better than the 
limit order or quote on the Exchange order book on the same side of the 
Agency Order. The Crossing Transaction may be priced in one-cent 
increments. The Crossing Transaction may not be canceled, but the price 
of the Counter-Side Order may be improved during the exposure period.
    ISE Gemini proposes to amend Rule 723(b) to require Electronic 
Access Members to provide at least $0.01 price improvement for an 
Agency Order if that order is for less than 50 contracts and if the 
difference between the NBBO is $0.01. For the period beginning January 
19, 2017 until a date specified by the Exchange in a Regulatory 
Information Circular, which date shall be no later than April 15, 2017, 
ISE Gemini will adopt a member conduct standard to implement this 
requirement.\7\ Under this provision, ISE Gemini is proposing to amend 
the Auction Eligibility Requirements to require that, if the Agency 
Order is for less than 50 option contracts, and if the difference 
between the NBBO is $0.01, an Electronic Access Member shall not enter 
a Crossing Transaction unless such Crossing Transaction is entered at a 
price that is one minimum price improvement increment better than the 
NBBO on the opposite side of the market from the Agency Order, and 
better than any limit order on the limit order book on the same side of 
the market as the Agency Order. This requirement will apply regardless 
of whether the Agency Order is for the account of a public customer, or 
where the Agency Order is for the account of a broker dealer or any 
other person or entity that is not a Public Customer. Failure to 
provide such price improvement will subject Members to the fines set 
forth in Rule 1614(d)(4) of the International Securities Exchange, LLC 
(``ISE'').\8\
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    \7\ The Exchange notes that its indirect parent company, U.S. 
Exchange Holdings, Inc. has been acquired by Nasdaq, Inc. See 
Securities Exchange Act Release No. 78119 (June 21, 2016), 81 FR 
41611 (June 27, 2016) (SR-ISEGemini-2016-05). Pursuant to this 
acquisition, ISE Gemini platforms are migrating to Nasdaq platforms, 
including the platform that operates PIM. ISE Gemini intends to 
retain the proposed member conduct standard requiring price 
improvement for options orders of under 50 contracts where the 
difference between the NBBO is $0.01 until the ISE Gemini platforms 
and the corresponding symbols are migrated to the platforms operated 
by Nasdaq, Inc.
    \8\ In a separate proposed rule change, ISE is proposing to 
adopt similar price improvement requirements for orders of less than 
50 contracts for its PIM. As part of that rule change, ISE is 
proposing to amend ISE Rule 1614 (Imposition of Fines for Minor Rule 
Violations) to add Rule 1614(d)(4), which will provide that, 
beginning January 19, 2017, any Member who enters an order into PIM 
for less than 50 contracts, while the National Best Bid or Offer 
spread is $0.01, must provide price improvement of at least one 
minimum price improvement increment better than the NBBO on the 
opposite side of the market from the Agency Order, which increment 
may not be smaller than $0.01. Failure to provide such price 
improvement will result in members being subject to the following 
fines: $500 for the second offense, $1,000 for the third offense, 
and $2,500 for the fourth offense. Subsequent offenses will subject 
the member to formal disciplinary action. ISE will review violations 
on a monthly cycle to assess these violations.
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    The Exchange will conduct electronic surveillance of PIM to ensure 
that members comply with the proposed

[[Page 91976]]

price improvement requirements for option orders of less than 50 
contracts. Specifically, using an electronic surveillance system that 
produces alerts of potentially unlawful PIM orders, the Exchange will 
perform a frequent review of member firm activity to identify instances 
of apparent violations. Upon discovery of an apparent violation, the 
Exchange will attempt to contact the appropriate member firm to 
communicate the specifics of the apparent violation with the intent to 
assist the member firm in preventing submission of subsequent 
problematic orders. The Exchange will review the alerts monthly and 
determine the applicability of the MRVP and appropriate penalty. The 
Exchange is not limited to the application of the MRVP, and may at its 
discretion, choose to escalate a matter for processing through the 
Exchange's disciplinary program.
    The Exchange is also proposing a systems-based mechanism to 
implement this price improvement requirement, which shall be effective 
following the migration of a symbol to INET, the platform operated by 
Nasdaq, Inc. that will also operate the PIM. Under this provision, if 
the Agency Order is for less than 50 option contracts, and if the 
difference between the National Best Bid and National Best Offer 
(``NBBO'') is $0.01, the Crossing Transaction must be entered at one 
minimum price improvement increment better than the NBBO on the 
opposite side of the market from the Agency Order and better than the 
limit order or quote on the ISE order book on the same side of the 
Agency Order.
    The Exchange believes that these changes to PIM may provide 
additional opportunities for Agency Orders of under 50 option contracts 
to receive price improvement over the NBBO where the difference in the 
NBBO is $0.01 and therefore encourage the increased submission of 
orders of under 50 option contracts. The Exchange notes that the 
statistics for the current pilot, which include, among other things, 
price improvement for orders of less than 50 option contracts under the 
current auction eligibility requirements, show relatively small amounts 
of price improvement for such orders. ISE Gemini believes that the 
proposed requirements will therefore increase the price improvement 
that orders of under 50 option contracts may receive in PIM.
    The Exchange will retain the current requirements for auction 
eligibility where the Agency Order is for 50 option contracts or more, 
or if the difference between the NBBO is greater than $0.01. 
Accordingly, the Exchange is amending the Auction Eligibility 
Requirements to state that, if the PIM Order is for 50 option contracts 
or more or if the difference between the NBBO is greater than $0.01, 
the Crossing Transaction must be entered only at a price that is equal 
to or better than the NBBO and better than the limit order or quote on 
the Exchange order book on the same side as the Agency Order.
No Minimum Size Requirement
    Supplemental Material .03 to Rule 723 provides that, as part of the 
current Pilot, there will be no minimum size requirement for orders to 
be eligible for the Auction.\9\ As with the ISE PIM, the Exchange 
proposed the no-minimum size requirement for the PIM because it 
believed that this would provide small customer orders with the 
opportunity to participate in the PIM and to receive corresponding 
price improvement. In initially approving the ISE PIM, the Commission 
noted that the no minimum size requirement provided an opportunity for 
more market participants to participate in the auction.\10\ The 
Commission also stated that it would evaluate PIM during the Pilot 
Period to determine whether it would be beneficial to customers and to 
the options market as a whole to approve any proposal requesting 
permanent approval to permit orders of fewer than 50 contracts to be 
submitted to the PIM.\11\
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    \9\ The provision relating to the no minimum size requirement 
also requires the Exchange to submit certain data, periodically as 
required by the Commission, to provide supporting evidence that, 
among other things, there is meaningful competition for all size 
orders within the PIM, that there is significant price improvement 
for all orders executed through the PIM, and that there is an active 
and liquid market functioning on the Exchange outside of the PIM. 
Any raw data which is submitted to the Commission will be provided 
on a confidential basis.
    \10\ See Securities Exchange Act Release No. 50819 (December 8, 
2004), 69 FR 75093 (December 15, 2004) (SR-ISE-2003-06) (``ISE PIM 
Approval Order'').
    \11\ Id.
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    As noted above, throughout the Pilot, the Exchange has been 
required to submit certain data periodically to provide supporting 
evidence that, among other things, there is meaningful competition for 
all size orders within the PIM, that there is significant price 
improvement for all orders executed through the PIM, and that there is 
an active and liquid market functioning on the Exchange both within PIM 
and outside of the Auction mechanism.
    The Exchange believes that the data gathered since the approval of 
the Pilot establishes that there is liquidity and competition both 
within PIM and outside of PIM, and that there are opportunities for 
significant price improvement within PIM.\12\
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    \12\ Specifically, the Exchange gathered and reported nine 
separate data fields relating to PIM orders of fewer than 50 
contracts, including (1) the number of orders of fewer than 50 
contracts entered into the PIM; (2) the percentage of all orders of 
fewer than 50 contracts sent to the Exchange that are entered into 
the PIM; (3) the spread in the option, at the time an order of fewer 
than 50 contracts is submitted to the PIM; and (4) of PIM trades, 
the percentage done at the NBBO plus $.01, plus $.02, plus $.03, 
etc. See Exhibit B to Topaz Exchange Application, Securities 
Exchange Act Release No. 69012 (March 1, 2013), 78 FR 14847 (March 
7, 2013) (File No. 10-209).
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    In the period between January and June 2016, the PIM executed a 
total of 297,239 contracts, which represented 0.62% of total ISE Gemini 
contract volume and 0.01% of industry volume. The percent of ISE Gemini 
volume traded in PIM ranged from 0.47% in May 2016 to 0.69% in February 
2016.
    The Exchange compiled price improvement data in orders from January 
through June 2016 that divides the data into the following groups: (1) 
Orders of over 50 contracts where the Agency Order was on behalf of a 
Public Customer and ISE Gemini was at the NBBO; (2) orders of over 50 
contracts where the Agency Order was on behalf of a Public Customer and 
ISE Gemini was not at the NBBO; (3) orders of over 50 contracts where 
the Agency Order was on behalf of a non-customer and ISE Gemini was at 
the NBBO; (4) orders of over 50 contracts where the Agency Order was on 
behalf of a non-customer and ISE Gemini was not at the NBBO; (5) orders 
of 50 contracts or less where the Agency Order was on behalf of a 
Public Customer and ISE Gemini was at the NBBO; (6) orders of 50 
contracts or less where the Agency Order was on behalf of a Public 
Customer and ISE Gemini was not at the NBBO; (7) orders of 50 contracts 
or less where the Agency Order was on behalf of a non-customer and ISE 
Gemini was at the NBBO; and (8) orders of 50 contracts or less where 
the Agency Order was on behalf of a non-customer and ISE Gemini was not 
at the NBBO.
    For January 2016, where the order was on behalf of a Public 
Customer, the order was for 50 contracts or less, and ISE Gemini was at 
the NBBO, the most contracts traded (4,192) occurred when the spread 
was between $0.05 and $0.10.\13\ Of these, the greatest number of 
contracts (1,400) received $0.03 price improvement. There was an 
average number of three participants when the spread was between $0.05 
and $0.10. In

[[Page 91977]]

comparison, 6 contracts that traded at this spread received no price 
improvement. When the spread was $0.01 for this same category, a total 
of 499 contracts traded; 349 contracts received no price improvement, 
and 150 received $0.01 price improvement. There was an average number 
of four participants when the spread was $0.01.
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    \13\ This discussion of January 2016 data is intended to be 
illustrative of data that was gathered between January 2016 and July 
2016. The complete underlying data for January 2016 through June 
2016 for these eight categories is attached as Exhibit 3.
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    In comparison, in January 2016, where the order was on behalf of a 
Public Customer, and the order was for greater than 50 contracts, and 
ISE Gemini was at the NBBO, the most contracts traded (1,495) occurred 
where the spread was $0.02. Of those contracts, the greatest number of 
contracts (979) received $0.01 price improvement, and 456 contracts 
received no price improvement. There was an average number of 4 
participants where the spread was $0.02.
    In January 2016, where the order was on behalf of a Public 
Customer, the order was for 50 contracts or less, and ISE Gemini was 
not at the NBBO, the most contracts traded (1,403) occurred when the 
spread was between $0.05 and $0.10. Of this category, the greatest 
number of contracts (570) received $0.01 price improvement. In 
comparison, when the spread was $0.01 in this same category, a total of 
80 contracts traded, and all received price improvement.
    In comparison, in January 2016, where the order was on behalf of a 
Public Customer, and order was for greater than 50 contracts, and ISE 
Gemini was not at the NBBO, the most contracts traded (4,846) occurred 
where the spread was $0.05-$0.10. Of those contracts, the greatest 
number of contracts (1,234) received $0.01 price improvement, and 1,008 
contracts received no price improvement. There was an average number of 
4 participants where the spread was $0.05--$0.10.
    ISE Gemini believes that the data gathered during the Pilot period 
indicates that there is meaningful competition in PIM auctions for all 
size orders, there is an active and liquid market functioning on the 
Exchange outside of the auction mechanism, and that there are 
opportunities for significant price improvement for orders executed 
through PIM. The Exchange therefore believes that it is appropriate to 
approve the no-minimum size requirement on a permanent basis.
Early Conclusion of the PIM Auction
    Supplemental Material .05 to Rule 723 provides that Rule 723(c)(5) 
and Rule 723(d)(4), which relate to the termination of the exposure 
period by unrelated orders shall be part of the current Pilot. Rule 
723(c)(5) provides that the exposure period will automatically 
terminate (i) at the end of the 500 millisecond period,\14\ (ii) upon 
the receipt of a market or marketable limit order on the Exchange in 
the same series, or (iii) upon the receipt of a nonmarketable limit 
order in the same series on the same side of the market as the Agency 
Order that would cause the price of the Crossing Transaction to be 
outside of the best bid or offer on the Exchange. Rule 723(d)(4) 
provides that, when a market order or marketable limit order on the 
opposite side of the market from the Agency Order ends the exposure 
period, it will participate in the execution of the Agency Order at the 
price that is mid-way between the best counter-side interest and the 
NBBO, so that both the market or marketable limit order and the Agency 
Order receive price improvement. Transactions will be rounded, when 
necessary, to the $.01 increment that favors the Agency Order.\15\
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    \14\ As initially approved, this provision of Rule 723(c)(5) 
provided that the exposure period would automatically terminate at 
the end of a one second period. See Exhibit B to ISE Topaz Form 1 
(10-209). This exposure period was subsequently reduced to the 
current 500 milliseconds, and the Exchange is further proposing to 
modify the exposure period to a time period of no less than 100 
milliseconds and no more than one second. See Securities Exchange 
Act Release No. 79353 (November 18, 2016), 81 FR 85280 (November 25, 
2016) (SR-ISEGemini-2016-14).
    \15\ When the Pilot was initially approved, Rule 723(d)(5) was 
approved on a pilot basis, which was subsequently re-numbered as 
current Rule 723(d)(4). See Securities Exchange Act Release No. 
72553 (July 8, 2014), 79 FR 40813 (July 8, 2014) (SR-ISEGemini-2014-
19).
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    As with the no minimum size requirement, the Exchange has gathered 
data on these three conditions to assess the effect of early PIM 
Auction conclusions on the Pilot.\16\
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    \16\ The Exchange agreed to gather and submit the following data 
on this part of the Pilot: (1) The number of times that a market or 
marketable limit order in the same series on the same side of the 
market as the Agency Order prematurely ended the PIM auction, and 
the number of times such orders were entered by the same (or 
affiliated) firm that initiated the PIM that was terminated; (2) the 
percentage of PIM early terminations due to the receipt of a market 
or marketable limit order in the same series on the same side of the 
market that occurred within a \1/2\ second of the start of the PIM 
auction; the percentage that occurred within one second of the start 
of the PIM auction; the percentage that occurred within one and \1/
2\ second of the start of the PIM auction; the percentage that 
occurred within 2 seconds of the start of the PIM auction; the 
percentage that occurred within 2 and \1/2\ seconds of the PIM 
auction; and the average amount of price improvement provided to the 
Agency Order where the PIM is terminated early at each of these time 
periods; (3) the number of times that a market or marketable limit 
order in the same series on the opposite side of the market as the 
Agency Order prematurely ended the PIM auction and at what time the 
unrelated order ended the PIM auction, and the number of times such 
orders were entered by the same (or affiliated) firm that initiated 
the PIM that was terminated; (4) the percentage of PIM early 
terminations due to the receipt of a market or marketable limit 
order in the same series on the opposite side of the market that 
occurred within a \1/2\ second of the start of the PIM auction; the 
percentage that occurred within one second of the start of the PIM 
auction; the percentage that occurred within one and \1/2\ second of 
the start of the PIM auction; the percentage that occurred within 2 
seconds of the start of the PIM auction; the percentage that 
occurred within 2 and \1/2\ seconds of the PIM auction; and the 
average amount of price improvement provided to the Agency Order 
where the PIM is terminated early at each of these time periods; (5) 
the number of times that a nonmarketable limit order in the same 
series on the same side of the market as the Agency Order that would 
cause the price of the Crossing Transaction to be outside of the 
best bid or offer on the Exchange prematurely ended the PIM auction 
and at what time the unrelated order ended the PIM auction, and the 
number of times such orders were entered by the same (or affiliated) 
firm that initiated the PIM that was terminated; (6) the percentage 
of PIM early terminations due to the receipt of a market or 
marketable limit order in the same series on the same side of the 
market as the Agency Order that would cause the price of the 
Crossing Transaction to be outside of the best bid or offer on the 
Exchange that occurred within a \1/2\ second of the start of the PIM 
auction; the percentage that occurred within one second of the start 
of the PIM auction; the percentage that occurred within one and \1/
2\ second of the start of the PIM auction; the percentage that 
occurred within 2 seconds of the start of the PIM auction; the 
percentage that occurred within 2 and \1/2\ seconds of the PIM 
auction; and the average amount of price improvement provided to the 
Agency Order where the PIM is terminated early at each of these time 
periods; and (7) The average amount of price improvement provided to 
the Agency Order when the PIM auction is not terminated early (i.e., 
runs the full three seconds). See Exhibit B to Topaz Exchange 
Application, Securities Exchange Act Release No. 69012 (March 1, 
2013), 78 FR 14847 (March 7, 2013) (File No. 10-209).
---------------------------------------------------------------------------

    For the period from January 2016 through June 2016, there were a 
total of 65 early terminated auctions. The number of orders in early 
terminated PIM auctions constituted 0.08% of total PIM orders. There 
were a total of 325 contracts that traded through early terminated 
auctions. The number of contracts in early terminated PIM auctions 
represented 0.11% of total PIM contracts. Of the early terminated 
auctions, 50.77% of those auctions received price improvement, and 52% 
of contracts that traded in an early-terminated auction received price 
improvement. The total amount of price improvement for PIM auctions 
that terminated early was $7.96.
    Based on the data gathered during the pilot, the Exchange does not 
anticipate that any of these conditions will occur with significant 
frequency, or will otherwise significantly affect the functioning of 
the PIM. The Exchange also notes that, of the early terminated 
auctions, 50.77% of those auctions received price improvement, and 52% 
of contracts that traded in an early-terminated auction received price 
improvement. The total amount of price improvement per contract for PIM

[[Page 91978]]

auctions that terminated early was $7.96. The Exchange therefore 
believes it is appropriate to approve this aspect of the Pilot on a 
permanent basis.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\17\ in general and with 
Section 6(b)(5) of the Act,\18\ in that it is designed to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest; and is not designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers, or to regulate by virtue of any authority conferred by the Act 
matters not related to the purposes of the Act or the administration of 
the Exchange.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78f.
    \18\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is also 
consistent with Section 6(b)(8) of the Act \19\ in that it does not 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    Specifically, the Exchange believes that PIM, including the rules 
to which the Pilot applies, results in increased liquidity available at 
improved prices, with competitive final pricing out of the complete 
control of the Electronic Access Member that initiated the auction. The 
Exchange believes that PIM promotes and fosters competition and affords 
the opportunity for price improvement to more options contracts. The 
Exchange believes that the changes to the PIM requiring price 
improvement of at least one minimum price improvement increment over 
the NBBO for Agency Orders of less than 50 option contracts where the 
difference in the NBBO is $0.01 will provide further price improvement 
for those orders, and thereby encourage additional submission of those 
orders into PIM. The Exchange believes that the proposal, which 
subjects members to the Minor Rule Violation Plan for failing to 
provide the required price improvement, coupled with the Exchange's 
surveillance efforts, are designed to facilitate members' compliance 
with the proposed requirement.
    The Exchange believes that approving the Pilot on a permanent basis 
is also consistent with the Act. With respect to the no minimum size 
requirement, the Exchange believes that the data gathered during the 
Pilot period indicates that there is meaningful competition in the PIM 
for all size orders, there is an active and liquid market functioning 
on the Exchange outside of the auction mechanism, and that there are 
opportunities for significant price improvement for orders executed 
through PIM, including for small customer orders.
    With respect to the early termination of the PIM, the Exchange 
believes that it is appropriate to terminate an auction (i) at the end 
of the 500 millisecond period, (ii) upon the receipt of a market or 
marketable limit order on the Exchange in the same series, or (iii) 
upon the receipt of a nonmarketable limit order in the same series on 
the same side of the market as the Agency Order that would cause the 
price of the Crossing Transaction to be outside of the best bid or 
offer on the Exchange. The Exchange also believes that it is consistent 
with the Act to require that, when a market order or marketable limit 
order on the opposite side of the market from the Agency Order ends the 
exposure period, it will participate in the execution of the Agency 
Order at the price that is mid-way between the best counter-side 
interest and the NBBO, so that both the market or marketable limit 
order and the Agency Order receive price improvement. Based on the data 
gathered during the pilot, the Exchange does not anticipate that any of 
these conditions will occur with significant frequency, or will 
otherwise disrupt the functioning of the PIM. The Exchange also notes 
that a significant percentage of PIM auctions that terminated early 
executed at a price that was better than the NBBO at the time the 
auction began, and that a significant percentage of contracts in 
auctions that terminated early received price improvement.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The proposal will apply to all 
Exchange members, and participation in the PIM process is completely 
voluntary. Based on the data collected by the Exchange during the 
Pilot, the Exchange believes that there is meaningful competition in 
the PIM for all size orders, there are opportunities for significant 
price improvement for orders executed through PIM, and that there is an 
active and liquid market functioning on the Exchange outside of the 
PIM. The Exchange believes that requiring increased price improvement 
for Agency Orders may encourage competition by attracting additional 
orders to participate in the PIM. The Exchange believes that approving 
the Pilot on a permanent basis will not significantly impact 
competition, as the Exchange is proposing no other change to the Pilot 
beyond implementing it on a permanent basis.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received from Members, Participants, or Others

    No written comments were either solicited or received.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission shall: (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 [email protected]. Please 
include File Number SR-ISEGemini-2016-23 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-ISEGemini-2016-23. 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/

[[Page 91979]]

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-
ISEGemini-2016-23 and should be submitted on or before January 9, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
---------------------------------------------------------------------------

    \20\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2016-30394 Filed 12-16-16; 8:45 am]
 BILLING CODE 8011-01-P
91974 Federal Register / Vol. 81, No. 243 / Monday, December 19, 2016 / Notices

SECURITIES AND EXCHANGE statements may be examined at the ‘‘Counter-Side Order’’). The Counter-
COMMISSION places specified in Item IV below. The Side Order may represent interest for
Exchange has prepared summaries, set the Member’s own account, or interest
[Release No. 34–79541; File No. SR– forth in sections A, B, and C below, of the Member has solicited from one or
ISEGemini–2016–23] the most significant aspects of such more other parties, or a combination of
statements. both.
Self-Regulatory Organizations; ISE
Rule 723 sets forth the criteria
Gemini, LLC; Notice of Filing of A. Self-Regulatory Organization’s pursuant to which the PIM is initiated.
Proposed Rule Change To Amend ISE Statement of the Purpose of, and Specifically, a Crossing Transaction
Gemini Rule 723 and To Make Pilot Statutory Basis for, the Proposed Rule must be entered only at a price that is
Program Permanent Change equal to or better than the national best
December 13, 2016. 1. Purpose bid or offer (‘‘NBBO’’) and better than
Pursuant to Section 19(b)(1) of the The purpose of this proposed rule the limit order or quote on the Exchange
Securities Exchange Act of 1934 (the change is to make permanent certain order book on the same side of the
‘‘Act’’),1 and Rule 19b–4 thereunder,2 pilots within Rule 723, relating to PIM. Agency Order. The Crossing Transaction
notice is hereby given that on December Paragraph .03 of the Supplementary may be priced in one-cent increments.
12, 2016, ISE Gemini, LLC (the Material to Rule 723 provides that there The Crossing Transaction may not be
‘‘Exchange’’ or ‘‘ISE Gemini’’) filed with is no minimum size requirement for canceled, but the price of the Counter-
the Securities and Exchange orders to be eligible for PIM. Paragraph Side Order may be improved during the
Commission (‘‘Commission’’) the .05 concerns the termination of the exposure period.
proposed rule change as described in Rule 723 also sets forth requirements
exposure period by unrelated orders. In
Items I, II, and III below, which Items relating to the exposure of orders in PIM
addition, ISE Gemini proposes to
and the termination of the exposure
have been prepared by the Exchange. modify the requirements for PIM
period. Upon entry of a Crossing
The Commission is publishing this auctions involving less than 50
Transaction into the Price Improvement
notice to solicit comments on the contracts where the National Best Bid
Mechanism, a broadcast message that
proposed rule change from interested and Offer (‘‘NBBO’’) is only $0.01 wide.
includes the series, price and size of the
persons. Background Agency Order, and whether it is to buy
I. Self-Regulatory Organization’s The Exchange adopted PIM as part of or sell, will be sent to all Members. This
Statement of the Terms of Substance of its application to be registered as a broadcast message will not be included
the Proposed Rule Change national securities exchange under its in the ISE disseminated best bid or offer
The Exchange proposes to amend ISE previous name of Topaz Exchange, LLC and will not be disseminated through
(‘‘Topaz’’).4 In approving PIM, the OPRA. Members will be given 500
Gemini Rule 723, concerning its Price
Commission noted that it was largely milliseconds to indicate the size and
Improvement Mechanism (‘‘PIM’’).
based on a similar functionality offered price at which they want to participate
Certain aspects of PIM are currently
by the International Securities in the execution of the Agency Order
operating on a pilot basis (‘‘Pilot’’),
Exchange, LLC (‘‘ISE’’).5 The PIM is a (‘‘Improvement Orders’’). Improvement
which is set to expire on January 18,
process that allows Electronic Access Orders may be entered by all Members
2017.3 The Pilot concerns (i) the
Members (‘‘EAM’’) to provide price for their own account or for the account
termination of the exposure period by
improvement opportunities for a of a Public Customer in one-cent
unrelated orders; and (ii) no minimum
transaction wherein the Member seeks increments at the same price as the
size requirement of orders eligible for Crossing Transaction or at an improved
PIM. ISE Gemini seeks to make the Pilot to execute an agency order as principal
or execute an agency order against a price for the Agency Order, and for any
permanent, and also proposes to change size up to the size of the Agency Order.
the requirements for providing price solicited order (a ‘‘Crossing
Transaction’’). A Crossing Transaction is During the exposure period,
improvement for Agency Orders of less Improvement Orders may not be
than 50 option contracts. comprised of the order the EAM
represents as agent (the ‘‘Agency canceled, but may be modified to (1)
The text of the proposed rule change increase the size at the same price, or (2)
is available on the Exchange’s Web site Order’’) and a counter-side order for the
full size of the Agency Order (the improve the price of the Improvement
at http://nasdaq.cchwallstreet.com, at Order for any size up to the size of the
the principal office of the Exchange, and 4 See Securities Exchange Act Release No. 70050 Agency Order. During the exposure
at the Commission’s Public Reference (July 26, 2013), 78 FR 46622 (August 1, 2013) (File period, responses (including the
Room. No. 10–209) (‘‘Exchange Approval Order’’). The Counter Side Order, Improvement
Exchange subsequently changed its name to ISE Orders, and any changes to either)
II. Self-Regulatory Organization’s Gemini. See Securities Exchange Act Release No.
Statement of the Purpose of, and 71586 (February 20, 2014), 79 FR 10861 (February submitted by Members shall not be
Statutory Basis for, the Proposed Rule 26, 2014) (SR–Topaz–2014–06). In addition to the visible to other auction participants.
Exchange Approval Order and the filings cited The exposure period will automatically
Change above, the following proposed rule changes have
been submitted in connection with PIM. See
terminate (i) at the end of the 500
In its filing with the Commission, the millisecond period, (ii) upon the receipt
Securities Exchange Act Release Nos. 79253
Exchange included statements (November 7, 2016), 81 FR 79540 (ISEGemini– of a market or marketable limit order on
concerning the purpose of and basis for 2016–13); 78343 (July 15, 2016), 81 FR 47483 (July the Exchange in the same series, or (iii)
the proposed rule change and discussed 21, 2016) (SR–ISE Gemini–2016–07); 75481 (July
sradovich on DSK3GMQ082PROD with NOTICES

17, 2015), 80 FR 43826 (July 23, 2015) (SR–ISE
upon the receipt of a nonmarketable
any comments it received on the limit order in the same series on the
Gemini–2015–13); 73317 (October 8, 2014), 79 FR
proposed rule change. The text of these 61911 (October 15, 2014) (SR–ISEGemini–2014–26); same side of the market as the Agency
72553 (July 8, 2014), 79 FR 40813 (July 8, 2014) Order that would cause the price of the
1 15 U.S.C. 78s(b)(1). (SR–ISE Gemini–2014–19); 72466 (June 25, 2014),
2 17 CFR 240.19b–4. 79 FR 37378 (July 1, 2014) (SR–ISE Gemini–2014–
Crossing Transaction to be outside of
3 See Securities Exchange Act Release No. 78343 17); 70636 (October 9, 2013), 78 FR 62838 (October the best bid or offer on the Exchange.
(July 15, 2016), 81 FR 47483 (July 21, 2016) (SR– 22, 2013) (SR–Topaz–2013–05). Rule 723 also describes how orders
ISEGemini–2016–07). 5 See Exchange Approval Order, supra note 4. will be executed at the end of the

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Federal Register / Vol. 81, No. 243 / Monday, December 19, 2016 / Notices 91975

exposure period. Specifically, at the end that both the market or marketable limit that order is for less than 50 contracts
of the exposure period, the Agency order and the Agency Order receive and if the difference between the NBBO
Order will be executed in full at the best price improvement. Transactions will be is $0.01. For the period beginning
prices available, taking into rounded, when necessary, to the $.01 January 19, 2017 until a date specified
consideration orders and quotes in the increment that favors the Agency Order. by the Exchange in a Regulatory
Exchange market, Improvement Orders, Information Circular, which date shall
The Pilot
and the Counter-Side Order. The be no later than April 15, 2017, ISE
Agency Order will receive executions at As described above, two components Gemini will adopt a member conduct
multiple price levels if there is of PIM are currently operating on a pilot standard to implement this
insufficient size to execute the entire basis: (i) The termination of the requirement.7 Under this provision, ISE
order at the best price. At a given price, exposure period by unrelated orders; Gemini is proposing to amend the
Priority Customer interest is executed in and (ii) no minimum size requirement Auction Eligibility Requirements to
full before Professional Orders and any of orders entered into PIM. The pilot has require that, if the Agency Order is for
other interest of Members (i.e., been extended until January 18, 2017.6 less than 50 option contracts, and if the
proprietary interest from Electronic As described in greater detail below, difference between the NBBO is $0.01,
Access Members and Exchange market during the pilot period the Exchange an Electronic Access Member shall not
makers). has been required to submit, and has enter a Crossing Transaction unless
After Priority Customer interest at a been submitting, certain data such Crossing Transaction is entered at
given price, Professional Orders and periodically as required by the a price that is one minimum price
Members’ interest will participate in the Commission, to provide supporting improvement increment better than the
execution of the Agency Order based evidence that, among other things, there NBBO on the opposite side of the
upon the percentage of the total number is meaningful competition for all size market from the Agency Order, and
of contracts available at the price that is orders within the PIM, that there is better than any limit order on the limit
represented by the size of the Members’ significant price improvement for all order book on the same side of the
interest. orders executed through the PIM, and market as the Agency Order. This
In the case where the Counter-Side that there is an active and liquid market requirement will apply regardless of
Order is at the same price as Members’ functioning on the Exchange both whether the Agency Order is for the
interest (after Priority Customer interest within PIM and outside of the Auction account of a public customer, or where
at a given price), the Counter-Side order mechanism. The Exchange has also the Agency Order is for the account of
will be allocated the greater of one (1) analyzed the impact of certain aspects of a broker dealer or any other person or
contract or forty percent (40%) of the the Pilot; for example, situation in entity that is not a Public Customer.
initial size of the Agency Order before which PIM is terminated prematurely by Failure to provide such price
other Member interest is executed. an unrelated order. improvement will subject Members to
Upon entry of Counter-Side orders, The Exchange now seeks to have the the fines set forth in Rule 1614(d)(4) of
Members can elect to automatically Pilot approved on a permanent basis. In the International Securities Exchange,
match the price and size of orders, addition, the Exchange proposes to LLC (‘‘ISE’’).8
quotes and responses received during modify the scope of PIM so that, with The Exchange will conduct electronic
the exposure period up to a specified respect to PIM orders for less than 50 surveillance of PIM to ensure that
limit price or without specifying a limit option contracts, members will be members comply with the proposed
price. In this case, the Counter-Side required to receive price improvement
order will be allocated its full size at of at least one minimum price 7 The Exchange notes that its indirect parent

each price point, or at each price point improvement increment over the NBBO company, U.S. Exchange Holdings, Inc. has been
acquired by Nasdaq, Inc. See Securities Exchange
within its limit price if a limit is if the NBBO is only $0.01 wide. For Act Release No. 78119 (June 21, 2016), 81 FR 41611
specified, until a price point is reached orders of 50 contracts or more, or if the (June 27, 2016) (SR–ISEGemini–2016–05). Pursuant
where the balance of the order can be difference in the NBBO is greater than to this acquisition, ISE Gemini platforms are
fully executed. At such price point, the $0.01, the requirements for price migrating to Nasdaq platforms, including the
platform that operates PIM. ISE Gemini intends to
Counter-Side order shall be allocated improvement remain the same. retain the proposed member conduct standard
the greater of one contract or forty requiring price improvement for options orders of
percent (40%) of the original size of the Price Improvement for Orders Under 50 under 50 contracts where the difference between
Agency Order, but only after Priority Contracts the NBBO is $0.01 until the ISE Gemini platforms
and the corresponding symbols are migrated to the
Customer Orders at such price point are Currently, the PIM may be initiated if platforms operated by Nasdaq, Inc.
executed in full. Thereafter, all other all of the following conditions are met. 8 In a separate proposed rule change, ISE is

orders, Responses, and quotes at the A Crossing Transaction must be entered proposing to adopt similar price improvement
price point will participate in the only at a price that is equal to or better requirements for orders of less than 50 contracts for
execution of the Agency Order based its PIM. As part of that rule change, ISE is proposing
than the NBBO and better than the limit to amend ISE Rule 1614 (Imposition of Fines for
upon the percentage of the total number order or quote on the Exchange order Minor Rule Violations) to add Rule 1614(d)(4),
of contracts available at the price that is book on the same side of the Agency which will provide that, beginning January 19,
represented by the size of the order, Order. The Crossing Transaction may be 2017, any Member who enters an order into PIM for
less than 50 contracts, while the National Best Bid
Response or quote. An election to priced in one-cent increments. The or Offer spread is $0.01, must provide price
automatically match better prices Crossing Transaction may not be improvement of at least one minimum price
cannot be cancelled or altered during canceled, but the price of the Counter- improvement increment better than the NBBO on
sradovich on DSK3GMQ082PROD with NOTICES

the exposure period. Side Order may be improved during the the opposite side of the market from the Agency
When a market order or marketable Order, which increment may not be smaller than
exposure period. $0.01. Failure to provide such price improvement
limit order on the opposite side of the ISE Gemini proposes to amend Rule will result in members being subject to the
market from the Agency Order ends the 723(b) to require Electronic Access following fines: $500 for the second offense, $1,000
exposure period, it will participate in Members to provide at least $0.01 price for the third offense, and $2,500 for the fourth
offense. Subsequent offenses will subject the
the execution of the Agency Order at the improvement for an Agency Order if member to formal disciplinary action. ISE will
price that is mid-way between the best review violations on a monthly cycle to assess these
counter-side interest and the NBBO, so 6 See note 3 above. violations.

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91976 Federal Register / Vol. 81, No. 243 / Monday, December 19, 2016 / Notices

price improvement requirements for the Auction Eligibility Requirements to opportunities for significant price
option orders of less than 50 contracts. state that, if the PIM Order is for 50 improvement within PIM.12
Specifically, using an electronic option contracts or more or if the In the period between January and
surveillance system that produces alerts difference between the NBBO is greater June 2016, the PIM executed a total of
of potentially unlawful PIM orders, the than $0.01, the Crossing Transaction 297,239 contracts, which represented
Exchange will perform a frequent must be entered only at a price that is 0.62% of total ISE Gemini contract
review of member firm activity to equal to or better than the NBBO and volume and 0.01% of industry volume.
identify instances of apparent better than the limit order or quote on The percent of ISE Gemini volume
violations. Upon discovery of an the Exchange order book on the same traded in PIM ranged from 0.47% in
apparent violation, the Exchange will side as the Agency Order. May 2016 to 0.69% in February 2016.
attempt to contact the appropriate The Exchange compiled price
No Minimum Size Requirement improvement data in orders from
member firm to communicate the
specifics of the apparent violation with Supplemental Material .03 to Rule January through June 2016 that divides
the intent to assist the member firm in 723 provides that, as part of the current the data into the following groups: (1)
preventing submission of subsequent Pilot, there will be no minimum size Orders of over 50 contracts where the
problematic orders. The Exchange will requirement for orders to be eligible for Agency Order was on behalf of a Public
review the alerts monthly and the Auction.9 As with the ISE PIM, the Customer and ISE Gemini was at the
determine the applicability of the MRVP Exchange proposed the no-minimum NBBO; (2) orders of over 50 contracts
and appropriate penalty. The Exchange size requirement for the PIM because it where the Agency Order was on behalf
is not limited to the application of the believed that this would provide small of a Public Customer and ISE Gemini
MRVP, and may at its discretion, choose customer orders with the opportunity to was not at the NBBO; (3) orders of over
to escalate a matter for processing participate in the PIM and to receive 50 contracts where the Agency Order
through the Exchange’s disciplinary corresponding price improvement. In was on behalf of a non-customer and
program. initially approving the ISE PIM, the ISE Gemini was at the NBBO; (4) orders
The Exchange is also proposing a Commission noted that the no minimum of over 50 contracts where the Agency
systems-based mechanism to implement size requirement provided an Order was on behalf of a non-customer
this price improvement requirement, opportunity for more market and ISE Gemini was not at the NBBO;
which shall be effective following the participants to participate in the (5) orders of 50 contracts or less where
migration of a symbol to INET, the auction.10 The Commission also stated the Agency Order was on behalf of a
platform operated by Nasdaq, Inc. that that it would evaluate PIM during the Public Customer and ISE Gemini was at
will also operate the PIM. Under this Pilot Period to determine whether it the NBBO; (6) orders of 50 contracts or
provision, if the Agency Order is for less would be beneficial to customers and to less where the Agency Order was on
than 50 option contracts, and if the the options market as a whole to behalf of a Public Customer and ISE
difference between the National Best approve any proposal requesting Gemini was not at the NBBO; (7) orders
Bid and National Best Offer (‘‘NBBO’’) permanent approval to permit orders of of 50 contracts or less where the Agency
is $0.01, the Crossing Transaction must fewer than 50 contracts to be submitted Order was on behalf of a non-customer
be entered at one minimum price to the PIM.11 and ISE Gemini was at the NBBO; and
improvement increment better than the As noted above, throughout the Pilot, (8) orders of 50 contracts or less where
NBBO on the opposite side of the the Exchange has been required to the Agency Order was on behalf of a
market from the Agency Order and submit certain data periodically to
non-customer and ISE Gemini was not
better than the limit order or quote on provide supporting evidence that,
at the NBBO.
the ISE order book on the same side of among other things, there is meaningful For January 2016, where the order
the Agency Order. competition for all size orders within was on behalf of a Public Customer, the
The Exchange believes that these the PIM, that there is significant price order was for 50 contracts or less, and
changes to PIM may provide additional improvement for all orders executed ISE Gemini was at the NBBO, the most
opportunities for Agency Orders of through the PIM, and that there is an contracts traded (4,192) occurred when
under 50 option contracts to receive active and liquid market functioning on the spread was between $0.05 and
price improvement over the NBBO the Exchange both within PIM and $0.10.13 Of these, the greatest number of
where the difference in the NBBO is outside of the Auction mechanism. contracts (1,400) received $0.03 price
$0.01 and therefore encourage the The Exchange believes that the data
improvement. There was an average
increased submission of orders of under gathered since the approval of the Pilot
number of three participants when the
50 option contracts. The Exchange notes establishes that there is liquidity and
spread was between $0.05 and $0.10. In
that the statistics for the current pilot, competition both within PIM and
which include, among other things, outside of PIM, and that there are 12 Specifically, the Exchange gathered and
price improvement for orders of less reported nine separate data fields relating to PIM
than 50 option contracts under the 9 The provision relating to the no minimum size orders of fewer than 50 contracts, including (1) the
current auction eligibility requirements, requirement also requires the Exchange to submit number of orders of fewer than 50 contracts entered
certain data, periodically as required by the into the PIM; (2) the percentage of all orders of
show relatively small amounts of price Commission, to provide supporting evidence that, fewer than 50 contracts sent to the Exchange that
improvement for such orders. ISE among other things, there is meaningful are entered into the PIM; (3) the spread in the
Gemini believes that the proposed competition for all size orders within the PIM, that option, at the time an order of fewer than 50
requirements will therefore increase the there is significant price improvement for all orders contracts is submitted to the PIM; and (4) of PIM
executed through the PIM, and that there is an trades, the percentage done at the NBBO plus $.01,
sradovich on DSK3GMQ082PROD with NOTICES

price improvement that orders of under active and liquid market functioning on the plus $.02, plus $.03, etc. See Exhibit B to Topaz
50 option contracts may receive in PIM. Exchange outside of the PIM. Any raw data which Exchange Application, Securities Exchange Act
The Exchange will retain the current is submitted to the Commission will be provided on Release No. 69012 (March 1, 2013), 78 FR 14847
requirements for auction eligibility a confidential basis. (March 7, 2013) (File No. 10–209).
10 See Securities Exchange Act Release No. 50819 13 This discussion of January 2016 data is
where the Agency Order is for 50 option
(December 8, 2004), 69 FR 75093 (December 15, intended to be illustrative of data that was gathered
contracts or more, or if the difference 2004) (SR–ISE–2003–06) (‘‘ISE PIM Approval between January 2016 and July 2016. The complete
between the NBBO is greater than $0.01. Order’’). underlying data for January 2016 through June 2016
Accordingly, the Exchange is amending 11 Id. for these eight categories is attached as Exhibit 3.

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comparison, 6 contracts that traded at that the exposure period will For the period from January 2016
this spread received no price automatically terminate (i) at the end of through June 2016, there were a total of
improvement. When the spread was the 500 millisecond period,14 (ii) upon 65 early terminated auctions. The
$0.01 for this same category, a total of the receipt of a market or marketable number of orders in early terminated
499 contracts traded; 349 contracts limit order on the Exchange in the same PIM auctions constituted 0.08% of total
received no price improvement, and 150 series, or (iii) upon the receipt of a PIM orders. There were a total of 325
received $0.01 price improvement. nonmarketable limit order in the same contracts that traded through early
There was an average number of four series on the same side of the market as terminated auctions. The number of
participants when the spread was $0.01. the Agency Order that would cause the contracts in early terminated PIM
In comparison, in January 2016, price of the Crossing Transaction to be auctions represented 0.11% of total PIM
where the order was on behalf of a outside of the best bid or offer on the contracts. Of the early terminated
Public Customer, and the order was for Exchange. Rule 723(d)(4) provides that, auctions, 50.77% of those auctions
greater than 50 contracts, and ISE when a market order or marketable limit received price improvement, and 52%
Gemini was at the NBBO, the most order on the opposite side of the market of contracts that traded in an early-
contracts traded (1,495) occurred where from the Agency Order ends the terminated auction received price
the spread was $0.02. Of those exposure period, it will participate in improvement. The total amount of price
contracts, the greatest number of the execution of the Agency Order at the improvement for PIM auctions that
contracts (979) received $0.01 price price that is mid-way between the best terminated early was $7.96.
improvement, and 456 contracts counter-side interest and the NBBO, so Based on the data gathered during the
received no price improvement. There that both the market or marketable limit pilot, the Exchange does not anticipate
was an average number of 4 participants order and the Agency Order receive that any of these conditions will occur
where the spread was $0.02. price improvement. Transactions will be with significant frequency, or will
In January 2016, where the order was rounded, when necessary, to the $.01 otherwise significantly affect the
on behalf of a Public Customer, the increment that favors the Agency functioning of the PIM. The Exchange
order was for 50 contracts or less, and Order.15 also notes that, of the early terminated
ISE Gemini was not at the NBBO, the As with the no minimum size auctions, 50.77% of those auctions
most contracts traded (1,403) occurred requirement, the Exchange has gathered received price improvement, and 52%
when the spread was between $0.05 and data on these three conditions to assess of contracts that traded in an early-
$0.10. Of this category, the greatest the effect of early PIM Auction terminated auction received price
number of contracts (570) received conclusions on the Pilot.16 improvement. The total amount of price
$0.01 price improvement. In improvement per contract for PIM
comparison, when the spread was $0.01 14 As initially approved, this provision of Rule

in this same category, a total of 80 723(c)(5) provided that the exposure period would PIM early terminations due to the receipt of a
automatically terminate at the end of a one second market or marketable limit order in the same series
contracts traded, and all received price period. See Exhibit B to ISE Topaz Form 1 (10–209). on the opposite side of the market that occurred
improvement. This exposure period was subsequently reduced to within a 1⁄2 second of the start of the PIM auction;
In comparison, in January 2016, the current 500 milliseconds, and the Exchange is the percentage that occurred within one second of
where the order was on behalf of a further proposing to modify the exposure period to the start of the PIM auction; the percentage that
a time period of no less than 100 milliseconds and occurred within one and 1⁄2 second of the start of
Public Customer, and order was for no more than one second. See Securities Exchange the PIM auction; the percentage that occurred
greater than 50 contracts, and ISE Act Release No. 79353 (November 18, 2016), 81 FR within 2 seconds of the start of the PIM auction; the
Gemini was not at the NBBO, the most 85280 (November 25, 2016) (SR–ISEGemini-2016– percentage that occurred within 2 and 1⁄2 seconds
contracts traded (4,846) occurred where 14). of the PIM auction; and the average amount of price
15 When the Pilot was initially approved, Rule
the spread was $0.05–$0.10. Of those improvement provided to the Agency Order where
723(d)(5) was approved on a pilot basis, which was the PIM is terminated early at each of these time
contracts, the greatest number of subsequently re-numbered as current Rule periods; (5) the number of times that a
contracts (1,234) received $0.01 price 723(d)(4). See Securities Exchange Act Release No. nonmarketable limit order in the same series on the
improvement, and 1,008 contracts 72553 (July 8, 2014), 79 FR 40813 (July 8, 2014) same side of the market as the Agency Order that
(SR–ISEGemini-2014–19). would cause the price of the Crossing Transaction
received no price improvement. There 16 The Exchange agreed to gather and submit the to be outside of the best bid or offer on the
was an average number of 4 participants following data on this part of the Pilot: (1) The Exchange prematurely ended the PIM auction and
where the spread was $0.05—$0.10. number of times that a market or marketable limit at what time the unrelated order ended the PIM
ISE Gemini believes that the data order in the same series on the same side of the auction, and the number of times such orders were
gathered during the Pilot period market as the Agency Order prematurely ended the entered by the same (or affiliated) firm that initiated
PIM auction, and the number of times such orders the PIM that was terminated; (6) the percentage of
indicates that there is meaningful were entered by the same (or affiliated) firm that PIM early terminations due to the receipt of a
competition in PIM auctions for all size initiated the PIM that was terminated; (2) the market or marketable limit order in the same series
orders, there is an active and liquid percentage of PIM early terminations due to the on the same side of the market as the Agency Order
market functioning on the Exchange receipt of a market or marketable limit order in the that would cause the price of the Crossing
same series on the same side of the market that Transaction to be outside of the best bid or offer on
outside of the auction mechanism, and occurred within a 1⁄2 second of the start of the PIM the Exchange that occurred within a 1⁄2 second of
that there are opportunities for auction; the percentage that occurred within one the start of the PIM auction; the percentage that
significant price improvement for orders second of the start of the PIM auction; the occurred within one second of the start of the PIM
executed through PIM. The Exchange percentage that occurred within one and 1⁄2 second auction; the percentage that occurred within one
of the start of the PIM auction; the percentage that and 1⁄2 second of the start of the PIM auction; the
therefore believes that it is appropriate occurred within 2 seconds of the start of the PIM percentage that occurred within 2 seconds of the
to approve the no-minimum size auction; the percentage that occurred within 2 and start of the PIM auction; the percentage that
1⁄2 seconds of the PIM auction; and the average occurred within 2 and 1⁄2 seconds of the PIM
requirement on a permanent basis.
amount of price improvement provided to the auction; and the average amount of price
sradovich on DSK3GMQ082PROD with NOTICES

Early Conclusion of the PIM Auction Agency Order where the PIM is terminated early at improvement provided to the Agency Order where
each of these time periods; (3) the number of times the PIM is terminated early at each of these time
Supplemental Material .05 to Rule that a market or marketable limit order in the same periods; and (7) The average amount of price
723 provides that Rule 723(c)(5) and series on the opposite side of the market as the improvement provided to the Agency Order when
Rule 723(d)(4), which relate to the Agency Order prematurely ended the PIM auction the PIM auction is not terminated early (i.e., runs
and at what time the unrelated order ended the PIM the full three seconds). See Exhibit B to Topaz
termination of the exposure period by auction, and the number of times such orders were Exchange Application, Securities Exchange Act
unrelated orders shall be part of the entered by the same (or affiliated) firm that initiated Release No. 69012 (March 1, 2013), 78 FR 14847
current Pilot. Rule 723(c)(5) provides the PIM that was terminated; (4) the percentage of (March 7, 2013) (File No. 10–209).

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91978 Federal Register / Vol. 81, No. 243 / Monday, December 19, 2016 / Notices

auctions that terminated early was The Exchange believes that approving there is an active and liquid market
$7.96. The Exchange therefore believes the Pilot on a permanent basis is also functioning on the Exchange outside of
it is appropriate to approve this aspect consistent with the Act. With respect to the PIM. The Exchange believes that
of the Pilot on a permanent basis. the no minimum size requirement, the requiring increased price improvement
Exchange believes that the data gathered for Agency Orders may encourage
2. Statutory Basis
during the Pilot period indicates that competition by attracting additional
The Exchange believes that the there is meaningful competition in the orders to participate in the PIM. The
proposed rule change is consistent with PIM for all size orders, there is an active Exchange believes that approving the
the provisions of Section 6 of the Act,17 and liquid market functioning on the Pilot on a permanent basis will not
in general and with Section 6(b)(5) of Exchange outside of the auction significantly impact competition, as the
the Act,18 in that it is designed to mechanism, and that there are Exchange is proposing no other change
promote just and equitable principles of opportunities for significant price to the Pilot beyond implementing it on
trade, to foster cooperation and improvement for orders executed a permanent basis.
coordination with persons engaged in through PIM, including for small
regulating, clearing, settling, processing customer orders. C. Self-Regulatory Organization’s
information with respect to, and With respect to the early termination Statement on Comments on the
facilitating transactions in securities, to of the PIM, the Exchange believes that Proposed Rule Change Received from
remove impediments to and perfect the it is appropriate to terminate an auction Members, Participants, or Others
mechanism of a free and open market (i) at the end of the 500 millisecond No written comments were either
and a national market system, and, in period, (ii) upon the receipt of a market solicited or received.
general, to protect investors and the or marketable limit order on the
public interest; and is not designed to Exchange in the same series, or (iii) III. Date of Effectiveness of the
permit unfair discrimination between upon the receipt of a nonmarketable Proposed Rule Change and Timing for
customers, issuers, brokers, or dealers, limit order in the same series on the Commission Action
or to regulate by virtue of any authority same side of the market as the Agency Within 45 days of the date of
conferred by the Act matters not related Order that would cause the price of the publication of this notice in the Federal
to the purposes of the Act or the Crossing Transaction to be outside of Register or within such longer period (i)
administration of the Exchange. the best bid or offer on the Exchange. as the Commission may designate up to
The Exchange believes that the The Exchange also believes that it is 90 days of such date if it finds such
proposed rule change is also consistent consistent with the Act to require that, longer period to be appropriate and
with Section 6(b)(8) of the Act 19 in that when a market order or marketable limit publishes its reasons for so finding or
it does not impose any burden on order on the opposite side of the market (ii) as to which the Exchange consents,
competition not necessary or from the Agency Order ends the the Commission shall: (a) By order
appropriate in furtherance of the exposure period, it will participate in approve or disapprove such proposed
purposes of the Act. the execution of the Agency Order at the rule change, or (b) institute proceedings
Specifically, the Exchange believes price that is mid-way between the best to determine whether the proposed rule
that PIM, including the rules to which counter-side interest and the NBBO, so change should be disapproved.
the Pilot applies, results in increased that both the market or marketable limit
liquidity available at improved prices, order and the Agency Order receive IV. Solicitation of Comments
with competitive final pricing out of the price improvement. Based on the data Interested persons are invited to
complete control of the Electronic gathered during the pilot, the Exchange submit written data, views, and
Access Member that initiated the does not anticipate that any of these arguments concerning the foregoing,
auction. The Exchange believes that PIM conditions will occur with significant including whether the proposed rule
promotes and fosters competition and frequency, or will otherwise disrupt the change is consistent with the Act.
affords the opportunity for price functioning of the PIM. The Exchange Comments may be submitted by any of
improvement to more options contracts. also notes that a significant percentage the following methods:
The Exchange believes that the changes of PIM auctions that terminated early
Electronic Comments
to the PIM requiring price improvement executed at a price that was better than
of at least one minimum price the NBBO at the time the auction began, • Use the Commission’s Internet
improvement increment over the NBBO and that a significant percentage of comment form (http://www.sec.gov/
for Agency Orders of less than 50 option contracts in auctions that terminated rules/sro.shtml); or
contracts where the difference in the early received price improvement. • Send an email to rule-comments@
NBBO is $0.01 will provide further sec.gov. Please include File Number SR–
B. Self-Regulatory Organization’s ISEGemini–2016–23 on the subject line.
price improvement for those orders, and Statement on Burden on Competition
thereby encourage additional Paper Comments
submission of those orders into PIM. The Exchange does not believe that
The Exchange believes that the the proposed rule change will impose • Send paper comments in triplicate
proposal, which subjects members to any burden on competition not to Brent J. Fields, Secretary, Securities
the Minor Rule Violation Plan for failing necessary or appropriate in furtherance and Exchange Commission, 100 F Street
to provide the required price of the purposes of the Act. The proposal NE., Washington, DC 20549–1090.
improvement, coupled with the will apply to all Exchange members, All submissions should refer to File
and participation in the PIM process is Number SR–ISEGemini-2016–23. This
sradovich on DSK3GMQ082PROD with NOTICES

Exchange’s surveillance efforts, are
designed to facilitate members’ completely voluntary. Based on the data file number should be included on the
compliance with the proposed collected by the Exchange during the subject line if email is used. To help the
requirement. Pilot, the Exchange believes that there is Commission process and review your
meaningful competition in the PIM for comments more efficiently, please use
17 15 U.S.C. 78f. all size orders, there are opportunities only one method. The Commission will
18 15 U.S.C. 78f(b)(5). for significant price improvement for post all comments on the Commission’s
19 15 U.S.C. 78f(b)(8). orders executed through PIM, and that Internet Web site (http://www.sec.gov/

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Federal Register / Vol. 81, No. 243 / Monday, December 19, 2016 / Notices 91979

rules/sro.shtml). Copies of the been prepared by the Exchange. The on June 24, 2014.7 The Plan8 was
submission, all subsequent Commission is publishing this notice to published for comment in the Federal
amendments, all written statements solicit comments on the proposed rule Register on November 7, 2014, and
with respect to the proposed rule change from interested persons. approved by the Commission, as
change that are filed with the modified, on May 6, 2015.9 The
Commission, and all written I. Self-Regulatory Organization’s Commission approved the Pilot on a
communications relating to the Statement of the Terms of Substance of two-year basis, with implementation to
proposed rule change between the the Proposed Rule Change begin no later than May 6, 2016.10 On
Commission and any person, other than November 6, 2015, the SEC exempted
those that may be withheld from the CHX proposes to amend Article 20, the Plan Participants from
public in accordance with the Rule 13(b) of the Rules of the Exchange implementing the pilot until October 3,
provisions of 5 U.S.C. 552, will be (‘‘CHX Rules’’) to modify the Web site 2016.11 As set forth in Appendices B
available for Web site viewing and data publication requirements and and C to the Plan, data that is reported
printing in the Commission’s Public clarify the Exchange’s data reporting pursuant to the appendices shall be
Reference Room, 100 F Street NE., obligations relating to the Regulation provided for dates starting six months
Washington, DC 20549, on official NMS Plan to Implement a Tick Size prior to the Pilot Period through six
business days between the hours of Pilot Program. months after the end of the Pilot Period.
10:00 a.m. and 3:00 p.m. Copies of the The text of this proposed rule change Under the revised Pilot implementation
filing also will be available for is available on the Exchange’s Web site date, the Pre-Pilot data collection period
inspection and copying at the principal at (www.chx.com) and in the commenced on April 4, 2016. On
office of the Exchange. All comments Commission’s Public Reference Room. September 13, 2016, the Commission
received will be posted without change; exempted the Plan Participants from the
the Commission does not edit personal II. Self-Regulatory Organization’s requirement to fully implement the Pilot
identifying information from Statement of the Purpose of, and on October 3, 2016, to permit the Plan
submissions. You should submit only Statutory Basis for, the Proposed Rule Participants to implement the pilot on a
information that you wish to make Change phased-in basis, as described in the Plan
available publicly. All submissions Participants’ exemptive request.12
should refer to File Number SR– In its filing with the Commission, the The Plan is designed to allow the
ISEGemini-2016–23 and should be CHX included statements concerning Commission, market participants, and
submitted on or before January 9, 2017. the purpose of and basis for the the public to study and assess the
For the Commission, by the Division of proposed rule changes and discussed impact of increment conventions on the
Trading and Markets, pursuant to delegated any comments it received on the liquidity and trading of the common
authority.20 proposed rule change. The text of these stocks of small-capitalization
Eduardo A. Aleman, statements may be examined at the companies. Each Plan Participant is
Assistant Secretary. places specified in Item IV below. The required to comply, and to enforce
[FR Doc. 2016–30394 Filed 12–16–16; 8:45 am] CHX has prepared summaries, set forth compliance by its members, as
in sections A, B and C below, of the applicable, with the provisions of the
BILLING CODE 8011–01–P
Plan.
most significant aspects of such On March 28, 2016, the Exchange
statements. filed with the Commission a proposed
SECURITIES AND EXCHANGE
COMMISSION A. Self-Regulatory Organization’s rule change to adopt Article 20, Rule
Statement of the Purpose of, and 13(b), which was immediately effective
[Release No. 34–79538; File No. SR–CHX– upon filing, to implement the data
Statutory Basis for, the Proposed Rule
2016–21] collection requirements of the Plan,
Changes
including requirements relating to Web
Self Regulatory Organizations; 1. Purpose site data publication.13 Specifically,
Chicago Stock Exchange, Inc.; Notice current Article 20, Rule 13(b)(2)(A)(v)
of Filing and Immediate Effectiveness On August 25, 2014, the Exchange, provides that the Exchange shall make
of a Proposed Rule Change To Modify and several other self-regulatory Appendix B.I and B.II data of certain
the Web Site Data Publication organizations (the ‘‘Plan Participants’’3)
Requirements and Clarify Certain Data filed with the Commission, pursuant to 7 See Securities Exchange Act Release No. 72460
Reporting Obligations Related to the Section 11A of the Act 4 and Rule 608 (June 24, 2014), 79 FR 36840 (June 30, 2014).
Regulation NMS Plan To Implement a of Regulation NMS thereunder,5 the
8 Unless otherwise specified, capitalized terms

Tick Size Pilot Program used in this rule filing are based on the defined
Plan to Implement a Tick Size Pilot terms of the Plan.
December 13, 2016. Program (the ‘‘Plan’’).6 The Plan 9 See Securities Exchange Act Release No. 74892

Pursuant to Section 19(b)(1) of the Participants filed the Plan to comply (May 6, 2015), 80 FR 27513 (May 13, 2015)
(‘‘Approval Order’’).
Securities Exchange Act of 1934 with an order issued by the Commission 10 See Approval Order at 27533 and 27545.
(‘‘Act’’),1 and Rule 19b–4 2 thereunder, 11 See Securities Exchange Act Release No. 76382

notice is hereby given that on November 3 A ‘‘Participant’’ is a ‘‘member’’ of the Exchange (November 6, 2015), 80 FR 70284 (November 13,
29, 2016, the Chicago Stock Exchange, for purposes of the Act. See CHX Article 1, Rule 2015) (File No. 4–657).
12 See Letter from David S. Shillman, Associate
Inc. (‘‘CHX’’ or the ‘‘Exchange’’) filed 1(s). For clarity, the Exchange proposes to utilize
Director, Division of Trading and Markets,
sradovich on DSK3GMQ082PROD with NOTICES

the term ‘‘CHX Participant’’ when referring to
with the Securities and Exchange Commission, to Eric Swanson, EVP, General
members of the Exchange and the term ‘‘Plan
Commission (‘‘Commission’’) the Participant’’ when referring to Participants of the Counsel and Secretary, Bats Global Markets, Inc.,
proposed rule change as described in Plan. dated September 13, 2016; see also Letter from Eric
Items I and II below, which Items have 4 15 U.S.C. 78k–1.
Swanson, EVP, General Counsel and Secretary, Bats
Global Markets, Inc., to Brent J. Fields, Secretary,
5 17 CFR 242.608.
Commission, dated September 9, 2016.
20 17 CFR 200.30–3(a)(12). 6 See Letter from Brendon J. Weiss, Vice 13 See Securities Exchange Act Release No. 77469
1 15 U.S.C. 78s(b)(1). President, Intercontinental Exchange, Inc., to (March 29, 2016), 81 FR 19275 (April 4, 2016) (SR–
2 17 CFR 240.19b–4. Secretary, Commission, dated August 25, 2014. CHX–2016–03).

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Document Created: 2016-12-17 03:15:39
Document Modified: 2016-12-17 03:15:39
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 91974