82 FR 3043 - Self-Regulatory Organizations; ISE Gemini, LLC; Order Approving a Proposed Rule Change To Modify the Response Times in the Block Mechanism, Facilitation Mechanism, Solicited Order Mechanism, and Price Improvement Mechanism
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 6 (January 10, 2017)
Federal Register Volume 82, Issue 6 (January 10, 2017)
| Page Range | 3043-3044 | |
| FR Document | 2017-00219 |
[Federal Register Volume 82, Number 6 (Tuesday, January 10, 2017)] [Notices] [Pages 3043-3044] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-00219] [[Page 3043]] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-79735; File No. SR-ISEGemini-2016-14] Self-Regulatory Organizations; ISE Gemini, LLC; Order Approving a Proposed Rule Change To Modify the Response Times in the Block Mechanism, Facilitation Mechanism, Solicited Order Mechanism, and Price Improvement Mechanism January 4, 2017. I. Introduction On November 8, 2016, ISE Gemini, LLC (the ``Exchange'' or ``ISE Gemini'') filed with the Securities and Exchange Commission (``Commission'') pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to amend ISE Gemini Rules 716 (Block Trades) and 723 (Price Improvement Mechanism for Crossing Transactions) to modify the response times in the Block Order Mechanism, Facilitation Mechanism, Solicited Order Mechanism, and Price Improvement Mechanism (``PIM'') from 500 milliseconds to a time period designated by the Exchange of no less than 100 milliseconds and no more than 1 second. The proposed rule change was published for comment in the Federal Register on November 25, 2016.\3\ No comment letters were received on the proposed rule change. This order approves the proposed rule change. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ See Securities Exchange Act Release No. 79353 (November 18, 2016), 81 FR 85280 (``Notice''). --------------------------------------------------------------------------- II. Description of the Proposed Rule Change ISE Gemini Rule 716 (Block Trades) contains the requirements applicable to the execution of orders using the Block Order Mechanism, Facilitation Mechanism, and Solicited Order Mechanism. The Block Order Mechanism allows ISE Gemini members to obtain liquidity for the execution of a block-size order.\4\ The Facilitation and Solicited Order Mechanisms allow ISE Gemini members to enter cross transactions seeking price improvement.\5\ ISE Gemini Rule 723 (Price Improvement Mechanism for Crossing Transactions) contains the requirements applicable to the execution of orders using the PIM. The PIM allows ISE Gemini members to enter cross transactions of any size. The Facilitation, Solicited Order Mechanisms, and PIM allow for ISE Gemini members to designate certain customer orders for price improvement and submit such orders into one of the mechanisms with a matching contra order. Once such an order is submitted, ISE Gemini commences an auction by broadcasting a message to all ISE Gemini members that includes the series, price, size, and side of the market.\6\ Further, responses within the PIM (i.e., Improvement Orders), are also broadcast to market participants during the auction. --------------------------------------------------------------------------- \4\ Block-size orders are orders for 50 contracts or more. See ISE Gemini Rule 716(a). \5\ Only block-size orders can be entered into the Facilitation Mechanism, whereas only orders for 500 contracts or more can be entered into the Solicited Order Mechanism. See ISE Gemini Rule 716(d) and (e). \6\ ISE Gemini members may choose to hide the size, side, and price when entering orders into the Block Order Mechanism. --------------------------------------------------------------------------- Orders entered into the Block Order Mechanism, Facilitation Mechanism, Solicited Order Mechanism, and PIM are currently exposed to all market participants for 500 milliseconds, giving them an opportunity to enter additional trading interest before the orders are automatically executed. Under the proposal, ISE Gemini would determine an exposure period for each of the four mechanisms that is no less than 100 milliseconds and no more than 1 second.\7\ --------------------------------------------------------------------------- \7\ While the proposed rule change would allow ISE Gemini to increase the exposure period up to 1 second, ISE Gemini stated that it currently intends to decrease the time period allowed for responses to 100 milliseconds. See Notice, supra note 3, at 85281. ISE Gemini further noted that its proposal is consistent with exposure periods permitted in similar mechanisms on other options exchanges. See id. at 85281. See also Securities Exchange Act Release Nos. 76301 (October 29, 2015), 80 FR 68347 (November 4, 2015) (SR-BX-2015-032) and 77557 (April 7, 2016), 81 FR 21935 (April 13, 2016) (SR-Phlx-2016-40). --------------------------------------------------------------------------- III. Discussion and Commission's Findings After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.\8\ In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act,\9\ which requires, among other things, that the rules of a national securities exchange be designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating 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 not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The Commission also finds that the proposed rule change is consistent with Section 6(b)(8) of the Act,\10\ which requires that the rules of an exchange not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. --------------------------------------------------------------------------- \8\ In approving this proposed rule change, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). \9\ 15 U.S.C. 78f(b)(5). \10\ 15 U.S.C. 78f(b)(8). --------------------------------------------------------------------------- The Commission believes that, given the electronic environment of ISE Gemini, reducing each of the exposure periods from 500 milliseconds to no less than 100 milliseconds could facilitate the prompt execution of orders, while continuing to provide market participants with an opportunity to compete for exposed bids and offers. To substantiate that its members could receive, process, and communicate a response back to ISE Gemini within 100 milliseconds, ISE Gemini stated that it surveyed all ISE Gemini members that responded to an auction in the period beginning July 1, 2015 and ending January 15, 2016. Each of the fifteen members surveyed indicated that they can currently receive, process, and communicate a response back to ISE Gemini within 100 milliseconds. To implement the reduced exposure periods and help ensure that ISE Gemini's and its members' systems are working properly given the faster response times, ISE Gemini will reduce the auction time over a period of weeks, ending at 100 milliseconds. Upon effectiveness of the proposal, and at least six weeks prior to implementation of the proposed rule change, ISE Gemini will issue a circular to its members, informing them of the implementation date of the reduction of the auction from 500 milliseconds to the auction time designated by ISE Gemini (100 milliseconds), to allow members the opportunity to perform systems changes. ISE Gemini also represented that it will issue a circular at least four weeks prior to any future changes, as permitted by its rules, to the auction time.\11\ In addition, ISE Gemini reviewed all executions occurring in the mechanisms by ISE Gemini members from March 28, 2016 to April 25, 2016. This review of executions in the mechanisms indicated that approximately 98% of responses that resulted in price improving executions at the conclusion of an auction were submitted within 500 milliseconds. Approximately 94% of responses that resulted in price improving executions [[Page 3044]] at the conclusion of an auction were submitted within 100 milliseconds, and 83% were submitted within 50 milliseconds of the initial order.\12\ Furthermore, with regard to the impact of the proposal on system capacity, ISE Gemini has analyzed its capacity and represented that it has the necessary systems capacity to handle the potential additional traffic associated with the additional transactions that may occur with the implementation of the reduction in the auction duration to no less than 100 milliseconds.\13\ --------------------------------------------------------------------------- \11\ See Notice, supra note 3, at 85282. \12\ See id. \13\ See id. --------------------------------------------------------------------------- Based on ISE Gemini's statements, the Commission believes that market participants should continue to have opportunities to compete for exposed bids and offers within an exposure period of no less than 100 milliseconds and no more than 1 second.\14\ Accordingly, the Commission believes that it is consistent with the Act for the Exchange to modify the response times in the Block Mechanism, Facilitation Mechanism, Solicited Order Mechanism, and PIM from 500 milliseconds to a time period designated by the Exchange of no less than 100 milliseconds and no more than 1 second. --------------------------------------------------------------------------- \14\ The Commission notes that the ability to designate such an exposure time period is consistent with the rules of other options exchanges. See supra note 7. See also NASDAQ Phlx Rule 1080(n)(ii)(A)(4) and NASDAQ BX Options Rules Chapter VI, Section 9(ii)(A)(3). --------------------------------------------------------------------------- IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,\15\ that the proposed rule change (SR-ISEGemini-2016-14) be, and hereby is, approved. --------------------------------------------------------------------------- \15\ 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\16\ --------------------------------------------------------------------------- \16\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017-00219 Filed 1-9-17; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 82, No. 6 / Tuesday, January 10, 2017 / Notices 3043
SECURITIES AND EXCHANGE execution of orders using the PIM. The market and a national market system
COMMISSION PIM allows ISE Gemini members to and, in general, to protect investors and
enter cross transactions of any size. The the public interest, and not be designed
[Release No. 34–79735; File No. SR–
ISEGemini–2016–14]
Facilitation, Solicited Order to permit unfair discrimination between
Mechanisms, and PIM allow for ISE customers, issuers, brokers, or dealers.
Self-Regulatory Organizations; ISE Gemini members to designate certain The Commission also finds that the
Gemini, LLC; Order Approving a customer orders for price improvement proposed rule change is consistent with
Proposed Rule Change To Modify the and submit such orders into one of the Section 6(b)(8) of the Act,10 which
Response Times in the Block mechanisms with a matching contra requires that the rules of an exchange
Mechanism, Facilitation Mechanism, order. Once such an order is submitted, not impose any burden on competition
Solicited Order Mechanism, and Price ISE Gemini commences an auction by that is not necessary or appropriate in
Improvement Mechanism broadcasting a message to all ISE furtherance of the purposes of the Act.
Gemini members that includes the The Commission believes that, given
January 4, 2017. series, price, size, and side of the the electronic environment of ISE
I. Introduction market.6 Further, responses within the Gemini, reducing each of the exposure
PIM (i.e., Improvement Orders), are also periods from 500 milliseconds to no less
On November 8, 2016, ISE Gemini, broadcast to market participants during than 100 milliseconds could facilitate
LLC (the ‘‘Exchange’’ or ‘‘ISE Gemini’’) the auction. the prompt execution of orders, while
filed with the Securities and Exchange Orders entered into the Block Order continuing to provide market
Commission (‘‘Commission’’) pursuant Mechanism, Facilitation Mechanism, participants with an opportunity to
to Section 19(b)(1) of the Securities Solicited Order Mechanism, and PIM compete for exposed bids and offers. To
Exchange Act of 1934 (‘‘Act’’) 1 and Rule are currently exposed to all market substantiate that its members could
19b–4 thereunder,2 a proposed rule participants for 500 milliseconds, giving receive, process, and communicate a
change to amend ISE Gemini Rules 716 them an opportunity to enter additional response back to ISE Gemini within 100
(Block Trades) and 723 (Price trading interest before the orders are milliseconds, ISE Gemini stated that it
Improvement Mechanism for Crossing automatically executed. Under the surveyed all ISE Gemini members that
Transactions) to modify the response proposal, ISE Gemini would determine responded to an auction in the period
times in the Block Order Mechanism, an exposure period for each of the four beginning July 1, 2015 and ending
Facilitation Mechanism, Solicited Order mechanisms that is no less than 100 January 15, 2016. Each of the fifteen
Mechanism, and Price Improvement milliseconds and no more than 1 members surveyed indicated that they
Mechanism (‘‘PIM’’) from 500 second.7 can currently receive, process, and
milliseconds to a time period designated communicate a response back to ISE
by the Exchange of no less than 100 III. Discussion and Commission’s
Gemini within 100 milliseconds. To
milliseconds and no more than 1 Findings
implement the reduced exposure
second. The proposed rule change was After careful review, the Commission periods and help ensure that ISE
published for comment in the Federal finds that the proposed rule change is Gemini’s and its members’ systems are
Register on November 25, 2016.3 No consistent with the requirements of the working properly given the faster
comment letters were received on the Act and the rules and regulations response times, ISE Gemini will reduce
proposed rule change. This order thereunder applicable to a national the auction time over a period of weeks,
approves the proposed rule change. securities exchange.8 In particular, the ending at 100 milliseconds. Upon
II. Description of the Proposed Rule Commission finds that the proposed effectiveness of the proposal, and at
Change rule change is consistent with Section least six weeks prior to implementation
6(b)(5) of the Act,9 which requires, of the proposed rule change, ISE Gemini
ISE Gemini Rule 716 (Block Trades) among other things, that the rules of a will issue a circular to its members,
contains the requirements applicable to national securities exchange be informing them of the implementation
the execution of orders using the Block designed to promote just and equitable date of the reduction of the auction from
Order Mechanism, Facilitation principles of trade, to foster cooperation 500 milliseconds to the auction time
Mechanism, and Solicited Order and coordination with persons engaged designated by ISE Gemini (100
Mechanism. The Block Order in regulating transactions in securities, milliseconds), to allow members the
Mechanism allows ISE Gemini members to remove impediments to and perfect opportunity to perform systems
to obtain liquidity for the execution of the mechanism of a free and open changes. ISE Gemini also represented
a block-size order.4 The Facilitation and that it will issue a circular at least four
Solicited Order Mechanisms allow ISE 6 ISE Gemini members may choose to hide the
weeks prior to any future changes, as
Gemini members to enter cross size, side, and price when entering orders into the
permitted by its rules, to the auction
transactions seeking price Block Order Mechanism.
7 While the proposed rule change would allow time.11 In addition, ISE Gemini
improvement.5 ISE Gemini Rule 723 reviewed all executions occurring in the
ISE Gemini to increase the exposure period up to
(Price Improvement Mechanism for 1 second, ISE Gemini stated that it currently mechanisms by ISE Gemini members
Crossing Transactions) contains the intends to decrease the time period allowed for
from March 28, 2016 to April 25, 2016.
requirements applicable to the responses to 100 milliseconds. See Notice, supra
note 3, at 85281. ISE Gemini further noted that its This review of executions in the
1 15
proposal is consistent with exposure periods mechanisms indicated that
U.S.C. 78s(b)(1). permitted in similar mechanisms on other options
2 17 CFR 240.19b–4.
approximately 98% of responses that
exchanges. See id. at 85281. See also Securities
pmangrum on DSK3GDR082PROD with NOTICES
3 See Securities Exchange Act Release No. 79353 Exchange Act Release Nos. 76301 (October 29, resulted in price improving executions
(November 18, 2016), 81 FR 85280 (‘‘Notice’’). 2015), 80 FR 68347 (November 4, 2015) (SR–BX– at the conclusion of an auction were
4 Block-size orders are orders for 50 contracts or 2015–032) and 77557 (April 7, 2016), 81 FR 21935 submitted within 500 milliseconds.
more. See ISE Gemini Rule 716(a). (April 13, 2016) (SR–Phlx–2016–40). Approximately 94% of responses that
5 Only block-size orders can be entered into the 8 In approving this proposed rule change, the
Facilitation Mechanism, whereas only orders for Commission has considered the proposed rule’s
resulted in price improving executions
500 contracts or more can be entered into the impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f). 10 15 U.S.C. 78f(b)(8).
Solicited Order Mechanism. See ISE Gemini Rule
716(d) and (e). 9 15 U.S.C. 78f(b)(5). 11 See Notice, supra note 3, at 85282.
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![3044 Federal Register / Vol. 82, No. 6 / Tuesday, January 10, 2017 / Notices
at the conclusion of an auction were Investment Company Act of 1940 (the service. Pursuant to rule 0–5 under the
submitted within 100 milliseconds, and ‘‘Act’’) for an exemption from sections Act, hearing requests should state the
83% were submitted within 50 2(a)(32), 5(a)(1), 22(d), and 22(e) of the nature of the writer’s interest, any facts
milliseconds of the initial order.12 Act and rule 22c–1 under the Act, under bearing upon the desirability of a
Furthermore, with regard to the impact sections 6(c) and 17(b) of the Act for an hearing on the matter, the reason for the
of the proposal on system capacity, ISE exemption from sections 17(a)(1) and request, and the issues contested.
Gemini has analyzed its capacity and 17(a)(2) of the Act, and under section Persons who wish to be notified of a
represented that it has the necessary 12(d)(1)(J) for an exemption from hearing may request notification by
systems capacity to handle the potential sections 12(d)(1)(A) and 12(d)(1)(B) of writing to the Commission’s Secretary.
additional traffic associated with the the Act. The requested order would ADDRESSES: Brent J. Fields, Secretary,
additional transactions that may occur permit (a) actively-managed series of Securities and Exchange Commission,
with the implementation of the certain open-end management 100 F Street NE., Washington, DC
reduction in the auction duration to no investment companies (‘‘Funds’’) to 20549–1090; Applicants: the Initial
less than 100 milliseconds.13 issue shares redeemable in large Adviser and the Trust, 1270 Avenue of
Based on ISE Gemini’s statements, the aggregations only (‘‘Creation Units’’); (b) the Americas, Suite 2217, New York,
Commission believes that market secondary market transactions in Fund New York 10020; and the Initial
participants should continue to have shares to occur at negotiated market Distributor, One Freedom Valley Drive,
opportunities to compete for exposed prices rather than at net asset value Oaks, Pennsylvania 19456.
bids and offers within an exposure (‘‘NAV’’); (c) certain Funds to pay
period of no less than 100 milliseconds FOR FURTHER INFORMATION CONTACT:
redemption proceeds, under certain
and no more than 1 second.14 Laura J. Riegel, Senior Counsel, at (202)
circumstances, more than seven days
Accordingly, the Commission believes 551–3038, or Mary Kay Frech, Branch
after the tender of shares for
that it is consistent with the Act for the Chief, at (202) 551–6821 (Division of
redemption; (d) certain affiliated
Exchange to modify the response times Investment Management, Chief
persons of a Fund to deposit securities
in the Block Mechanism, Facilitation Counsel’s Office).
into, and receive securities from, the
Mechanism, Solicited Order Fund in connection with the purchase SUPPLEMENTARY INFORMATION: The
Mechanism, and PIM from 500 and redemption of Creation Units; (e) following is a summary of the
milliseconds to a time period designated certain registered management application. The complete application
by the Exchange of no less than 100 investment companies and unit may be obtained via the Commission’s
milliseconds and no more than 1 investment trusts outside of the same Web site by searching for the file
second. group of investment companies as the number, or for an applicant using the
Funds (‘‘Funds of Funds’’) to acquire Company name box, at http://
IV. Conclusion www.sec.gov/search/search.htm or by
shares of the Funds; and (f) certain
It is therefore ordered, pursuant to Funds (‘‘Feeder Funds’’) to create and calling (202) 551–8090.
Section 19(b)(2) of the Act,15 that the redeem Creation Units in-kind in a
proposed rule change (SR–ISEGemini– Summary of the Application
master-feeder structure.
2016–14) be, and hereby is, approved. 1. Applicants request an order that
For the Commission, by the Division of APPLICANTS: Krane Funds Advisors, LLC would allow Funds to operate as
Trading and Markets, pursuant to delegated (the ‘‘Initial Adviser’’), a Delaware actively-managed exchange traded
authority.16 limited liability company registered as funds (‘‘ETFs’’).1 Fund shares will be
Eduardo A. Aleman, an investment adviser under the purchased and redeemed at their NAV
Assistant Secretary. Investment Advisers Act of 1940, in Creation Units only. All orders to
[FR Doc. 2017–00219 Filed 1–9–17; 8:45 am] KraneShares Trust (the ‘‘Trust’’), a purchase Creation Units and all
BILLING CODE 8011–01–P Delaware statutory trust that is redemption requests will be placed by
registered under the Act as an open-end or through an ‘‘Authorized Participant’’,
management investment company with which will have signed a participant
SECURITIES AND EXCHANGE multiple series, and SEI Investments agreement with the Distributor. Shares
COMMISSION Distribution Company (the ‘‘Initial will be listed and traded individually on
Distributor’’), a Pennsylvania a national securities exchange, where
[Investment Company Act Release No.
corporation and broker-dealer registered share prices will be based on the current
32412; File No. 812–14675]
under the Securities Exchange Act of bid/offer market. Certain Funds may
Krane Funds Advisors, LLC, et al.; 1934 (the ‘‘Exchange Act’’). operate as Feeder Funds in a master-
Notice of Application FILING DATES: The application was filed feeder structure. Any order granting the
on July 20, 2016 and amended on requested relief would be subject to the
January 4, 2017. terms and conditions stated in the
November 29, 2016.
AGENCY: Securities and Exchange application.
Commission (‘‘Commission’’). HEARING OR NOTIFICATION OF HEARING: An
order granting the requested relief will
ACTION: Notice of an application for an 1 Applicants request that the order apply to the
be issued unless the Commission orders
order under section 6(c) of the initial series of the Trust and any future series of
a hearing. Interested persons may the Trust offering exchange-traded shares, as well
12 See id.
request a hearing by writing to the as other existing or future open-end management
pmangrum on DSK3GDR082PROD with NOTICES
13 See Commission’s Secretary and serving companies or existing or future series thereof
id. offering exchange-traded shares (and their
14 The Commission notes that the ability to applicants with a copy of the request, respective existing or future Master Funds, as
designate such an exposure time period is personally or by mail. Hearing requests defined below), that will utilize active management
consistent with the rules of other options should be received by the Commission investment strategies (collectively, ‘‘Future
exchanges. See supra note 7. See also NASDAQ Funds’’). Any Future Fund will (a) be advised by
Phlx Rule 1080(n)(ii)(A)(4) and NASDAQ BX
by 5:30 p.m. on January 26, 2017, and
the Initial Adviser or an entity controlling,
Options Rules Chapter VI, Section 9(ii)(A)(3). should be accompanied by proof of controlled by, or under common control with the
15 15 U.S.C. 78s(b)(2). service on applicants, in the form of an Initial Adviser (each, an ‘‘Adviser’’) and (b) comply
16 17 CFR 200.30–3(a)(12). affidavit, or for lawyers, a certificate of with the terms and conditions of the application.
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Document Created: 2018-02-01 14:54:01
Document Modified: 2018-02-01 14:54:01
| 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 | 82 FR 3043 |
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