4710 Federal Register / Vol. 81, No. 17 / Wednesday, January 27, 2016 / Notices 

23See Amendment No. 2, supra note 4. 

24 Id. 

25 Id. 

26 15 U.S.C. 78f(b)(2). 

27 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3The term ‘‘Priority Customer’’ means a person 

or entity that (i) is not a broker or dealer in 

securities, and (ii) does not place more than 390 

orders in listed options per day on average during 

a calendar month for its own beneficial account(s). 

4 ‘‘Non-‘Customer to Customer’ Orders’’ are QCC 

and/or other solicited crossing orders, including 

solicited orders executed in the Solicitation, 

Facilitation or Price Improvement Mechanisms, and 

excluding ‘‘Customer to Customer’’ Orders. 

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–C2– 

2015–033 and should be submitted on 

or before February 17, 2016. 

V. Accelerated Approval of Proposed 

Rule Change, as Modified by 

Amendment Nos. 1 and 2 

The Commission finds good cause, 

pursuant to Section 19(b)(2) of the Act, 

to approve the proposed rule change, as 

modified by Amendment Nos. 1 and 2, 

prior to the 30th day after the date of 

publication of Amendment No. 2 in the 

Federal Register. As discussed above, 

Amendment No. 2 clarified that the 

Exchange will notify Trading Permit 

Holders by electronic message if the 

Exchange determines that the put strike 

price or call underlying value check 

should not apply in the interest of 

maintaining a fair and orderly market 

under proposed Exchange Rule 

6.17(d)(ii).23 C2 also represented in 

Amendment No. 2 that the Exchange 

will document, retain, and periodically 

review any Exchange decision to not 

apply the put check or call check under 

proposed Exchange Rule 6.17(d)(ii), 

including the reason for the decision.24

Lastly, in Amendment No. 2, C2 

clarified that the potential range of the 

percentage amount it will use to 

calculate the maximum value acceptable 

price range check in proposed Exchange 

Rule 6.17, Interpretation and Policy 

.04(h)(1)(iii), is between 1% and 5%.25

The Commission believes that these 

changes provide greater clarity and 

remove any possible uncertainty 

regarding the potential exercise of 

Exchange discretion with regard to the 

proposed price protection mechanisms. 

In particular, the representation about 

documenting, retaining, and 

periodically reviewing decisions to 

suspend a price check will enable C2 to 

monitor the actions of its senior Help 

Desk personnel and assure that the 

suspension of any price check is 

appropriate and consistent with C2’s 

responsibilities as a self-regulatory 

organization and the principles 

articulated in the Act that are applicable 

to exchanges. Further, clarifying the 

possible range of the maximum value 

acceptable price range provides valuable 

information to Trading Permit Holders 

to help them better understand and 

evaluate this price protection 

functionality. Accordingly, the 

Commission finds good cause for 

approving the proposed rule change, as 

modified by Amendment Nos. 1 and 2, 

on an accelerated basis, pursuant to 

Section 19(b)(2) of the Act. 

VI. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act 26 that the 

proposed rule change (SR–C2–2015– 

033), as modified by Amendment Nos. 

1 and 2, be, and hereby is, approved on 

an acceleratedbasis. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.27

Brent J. Fields, 

Secretary. 

[FR Doc. 2016–01539 Filed 1–26–16; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–76957; File No. SR–ISE– 

2016–03] 

Self-Regulatory Organizations; 

International Securities Exchange, 

LLC; Notice of Filing and Immediate 

Effectiveness of Proposed Rule 

Change To Amend the Schedule of 

Fees 

January 21, 2016. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on January 

13, 2016, the International Securities 

Exchange, LLC (the ‘‘Exchange’’ or 

‘‘ISE’’) filed with the Securities and 

Exchange Commission the proposed 

rule change, as described in Items I, II, 

and III below, which items have been 

prepared by the self-regulatory 

organization. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

ISE proposes to amend the Schedule 

of Fees as described in more detail 

below. The text of the proposed rule 

change is available on the Exchange’s 

Internet Web site at http://www.ise.com, 

at the principal office of the Exchange, 

and at the Commission’s Public 

Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of, and basis for, 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

self-regulatory organization has 

prepared summaries, set forth in 

Sections A, B and C below, of the most 

significant aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of the proposed rebate is 

to amend the Schedule of Fees to 

introduce a new set of rebates to the 

Qualified Contingent Cross (‘‘QCC’’) 

and/or other solicited crossing orders, 

including solicited orders executed in 

the Solicitation, Facilitation or Price 

Improvement Mechanisms, pricing 

initiative that offers rebates to members 

that execute a specified volume of QCC 

and other solicited crossing orders in a 

month. The proposed rebates apply to 

QCC and solicited orders between two 

Priority Customers 3 (‘‘ ‘Customer to 

Customer’ Orders’’) executed by 

members that (1) execute a specified 

volume of QCC and solicited orders in 

a given month and (2) have a total 

unsolicited originating Facilitation 

contract side volume of 175,000 or more 

per month. The Exchange notes it is not 

proposing any change to how volume is 

calculated for the current volume tiers. 

Thus, members will continue to obtain 

the tier level based on all QCC and/or 

solicited crossing orders’ originating 

side volume. Members will also 

continue to receive the Non-‘‘Customer 

to Customer’’ Order 4 rebate for their 

Non-‘‘Customer to Customer’’ Orders 

and the ‘‘Customer to Customer’’ Order 

rebate for their ‘‘Customer to Customer’’ 

Orders. 

Currently, the Exchange offers 

members rebates in QCC and/or other 

solicited crossing orders (including 

‘‘Customer to Customer’’ Orders), i.e. 


asabaliauskas on DSK5VPTVN1PROD with NOTICES
Federal Register / Vol. 81, No. 17 / Wednesday, January 27, 2016 / Notices 4711 

5The rebate is applied to the originating contract 

side of QCC and solicited crossing orders traded in 

a given month once a member reaches the specified 

volume threshold/Tier during that month. 

6See Rule 716(d). 

7 In addition, the Exchange notes that it will only 

count originating contract sides in determining 

whether the EAM has met the 175,000 contract 

threshold. 

8 15 U.S.C. 78f. 

9 15 U.S.C. 78f(b)(4). 

10See CBOE Fee Schedule, QCC Rate Table, Notes 

at https://www.cboe.com/publish/feeschedule/

CBOEFeeSchedule.pdf. 

11 15 U.S.C. 78f(b)(8). 

12CBOE for example, offers no rebate (credit) for 

customer to customer executions. See CBOE Fee 

Schedule, QCC Rate Table, Notes at https://

www.cboe.com/publish/feeschedule/

CBOEFeeSchedule.pdf. 

13 15 U.S.C. 78s(b)(3)(A)(ii). 

14 17 CFR 240.19b–4(f)(2). 

orders executed in the Solicitation, 

Facilitation, or Price Improvement 

Mechanisms where the agency order is 

executed against an order solicited from 

another party. These rebates are 

provided for each originating side of a 

crossing order, based on a member’s 

volume in the crossing mechanisms 

during a given month. Currently, for the 

Non-‘‘Customer to Customer’’ Rebate, 

for members that execute 0 to 99,999 

originating contract sides (‘‘Tier 1’’) the 

rebate is $0.00 per contract, for members 

that execute 100,000 to 199,999 

originating contract sides (‘‘Tier 2’’) the 

rebate is $0.05 per contract, for members 

that execute 200,000 to 499,999 

originating contract sides (‘‘Tier 3’’) the 

rebate is $0.07 per contract, for members 

that execute 500,000 to 699,999 

originating contract sides (‘‘Tier 4’’) the 

rebate is $0.08 per contract, for members 

that execute 700,000 to 999,999 

originating contract sides (‘‘Tier 5’’) the 

rebate is $0.09 per contract, and for 

members that execute 1,000,000 

originating contract sides or more (‘‘Tier 

6’’) the rebate is $0.11 per contract.5

Also, for the ‘‘Customer to Customer’’ 

Rebate, for Tier 1 the rebate is $0.00, for 

Tiers 2 through 3 the rebate is $0.01, 

and for Tiers 4 through 6 the rebate is 

$0.03. 

The Exchange now proposes to offer 

a new set of rebates called ‘‘Customer to 

Customer’’ Rebate PLUS. The proposed 

rebates apply to ‘‘Customer to 

Customer’’ Orders executed by members 

with (1) a specified volume of QCC and 

other solicited crossing orders in a given 

month and (2) 175,000 or more 

unsolicited originating Facilitation 

contract sides per month. The 

Facilitation Mechanism is a process by 

which an Electronic Access Member 

(‘‘EAM’’) can execute a transaction 

wherein the EAM seeks to facilitate a 

block-size order it represents as agent, 

and/or a transaction wherein the EAM 

solicited interest to execute against a 

block-size order it represents as agent.6

Only orders entered into the Facilitation 

Mechanism that are facilitated by the 

entering EAM (i.e. unsolicited 

Facilitation orders) will count towards 

the volume threshold described above.7

Once a member has met the volume 

thresholds described above, the member 

will receive a rebate for each originating 

contract side of their ‘‘Customer to 

Customer’’ Orders. In particular, the 

member will receive a ‘‘Customer to 

Customer’’ Rebate PLUS of $0.00 per 

contract for Tier 1, and $0.05 per 

contract for Tiers 2 through 6. The 

Exchange notes that members may 

receive either the ‘‘Customer to 

Customer’’ Rebate or the ‘‘Customer to 

Customer’’ Rebate PLUS—not both. 

Finally, all originating contract side 

volume will continue to contribute to 

the member’s Tier level, however a 

member’s ‘‘Customer to Customer’’ 

rebate will depend on its unsolicited 

originating Facilitation volume. For 

example, if a member has 175,000 

originating contract sides for Non- 

‘‘Customer to Customer’’ Orders and 

75,000 originating contract sides for 

‘‘Customer to Customer’’ Orders, the 

member’s aggregated volume will be 

250,000 placing them in Tier 3 (200,000 

to 499,999). As a result, the member will 

receive a rebate of $0.07 per originating 

contract side for its Non-‘‘Customer to 

Customer’’ Orders and a rebate of either 

1) $0.01 per originating contract side for 

its ‘‘Customer to Customer’’ Orders (i.e. 

‘‘Customer to Customer’’ Rebate) or 2) if 

the member has 175,000 or more 

unsolicited originating Facilitation 

contract sides, $0.05 per originating side 

for its ‘‘Customer to Customer’’ Orders 

(i.e. ‘‘Customer to Customer’’ Rebate 

PLUS). 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

the provisions of Section 6 of the Act,8

in general, and Section 6(b)(4) of the 

Act,9 in particular, in that it is designed 

to provide for the equitable allocation of 

reasonable dues, fees, and other charges 

among its members and other persons 

using its facilities. 

The Exchange believes that it is 

reasonable and equitable to provide for 

the opportunity to receive these rebates 

because they will incentivize members 

to send varying types of crossing 

volumes to the Exchange. In particular, 

the proposed rebates will encourage 

members to send unsolicited 

Facilitation orders to meet the 175,000 

volume threshold to obtain the greater 

PLUS Rebate and encourage more 

‘Customer to Customer’ volume to 

achieve the higher rebates. Further, the 

Exchange believes it is reasonable and 

equitable to provide for the opportunity 

to receive the proposed rebates because 

they are attractive to market 

participants, and many exchanges, 

including CBOE for example, offer no 

rebate for customer to customer 

executions.10 Finally, the Exchange 

believes that the proposed fees are not 

unfairly discriminatory because these 

rebates would be uniformly applied to 

all members’ ‘‘Customer to Customer’’ 

Orders that meet the required volume 

thresholds. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

In accordance with Section 6(b)(8) of 

the Act,11 the Exchange does not believe 

that the proposed rule change will 

impose any burden on intermarket or 

intramarket competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. The 

Exchange believes that the proposed 

rebates are attractive to market 

participants and are better than the 

rebates (if any) offered by other 

exchanges.12 The Exchange operates in 

a highly competitive market in which 

market participants can readily direct 

their order flow to competing venues. In 

such an environment, the Exchange 

must continually review, and consider 

adjusting, its fees and rebates to remain 

competitive with other exchanges. For 

the reasons described above, the 

Exchange believes that the proposed fee 

changes reflect this competitive 

environment. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The Exchange has not solicited, and 

does not intend to solicit, comments on 

this proposed rule change. The 

Exchange has not received any 

unsolicited written comments from 

members or other interested parties. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A)(ii) of the Act,13 and 

subparagraph (f)(2) of Rule 19b–4 

thereunder,14 because it establishes a 

due, fee, or other charge imposed by 

ISE. 

At any time within 60 days of the 

filing of such proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 


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4712 Federal Register / Vol. 81, No. 17 / Wednesday, January 27, 2016 / Notices 

15 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3The Commission approved Nasdaq Rule 5735 in 

Securities Exchange Act Release No. 57962 (June 

13, 2008), 73 FR 35175 (June 20, 2008) (SRNASDAQ–2008–039). There are already multiple 

actively-managed funds listed on the Exchange; see, 

e.g., Securities Exchange Act Release Nos. 71913 

(April 9, 2014), 79 FR 21333 (April 15, 2014) (SR– 

NASDAQ–2014–019) (order approving listing and 

trading of First Trust Managed Municipal ETF); 

69464 (April 26, 2013), 78 FR 25774 (May 2, 2013) 

(SR–NASDAQ–2013–036) (order approving listing 

and trading of First Trust Senior Loan Fund); 66489 

(February 29, 2012), 77 FR 13379 (March 6, 2012) 

(SR–NASDAQ–2012–004) (order approving listing 

and trading of WisdomTree Emerging Markets 

Corporate Bond Fund). The Exchange believes the 

proposed rule change raises no significant issues 

not previously addressed in those prior 

Commission orders. 

4A Managed Fund Share is a security that 

represents an interest in an investment company 

registered under the Investment Company Act of 

1940 (15 U.S.C. 80a-1) (the ‘‘1940 Act’’) organized 

as an open-end investment company or similar 

entity that invests in a portfolio of securities 

selected by its investment adviser consistent with 

its investment objectives and policies. In contrast, 

an open-end investment company that issues Index 

Fund Shares, listed and traded on the Exchange 

under Nasdaq Rule 5705, seeks to provide 

investment results that correspond generally to the 

price and yield performance of a specific foreign or 

domestic stock index, fixed income securities index 

or combination thereof. 

5The Commission has issued an order, upon 

which the Trust may rely, granting certain 

exemptive relief under the 1940 Act. See 

Investment Company Act Release No. 30029 (April 

10, 2012) (File No. 812–13795) (the ‘‘Exemptive 

Relief’’). In addition, on December 6, 2012, the staff 

of the Commission’s Division of Investment 

Management (‘‘Division’’) issued a no-action letter 

(‘‘No-Action Letter’’) relating to the use of 

derivatives by actively-managed ETFs. See NoAction Letter dated December 6, 2012 from 

Elizabeth G. Osterman, Associate Director, Office of 

Exemptive Applications, Division of Investment 

Management. The No-Action Letter stated that the 

Division would not recommend enforcement action 

to the Commission under applicable provisions of 

and rules under the 1940 Act if actively-managed 

ETFs operating in reliance on specified orders 

(which include the Exemptive Relief) invest in 

options contracts, futures contracts or swap 

agreements provided that they comply with certain 

representations stated in the No-Action Letter. 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. If the 

Commission takes such action, the 

Commission shall institute proceedings 

to determine whether the proposed rule 

should be approved or disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form http://www.sec.gov/

rules/sro.shtml); or 

• Send an Email to rule-comments@

sec.gov. Please include File No. SR–ISE– 

2016–03 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–ISE–2016–03. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE., 

Washington, DC 20549 on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of such 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change; 

the Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–ISE– 

2016–03 and should be submitted by 

February 17, 2016. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Brent J. Fields, 

Secretary. 

[FR Doc. 2016–01663 Filed 1–26–16; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–76944; File No. SR– 

NASDAQ–2016–002] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing of Proposed Rule Change To 

List and Trade Shares of the First Trust 

Municipal High Income ETF of First 

Trust Exchange-Traded Fund III 

January 21, 2016. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on January 6, 

2016, The NASDAQ Stock Market LLC 

(‘‘Nasdaq’’ or the ‘‘Exchange’’) filed with 

the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in in 

Items I and II below, which Items have 

been prepared by Nasdaq. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

Nasdaq proposes to list and trade the 

shares of the First Trust Municipal High 

Income ETF (the ‘‘Fund’’) of First Trust 

Exchange-Traded Fund III (the ‘‘Trust’’) 

under Nasdaq Rule 5735 (‘‘Managed 

Fund Shares’’).3 The shares of the Fund 

are collectively referred to herein as the 

‘‘Shares.’’ 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

Nasdaq included statements concerning 

the purpose of, and basis for, the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. 

Nasdaq has prepared summaries, set 

forth in Sections A, B, and C below, of 

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to list and 

trade the Shares of the Fund under 

Nasdaq Rule 5735, which governs the 

listing and trading of Managed Fund 

Shares 4 on the Exchange. The Fund will 

be an actively-managed exchange-traded 

fund (‘‘ETF’’). The Shares will be 

offered by the Trust, which was 

established as a Massachusetts business 

trust on January 9, 2008.5 The Trust is 

registered with the Commission as an 

investment company and has filed a 

registration statement on Form N–1A 

(‘‘Registration Statement’’) with the 


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