Federal Register / Vol. 82, No. 155 / Monday, August 14, 2017 / Notices 37971 

14 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release Nos. 70200 

(August 14, 2013), 74 FR 51242 (August 20, 2013) 

(SR-Topaz-2013–01) (Notice of Filing and 

Immediate Effectiveness of Proposed Rule Change 

to Establish the Schedule of Fees). 

4Members must record the appropriate account 

origin code on all orders at the time of entry in 

order. The Exchange represents that it has 

surveillances in place to verify that members mark 

orders with the correct account origin code. 

5The Exchange uses reports from OCC when 

assessing and collecting the ORF. 

6CMTA or Clearing Member Trade Assignment is 

a form of ‘‘give-up’’ whereby the position will be 

assigned to a specific clearing firm at OCC. 

available publicly. All submissions 

should refer to File Number SR– 

NYSEAMER–2017–02 and should be 

submitted on or before September 5, 

2017. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2017–17042 Filed 8–11–17; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–81342; File No. SR–GEMX– 

2017–31] 

Self-Regulatory Organizations; Nasdaq 

GEMX, LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Amend GEMX’s 

Schedule of Fees With Respect to the 

Options Regulatory Fee 

August 8, 2017. 

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 July 26, 

2017, Nasdaq GEMX, LLC (‘‘GEMX’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission (‘‘SEC’’ or 

‘‘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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to revise 

GEMX’s Schedule of Fees to: (i) More 

closely reflect the manner in which 

GEMX assesses and collects its ORF; 

and (ii) remove rule text related to the 

timing when the Exchange may increase 

or decrease the amount of the ORF. 

The text of the proposed rule change 

is available on the Exchange’s Web site 

at 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 

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 the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

GEMX initially filed to establish its 

ORF in 2013.3 At this time, the 

Exchange proposes to: (i) More closely 

reflect the manner in which GEMX 

assesses and collects its ORF; and (ii) 

remove rule text related to the timing 

when the Exchange may increase or 

decrease the amount of its ORF. 

The Exchange supports a common 

approach for the assessment and 

collection of ORF among the various 

options exchanges that assess such a fee. 

Furthermore, the Exchange supports 

guidance from the Commission 

regarding regulatory cost structures to 

ensure equal knowledge and treatment 

among options markets assessing ORF. 

Proposal 1—Reflect the Manner in 

Which GEMX Assesses and Collects Its 

ORF 

Currently, GEMX assesses an ORF of 

$0.0010 per contract side. This 

proposed rule change does not seek to 

amend the amount of the ORF. 

Currently, GEMX assesses its ORF for 

each customer option transaction that is 

either: (1) Executed by a member on 

GEMX; or (2) cleared by a GEMX 

member at The Options Clearing 

Corporation (‘‘OCC’’) in the customer 

range,4 even if the transaction was 

executed by a non-member of GEMX, 

regardless of the exchange on which the 

transaction occurs.5 If the OCC clearing 

member is a GEMX member, ORF is 

assessed and collected on all cleared 

customer contracts (after adjustment for 

CMTA 6); and (2) if the OCC clearing 

member is not a GEMX member, ORF is 

collected only on the cleared customer 

contracts executed at GEMX, taking into 

account any CMTA instructions which 

may result in collecting the ORF from a 

non-member. 

By way of example, if Broker A, a 

GEMX member, routes a customer order 

to CBOE and the transaction executes on 

CBOE and clears in Broker A’s OCC 

Clearing account, ORF will be collected 

by GEMX from Broker A’s clearing 

account at OCC via direct debit. While 

this transaction was executed on a 

market other than GEMX, it was cleared 

by a GEMX member in the member’s 

OCC clearing account in the customer 

range, therefore there is a regulatory 

nexus between GEMX and the 

transaction. If Broker A was not a GEMX 

member, then no ORF should be 

assessed and collected because there is 

no nexus; the transaction did not 

execute on GEMX nor was it cleared by 

a GEMX member. 

In the case where a member both 

executes a transaction and clears the 

transaction, the ORF is assessed to and 

collected from the member only. In the 

case where a member executes a 

transaction and a different member 

clears the transaction, the ORF is 

assessed to and collected from the 

member who clears the transaction and 

not the member who executes the 

transaction. In the case where a nonmember executes a transaction at an 

away market and a member clears the 

transaction, the ORF is assessed to and 

collected from the member who clears 

the transaction. In the case where a 

member executes a transaction on 

GEMX and a non-member clears the 

transaction, the ORF is assessed to the 

member that executed the transaction 

and collected from the non-member 

who cleared the transaction. In the case 

where a member executes a transaction 

at an away market and a non-member 

clears the transaction, the ORF is not 

assessed to the member who executed 

the transaction or collected from the 

non-member who cleared the 

transaction because the Exchange does 

not have access to the data to make 

absolutely certain that ORF should 

apply. Further, the data does not allow 

the Exchange to identify the member 

executing the trade at an away market. 

ORF Revenue and Monitoring of ORF 

The Exchange monitors the amount of 

revenue collected from the ORF to 

ensure that it, in combination with other 

regulatory fees and fines, does not 

exceed regulatory costs. In determining 

whether an expense is considered a 

regulatory cost, the Exchange reviews 

all costs and makes determinations if 

there is a nexus between the expense 


sradovich on DSK3GMQ082PROD with NOTICES
37972 Federal Register / Vol. 82, No. 155 / Monday, August 14, 2017 / Notices 

7 15 U.S.C. 78f(b). 

8 15 U.S.C. 78f(b)(4) and (5). 

9COATS effectively enhances intermarket 

options surveillance by enabling the options 

exchanges to reconstruct the market promptly to 

effectively surveil certain rules. 

10 In addition to its own surveillance programs, 

the Exchange works with other SROs and exchanges 

on intermarket surveillance related issues. Through 

its participation in the Intermarket Surveillance 

Group (‘‘ISG’’), the Exchange shares information 

and coordinates inquiries and investigations with 

other exchanges designed to address potential 

intermarket manipulation and trading abuses. The 

Exchange’s participation in ISG helps it to satisfy 

the requirement that it has coordinated surveillance 

with markets on which security futures are traded 

and markets on which any security underlying 

security futures are traded to detect manipulation 

and insider trading. See Section 6(h)(3)(I) of the 

Act. ISG is an industry organization formed in 1983 

to coordinate intermarket surveillance among the 

SROs by co-operatively sharing regulatory 

information pursuant to a written agreement 

between the parties. The goal of the ISG’s 

information sharing is to coordinate regulatory 

efforts to address potential intermarket trading 

abuses and manipulations. 

and a regulatory function. The Exchange 

notes that fines collected by the 

Exchange in connection with a 

disciplinary manner offset ORF. 

The ORF is designed to recover a 

material portion of the costs to the 

Exchange of the supervision and 

regulation of its members, including 

performing routine surveillances, 

investigations, examinations, financial 

monitoring, and policy, rulemaking, 

interpretive, and enforcement activities. 

The Exchange believes that revenue 

generated from the ORF, when 

combined with all of the Exchange’s 

other regulatory fees, will cover a 

material portion, but not all, of the 

Exchange’s regulatory costs. The 

Exchange will continue to monitor the 

amount of revenue collected from the 

ORF to ensure that it, in combination 

with its other regulatory fees and fines, 

does not exceed regulatory costs. If the 

Exchange determines regulatory 

revenues exceed regulatory costs, the 

Exchange will adjust the ORF by 

submitting a fee change filing to the 

Commission. 

Finally, the Exchange notes that it is 

amending GEMX’s Schedule of Fees to 

remove certain rule text and include 

new rule text to make clear the manner 

in which ORF is assessed and collected 

on GEMX. 

Proposal 2—Semi-Annual Changes to 

ORF 

The Exchange’s current ORF rule text 

provides that, ‘‘The Exchange may only 

increase or decrease the Options 

Regulatory Fee semi-annually, and any 

such fee change will be effective on the 

first business day of February or 

August.’’ The Exchange is proposing to 

eliminate the requirement that its ORF 

may be only increased or decreased 

semi-annually because the Exchange 

believes it requires the flexibility to 

amend its ORF as needed to meet its 

regulatory requirements and adjust its 

ORF to account for the regulatory 

revenue that it receives and the costs 

that it incurs. While the Exchange is 

eliminating the requirement to adjust 

only semi-annually, it will continue to 

submit a rule proposal with the 

Commission for each modification to 

the ORF and notify participants via an 

Options Trader Alert of any proposed 

change in the amount of the fee at least 

thirty (30) calendar days prior to the 

effective date. The Exchange believes 

that the prior notification to market 

participants will provide guidance on 

the timing of any changes to the ORF 

and ensure market participants are 

prepared to configure their systems to 

properly account for the ORF. 

The Exchange also notes it now issues 

Options Trader Alerts instead of 

circulars to provide notification to 

members. The Exchange is amending 

the rule text to reflect this change. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act 7 in general, and furthers the 

objectives of Sections 6(b)(4) and 6(b)(5) 

of the Act 8 in particular, in that it 

provides for the equitable allocation of 

reasonable dues, fees and other charges 

among members and issuers and other 

persons using its facility and is not 

designed to permit unfair 

discrimination between customers, 

issuers, brokers, or dealers. 

The Exchange believes the proposed 

clarifications in the Fee Schedule to the 

ORF further the objectives of Section 

6(b)(4) of the Act and are equitable and 

reasonable since they expressly describe 

the Exchange’s existing practices 

regarding the manner in which the 

Exchange assesses and collects its ORF. 

Proposal 1—Reflect the Manner in 

Which GEMX Assesses and Collects Its 

ORF 

The Exchange believes it is reasonable 

and appropriate for the Exchange to 

charge the ORF for options transactions 

regardless of the exchange on which the 

transactions occur. The Exchange has a 

statutory obligation to enforce 

compliance by members and their 

associated persons under the Act and 

the rules of the Exchange and to surveil 

for other manipulative conduct by 

market participants (including nonmembers) trading on the Exchange. The 

Exchange cannot effectively surveil for 

such conduct without looking at and 

evaluating activity across all options 

markets. Many of the Exchange’s market 

surveillance programs require the 

Exchange to look at and evaluate 

activity across all options markets, such 

as surveillance for position limit 

violations, manipulation, front-running 

and contrary exercise advice violations/ 

expiring exercise declarations. The 

Exchange, because it lacks access to 

information on the identity of the 

entering firm for executions that occur 

on away markets, believes it is 

appropriate to assess the ORF on its 

member’s clearing activity, based on 

information the Exchange receives from 

OCC, including for away market 

activity. Among other reasons, doing so 

better and more accurately captures 

activity that occurs away from the 

Exchange over which the Exchange has 

a degree of regulatory responsibility. In 

so doing, the Exchange believes that 

assessing ORF on member clearing firms 

in certain instances equitably distributes 

the collection of ORF in a fair and 

reasonable manner. Also, the Exchange 

and the other options exchanges are 

required to populate a consolidated 

options audit trail (‘‘COATS’’) 9 system 

in order to surveil a member’s activities 

across markets.10

The Exchange believes that assessing 

the ORF to each Exchange member for 

options transactions cleared by OCC in 

the customer range where the execution 

occurs on another exchange and is 

cleared by a GEMX member is an 

equitable allocation of reasonable dues, 

fees, and other charges among its 

members and issuers and other persons 

using its facilities. The ORF is collected 

by OCC on behalf of GEMX from 

Exchange clearing members for all 

customer transactions they clear or from 

non-members for all customer 

transactions they clear that were 

executed on GEMX. The Exchange 

believes that this collection practice is 

reasonable and appropriate because 

higher fees are assessed to those 

members that require more Exchange 

regulatory services based on the amount 

of customer options business they 

conduct. 

Regulating customer trading activity 

is more labor intensive and requires 

greater expenditure of human and 

technical resources than regulating noncustomer trading activity, which tends 

to be more automated and less labor 

intensive. As a result, the costs 

associated with administering the 

customer component of the Exchange’s 

overall regulatory program are 

anticipated to be typically higher than 

the costs associated with administering 

the non-customer component of its 


sradovich on DSK3GMQ082PROD with NOTICES
Federal Register / Vol. 82, No. 155 / Monday, August 14, 2017 / Notices 37973 

11See Phlx’s Pricing Schedule and NOM and BX 

Rules at Chapter XV, Sections 5. 12 15 U.S.C. 78s(b)(3)(A)(ii). 

13 17 CFR 200.30–3(a)(12). 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

regulatory program. The Exchange 

proposes assessing higher fees to those 

members that will require more 

Exchange regulatory services based on 

the amount of customer options 

business they conduct. Additionally, the 

dues and fees paid by members go into 

the general funds of the Exchange, a 

portion of which is used to help pay the 

costs of regulation. The Exchange has in 

place a regulatory structure to surveil, 

conduct examinations and monitor the 

marketplace for violations of Exchange 

Rules. The ORF assists the Exchange to 

fund the cost of this regulation of the 

marketplace. 

Proposal 2—Semi-Annual Changes to 

ORF 

The Exchange believes that the 

proposed rule change to remove the 

limit to amend the ORF only semiannually, with advance notice, is 

reasonable because the Exchange will 

continue to provide market participants 

with thirty (30) days advance notice of 

amending the amount of the ORF. Also, 

the Exchange is required to monitor the 

amount of revenue collected from the 

ORF to ensure that it, in combination 

with its other regulatory fees and fines, 

do not exceed regulatory costs. 

Therefore, the Exchange believes it is 

reasonable to remove the semi-annual 

limit to amend its ORF in order to 

permit the Exchange to make 

amendments to its ORF as necessary to 

comply with the Exchange’s obligations. 

This proposed change would conform 

this rule with that of NASDAQ PHLX 

LLC (‘‘Phlx’’), The NASDAQ Options 

Market LLC (‘‘NOM’’) and NASDAQ BX, 

Inc. (‘‘BX’’).11

The Exchange believes that the 

proposed rule change to remove the 

limit to amend the ORF only semiannually, with advance notice, is 

equitable and not unfairly 

discriminatory because it will apply in 

the same manner to all members that are 

subject to the ORF. The Exchange has in 

place a regulatory structure to surveil 

for, conduct examinations and monitor 

the marketplace for violations of 

Exchange Rules. The ORF assists the 

Exchange to fund the cost of this 

regulation of the marketplace. 

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 ORF is 

not intended to have any impact on 

competition. Rather, it is designed to 

enable the Exchange to recover a 

material portion of the Exchange’s cost 

related to its regulatory activities. The 

Exchange is obligated to ensure that the 

amount of regulatory revenue collected 

from the ORF, in combination with its 

other regulatory fees and fines, does not 

exceed regulatory costs. 

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 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A)(ii) of the Act.12 At any time 

within 60 days of the filing of the 

proposed rule change, the Commission 

summarily may temporarily suspend 

such rule change if it appears to the 

Commission that such action is: (i) 

Necessary or appropriate in the public 

interest; (ii) for the protection of 

investors; or (iii) 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– 

GEMX–2017–31 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 No. 

SR–GEMX–2017–31. 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 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 No. SR–GEMX– 

2017–31, and should be submitted on or 

before September 5, 2017. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.13

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2017–17047 Filed 8–11–17; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–81346; File No. SR–IEX– 

2017–25] 

Self-Regulatory Organizations; 

Investors Exchange LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Make a 

Correction to the Exchange Fee 

Schedule Related to Fees for 

Executions That Involve Taking 

Resting Interest With Non-Displayed 

Priority With a Displayable Order 

August 8, 2017. 

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

Securities Exchange Act of 1934 (the 

‘‘Act’’) 2 and Rule 19b–4 thereunder,3

notice is hereby given that, on August 

7, 2017, the Investors Exchange LLC 

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

Securities and Exchange Commission 

(the ‘‘Commission’’) the proposed rule 


sradovich on DSK3GMQ082PROD with NOTICES