Document ID: SEC-2017-0302-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2017-02-27T05:00Z

[Federal Register Volume 82, Number 37 (Monday, February 27, 2017)]
[Notices]
[Pages 11971-11973]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-03799]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80080; File No. SR-ISE-2017-10]

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

February 22, 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 February 10, 2017, the International Securities Exchange, LLC 
(``ISE'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``SEC'' or ``Commission'') the proposed rule change as 
described in Items I and II, 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 the Exchange's Schedule of Fees, as 
described in further detail below.
    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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to amend the Exchange's 
Schedule of Fees to increase, for all symbols other than FX Option 
Symbols,\3\ the fees applicable to Professional Customers \4\ for the 
initiating or contra side of Qualified Contingent Cross (``QCC'') 
orders or orders executed in the Solicited Order Mechanism 
(``Solicitation'' orders). Accordingly, the proposed rule change will 
also increase the rebates that the Exchange currently provides to 
members using QCC and/or other solicited crossing orders, including 
solicited orders executed in the Solicitation, Facilitation, and Price 
Improvement Mechanisms (``solicited crossing orders''), in each case 
between Professional Customers or between a Professional Customer and a 
Priority Customer.\5\
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    \3\ ``FX Option Symbols'' are options overlying AUM, GBP, EUU 
and NDO.
    \4\ A ``Professional Customer'' is a person or entity that is 
not a broker/dealer and is not a Priority Customer.
    \5\ A ``Priority Customer'' is 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), as defined in ISE 
Rule 100(a)(37A).
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    Currently, the Exchange does not charge a fee to Professional 
Customers for QCC and Solicitation orders.\6\ As such, Professional 
Customer volume in QCC and Solicitation orders are rebated in 
accordance with the standard ``Customer to Customer'' rebate tiers, 
which are lower than the rebates provided for QCC and other solicited 
crossing orders to all other market participants than Professional and 
Priority Customers, as further described below.
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    \6\ See Securities Exchange Act Release No. 79811 (January 17, 
2017), 82 FR 8244 (January 24, 2017) (SR-ISE-2017-01) (eliminating 
the Professional Customer fee for the initiating or contra side of a 
QCC or Solicitation order) (the ``January Fee Filing'').
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    The Exchange presently offers members rebates in QCC and other 
solicited crossing orders. These rebates are provided for each 
originating contract side of a crossing order, based on a member's 
volume in the crossing mechanisms during a given month. The applicable 
rebates will be applied on QCC and other solicited crossing order 
traded contracts once the specified volume threshold is met. Members 
receive the Non-``Customer to Customer'' Rebate for all QCC and/or 
other solicited crossing orders except for QCC and other solicited 
crossing orders between two Priority and/or Professional Customers. QCC 
and other solicited crossing orders between two Priority and/or 
Professional Customers receive the ``Customer to Customer'' Rebate or 
``Customer to Customer''

[[Page 11972]]

Rebate PLUS,\7\ respectively. 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.\8\ Also, for the 
``Customer to Customer'' Rebate, for Tier 1 the rebate is $0.00, for 
Tiers 2 and 3 the rebate is $0.01, and for Tiers 4 through 6 the rebate 
is $0.03. Lastly, for the ``Customer to Customer'' Rebate PLUS, for 
Tier 1 the rebate is $0.00, and for Tiers 2 through 6 the rebate is 
$0.05.
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    \7\ The PLUS rebates currently apply to ``Customer to Customer'' 
Orders (i.e. QCC and other solicited crossing orders between two 
Priority and/or Professional Customers) 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 Exchange notes that 
members may receive either the ``Customer to Customer'' Rebate or 
the ``Customer to Customer'' Rebate PLUS--not both.
    \8\ The rebate is applied to the originating contract side of 
QCC and other solicited crossing orders traded in a given month once 
a member reaches the specified volume threshold/tier during that 
month.
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    The Exchange now proposes to charge a fee of $0.10 per contract to 
Professional Customers for QCC and Solicitation orders. Accordingly, 
the Exchange also proposes that Professional Customer volume in QCC and 
Solicitation orders, as well as other solicited crossing orders, be 
rebated in the higher amounts set forth in the Non-``Customer to 
Customer'' Rebate tiers as described above. As a result of the proposed 
changes, members would receive the ``Customer to Customer'' Rebate and 
the ``Customer to Customer'' Rebate PLUS for QCC and/or other solicited 
crossing orders between two Priority Customers only.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\9\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\10\ 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 any facility, and is 
not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that it is reasonable and equitable to 
increase the fee for Professional Customer QCC and Solicitation orders 
because the proposed fee is designed to be attractive to Professional 
Customers that trade on ISE, and is generally lower than the fees 
applicable to other market participants, except for Priority Customers. 
Although the Exchange is increasing the Professional Customer fee for 
QCC and Solicitation orders, it is also increasing the associated 
rebates that the Exchange provides to members using such orders with 
the intent to attract greater order flow to ISE, which would ultimately 
benefit all market participants that trade on the Exchange.
    In addition, the Exchange believes that it is equitable and not 
unfairly discriminatory to continue to provide lower fees for Priority 
Customer orders. A Priority Customer is by definition not a broker or 
dealer in securities, and does not place more than 390 orders in listed 
options per day on average during a calendar month for its own 
beneficial account(s). This limitation does not apply to participants 
whose behavior is substantially similar to that of market 
professionals, including Professional Customers, who will generally 
submit a higher number of orders than Priority Customers. The Exchange 
notes that a recent modification to its rules caused a number of its 
Priority Customers to be re-classified as Professional Customers.\11\ 
Under the rule change, such market participants who were previously 
classified as Priority Customers, and incurred no fees for executing 
QCC and Solicitation orders, would have started incurring such fees 
after being re-classified as Professional Customers. The Exchange 
therefore decided to treat these market participants the same as 
Priority Customers for purposes of the QCC and Solicitation orders as a 
means of easing the transition process for such participants. Following 
the one month period, the Exchange has determined that it is reasonable 
to begin assessing fees for Professional Customer QCC and Solicitation 
orders, which are still lower than the original amounts assessed prior 
to the January Fee Filing.
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    \11\ See Securities Exchange Act Release No. 78788 (September 8, 
2016), 81 FR 63252 (September 14, 2016) (SR-ISE-2016-19).
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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. In terms of inter-market 
competition, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues if they deem fee levels at a particular venue to be 
excessive, or rebate opportunities available at other venues to be more 
favorable. In such an environment, the Exchange must continually adjust 
its fees to remain competitive with other exchanges and with 
alternative trading systems that have been exempted from compliance 
with the statutory standards applicable to exchanges. Because 
competitors are free to modify their own fees in response, and because 
market participants may readily adjust their order routing practices, 
the degree to which fee changes in this market may impose any burden on 
competition is extremely limited.

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\ and Rule 19b-4(f)(2) \13\ thereunder. 
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.
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    \12\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \13\ 17 CFR 240.19b-4(f)(2).
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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:

[[Page 11973]]

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 Number SR-ISE-2017-10 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-ISE-2017-10. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of 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 and should be submitted on or 
before March 20, 2017.
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    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-03799 Filed 2-24-17; 8:45 am]
 BILLING CODE 8011-01-P