Document ID: SEC-2014-0632-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: ISE Gemini, LLC
Posted Date: 2014-04-15T04:00Z

[Federal Register Volume 79, Number 72 (Tuesday, April 15, 2014)]
[Notices]
[Pages 21340-21343]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-08418]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71915; File No. SR-ISE Gemini-2014-12]

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

April 9, 2014.
    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 April 1, 2014 ISE Gemini, LLC (the ``Exchange'' or ``ISE 
Gemini'') 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.
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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

    ISE Gemini is proposing to amend its Schedule of Fees. 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 rule change is to amend the Schedule of 
Fees. The Exchange's Schedule of Fees has separate tables for fees 
applicable to Standard Options and Mini Options. The Exchange notes 
that while the discussion below relates to fees for Standard Options, 
the fees for Mini Options, which are not discussed below, are and shall 
continue to be 1/10th of the fees for Standard Options.
1. Qualifying Tier Thresholds
    ISE Gemini currently provides volume-based maker rebates and 
charges volume-based taker fees to Market Maker \3\ and Priority 
Customer \4\ orders in four tiers based on a member's average daily 
volume (``ADV'') in the following categories: (i) Total Affiliated 
Member ADV,\5\ (ii) Priority Customer Maker ADV,\6\ and (iii) Total 
Affiliated Member ADV with a Minimum Priority Customer Maker ADV, as 
shown in the table below. The highest tier threshold attained by any 
method below applies retroactively in a given month to all eligible 
traded contracts and applies to all eligible market participants.
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    \3\ The term Market Maker refers to ``Competitive Market 
Makers'' and ``Primary Market Makers'' collectively. Market Maker 
orders sent to the Exchange by an Electronic Access Member are 
assessed fees and rebates at the same level as Market Maker orders. 
See footnote 2, Schedule of Fees, Section I and II.
    \4\ A Priority Customer is a person or entity that is not a 
broker/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).
    \5\ The Total Affiliated Member ADV category includes all volume 
in all symbols and order types, including both maker and taker 
volume and volume executed in the PIM, Facilitation, Solicitation, 
and QCC mechanisms.
    \6\ The Priority Customer Maker ADV category includes all 
Priority Customer volume that adds liquidity in all symbols.

                                                Table 1--Current
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                                                                                 Total affiliated member  ADV/
             Tier                  Total affiliated       Priority customer     minimum priority  customer maker
                                      member ADV              maker ADV                       ADV
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Tier 1........................  0-64,999                0-19,999               0-39,999/0+
Tier 2........................  65,000-149,999          20,000-64,999          40,000-114,999/15,000+
Tier 3........................  150,000-274,999         65,000-114,999         115,000-224,999/45,000+
Tier 4........................  275,000+                115,000+               225,000+/65,000+
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    As outlined in the following table, the Exchange now proposes to 
decrease the thresholds for achieving the four current volume tiers, 
and to add an additional fifth tier for members that execute either (i) 
a Total Affiliated Member ADV of at least 350,000 contracts, (ii) a 
Priority Customer Maker ADV of at least 125,000 contracts, or (iii) a 
Total Affiliated Member ADV of at least 250,000 contracts with a 
Minimum Priority Customer Maker ADV of at least 85,000 contracts.\7\
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    \7\ New maker rebates and taker fees for members that achieve 
Tier 5 are described in Sections 2 and 3 below. Where not otherwise 
noted in this proposed rule change, Tier 5 fees will be introduced 
at the applicable Tier 4 rate.

[[Page 21341]]

                                                Table 1--Proposed
----------------------------------------------------------------------------------------------------------------
                                                                                 Total affiliated member  ADV/
             Tier                  Total affiliated       Priority customer     minimum priority  customer maker
                                      member ADV              maker ADV                       ADV
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Tier 1........................  0-49,999                0-19,999               0-39,999/0+
Tier 2........................  50,000-124,999          20,000-49,999          40,000-99,999/15,000+
Tier 3........................  125,000-249,999         50,000-84,999          100,000-174,999/40,000+
Tier 4........................  250,000-349,999         85,000-124,999         175,000-249,999/65,000+
Tier 5........................  350,000+                125,000+               250,000+/85,000+
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    In addition, the Exchange proposes to apply these tiers to fees for 
all market participants when taking liquidity on ISE Gemini. Maker 
rebates will continue to be based on Table 1 for Market Maker or 
Priority Customer orders, and Table 2 for Firm Proprietary/Broker-
Dealer or Professional Customer orders.
2. Maker Rebates for Market Maker and Priority Customer Orders
    Currently, the Exchange provides maker rebates in Penny Symbols and 
SPY to Market Maker orders as follows: $0.30 per contract (Tier 1), 
$0.32 per contract (Tier 2), $0.34 per contract (Tier 3), and $0.38 per 
contract (Tier 4).\8\ The Exchange now proposes to decrease the Tier 4 
maker rebate for Market Maker orders in these symbols to $0.37 per 
contract. Market Makers that meet the proposed volume requirements for 
the new Tier 5 will receive the higher $0.38 per contract rebate 
currently offered for Tier 4 Market Maker orders in Penny Symbols. The 
Exchange will no longer offer an increased rebate for SPY to Market 
Makers that achieve the highest volume tier.
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    \8\ This rebate is presently $0.40 per contract for SPY.
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    For Non-Penny Symbols the maker rebate for Market Maker orders is 
currently $0.40 per contract (Tier 1), $0.42 per contract (Tier 2), 
$0.44 per contract (Tier 3), and $0.47 per contract (Tier 4). As 
proposed, these rates will remain unchanged. Market Makers that achieve 
the new Tier 5 described above, however, will be entitled to a higher 
maker rebate of $0.49 per contract for orders in Non-Penny Symbols.
    The Exchange also provides maker rebates in Penny Symbols and SPY 
to Priority Customer orders as follows: $0.25 per contract (Tier 1), 
$0.40 per contract (Tier 2), $0.45 per contract (Tier 3), and $0.48 per 
contract (Tier 4). The Exchange now proposes to increase the Tier 3 
maker rebate for Priority Customer orders in these symbols to $0.46 per 
contract. In addition, Priority Customer orders executed by members 
that achieve the new Tier 5 will receive a higher maker rebate of $0.50 
per contract.
    For Non-Penny Symbols the maker rebate for Priority Customer orders 
is currently $0.75 per contract (Tier 1), $0.80 per contract (Tier 2), 
$0.82 per contract (Tier 3), and $0.85 per contract (Tier 4). The 
Exchange now proposes to offer the higher maker rebate of $0.85 per 
contract to Priority Customer orders in Non-Penny Symbols for members 
that achieve Tier 3, Tier 4, or Tier 5.
3. Taker and Response Fees for Penny Symbols and SPY
    Currently, all Market Maker, Non-ISE Gemini Market Maker,\9\ Firm 
Proprietary/Broker-Dealer,\10\ and Professional Customer \11\ orders in 
Penny Symbols and SPY pay a taker fee and a fee for responses to 
Crossing Orders of $0.48 per contract. The Exchange proposes to 
increase the taker fee for each of these market participants to $0.49 
per contract for current Tiers 1 through 4. For members that meet the 
volume requirements for the new Tier 5, Market Maker and Non-ISE Gemini 
Market Maker orders will pay a discounted rate of $0.48 per contract. 
The Exchange also proposes to increase the response fee, which is not 
based on tiers, to $0.49 per contract for all non-Priority Customer 
orders. As will remain the case, Priority Customer orders in these 
symbols pay a taker fee of $0.45 per contract for Tier 1 and $0.44 per 
contract for Tier 2 or higher, and a flat response fee of $0.45 per 
contract.
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    \9\ A ``Non-ISE Gemini Market Maker'' is a market maker as 
defined in Section 3(a)(38) of the Securities Exchange Act of 1934, 
as amended, registered in the same options class on another options 
exchange.
    \10\ A ``Firm Proprietary'' order is an order submitted by a 
member for its own proprietary account. This proposed rule change 
modifies the definition of a ``Broker-Dealer'' order as discussed in 
subsection 5 below.
    \11\ A ``Professional Customer'' is a person or entity that is 
not a broker/dealer and is not a Priority Customer.
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4. Non-Substantive Layout Changes
    Currently the Schedule of Fees has a single taker fee column for 
Tiers 2, 3, and 4. In order to make the fee schedule easier to read 
with the addition of new tier 5 for Market Maker, Non-ISE Gemini Market 
Maker, and Priority Customer orders, the Exchange proposes to break 
this into three separate columns for each tier as is currently done for 
maker rebates.\12\ The Exchange is not introducing any differentiation 
between taker fees charged for Tiers 2 through 4 at this time.
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    \12\ In addition, the Exchange notes that its maker rebate 
columns are each labeled ``maker rebate/fee.'' The Exchange proposes 
to take out the reference to fees from the header to these columns, 
which indicate only applicable rebate numbers.
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5. Broker Dealer Definition
    A ``Broker-Dealer'' order is presently defined as an order 
submitted by a member for a non-member broker-dealer account. In some 
instances, however, a member may submit orders for the account of 
another broker-dealer that is also an ISE Gemini member. Currently 
these orders would not fall into any of the market participant 
categories on the fee schedule. The Exchange believes that these orders 
should also be marked as Broker-Dealer orders, and therefore proposes 
to amend the definition of a Broker-Dealer order to include all orders 
submitted by a member for a broker-dealer account that is not its own 
proprietary account.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\13\ in general, and 
Section 6(b)(4) of the Act,\14\ 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.
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    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(4).
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1. Qualifying Tier Thresholds
    The Exchange believes that it is reasonable, equitable, and not 
unfairly

[[Page 21342]]

discriminatory to decrease the volume thresholds for achieving the four 
current tiers for Market Maker and Priority Customer orders as this 
proposed change is designed to attract additional volume to ISE Gemini. 
The Exchange already provides volume-based tiered maker rebates and 
taker fees for these orders, and believes that lowering the applicable 
volume thresholds to more attainable levels will incentivize members to 
send additional order flow to ISE Gemini in order to receive higher 
rebates and lower fees. In addition, the Exchange believes that it is 
reasonable, equitable, and not unfairly discriminatory to introduce a 
new volume tier, and to apply the volume tiers described in this filing 
to taker fees for all market participants, as the Exchange is providing 
additional incentives for members that bring substantial volume to ISE 
Gemini.
2. Maker Rebates for Market Maker and Priority Customer Orders
    The Exchange believes that the proposed changes to the maker 
rebates provided to Market Maker and Priority Customer orders are 
reasonable, equitable, and not unfairly discriminatory as the proposed 
rebates are still within the range of rebates provided by other maker/
taker options exchanges. The Exchange believes that providing higher 
rebates for Priority Customer orders, and for Priority Customer and 
Market Maker orders for members that meet the volume requirements for 
the new Tier 5, attracts that order flow to ISE Gemini and thereby 
creates liquidity to the benefit of all market participants who trade 
on the Exchange. Furthermore, while the Exchange is decreasing the 
maker rebate currently provided to certain Market Maker orders, it is 
also decreasing the volume thresholds required to achieve those rebates 
as described above. The Exchange believes that the combination of maker 
rebate rate changes, lower volume thresholds, and the addition of a 
fifth tier will encourage greater participation from Market Makers and 
Priority Customers on ISE Gemini.
3. Taker and Response Fees for Penny Symbols and SPY
    The Exchange believes that it is reasonable, equitable, and not 
unfairly discriminatory to increase the taker and response fees for 
Market Maker, Non-ISE Gemini Market Maker, Firm Proprietary/Broker-
Dealer, and Professional Customer orders in Penny Symbols and SPY as 
these fees are within the range of fees currently charged by other 
maker/taker options exchanges. The Exchange further believes that it is 
reasonable, equitable, and not unfairly discriminatory to offer members 
that achieve new Tier 5 lower taker fees for their Market Maker and 
Non-ISE Gemini Market Maker orders. As described above, this filing 
introduces a new tier that applies to orders executed by members that 
bring substantial volume to ISE Gemini. By offering discounted taker 
fees in these symbols for members that achieve the new tier, the 
Exchange is providing an incentive for these members to bring 
additional order flow to ISE Gemini, which will ultimately create 
liquidity to the benefit of all market participants who trade on the 
Exchange. The Exchange also notes that while it is not proposing 
similar fee discounts for Priority Customer orders, these orders are 
entitled to a rate that is lower than the rate charged to other market 
participants, and are already subject to a tiered discount for members 
that achieve Tier 2 or higher. The Exchange does not believe that it is 
unfairly discriminatory to limit the proposed taker fee discount to 
Market Maker and Non-ISE Gemini Market Maker orders as volume from 
other market participants is already sufficiently incented by the 
current fees and rebates offered. Moreover, with the introduction of 
tiered pricing that extends to Non-ISE Gemini Market Maker orders all 
market participants that trade on ISE Gemini will now be eligible for 
some form of volume based fees or rebates.
4. Non-Substantive Layout Changes
    The Exchange believes that the taker fee layout changes are 
reasonable, equitable, and not unfairly discriminatory as these are 
non-substantive changes intended to make the Schedule of Fees more 
transparent to members and investors.
5. Broker Dealer Definition
    The Exchange believes that the proposed amendment to the definition 
of a Broker-Dealer order is reasonable, equitable, and not unfairly 
discriminatory as this is a technical change intended to clarify how 
members should mark their orders. With this clarification, orders from 
a member broker-dealer executed through another member will be properly 
marked as Broker-Dealer orders, while orders submitted by a member for 
its own proprietary account will continue to be marked Firm 
Proprietary. This change is necessary to eliminate member confusion, as 
the current definitions of market participant types do not account for 
the scenario described above.
    The Exchange notes that it has determined to charge fees and 
provide rebates in Mini Options at a rate that is 1/10th the rate of 
fees and rebates the Exchange provides for trading in Standard Options. 
The Exchange believes it is reasonable and equitable and not unfairly 
discriminatory to assess lower fees and rebates to provide market 
participants an incentive to trade Mini Options on the Exchange. The 
Exchange believes the proposed fees and rebates are reasonable and 
equitable in light of the fact that Mini Options have a smaller 
exercise and assignment value, specifically 1/10th that of a standard 
option contract, and, as such, is providing fees and rebates for Mini 
Options that are 1/10th of those applicable to Standard Options.

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

    In accordance with Section 6(b)(8) of the Act,\15\ the Exchange 
does not believe that the proposed rule change will impose any burden 
on inter-market or intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. To the contrary, 
the Exchange believes that the proposed changes will promote 
competition as they are designed to allow ISE Gemini to better compete 
for order flow. 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.
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    \15\ 15 U.S.C. 78f(b)(8).
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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,\16\ and subparagraph (f)(2) of Rule 19b-4 
thereunder,\17\ because it establishes a

[[Page 21343]]

due, fee, or other charge imposed by ISE Gemini.
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    \16\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \17\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if 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 Gemini-2014-12 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 Gemini-2014-12. 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 inspection and 
copying 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 Gemini-2014-12 and 
should be submitted by May 6, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-08418 Filed 4-14-14; 8:45 am]
BILLING CODE 8011-01-P