Document ID: SEC-2016-0141-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2016-01-27T05:00Z

[Federal Register Volume 81, Number 17 (Wednesday, January 27, 2016)]
[Notices]
[Pages 4710-4712]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-01663]

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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.
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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 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.
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    \3\ The 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.
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    Currently, the Exchange offers members rebates in QCC and/or other 
solicited crossing orders (including ``Customer to Customer'' Orders), 
i.e.

[[Page 4711]]

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.
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    \5\ The 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.
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    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.
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    \6\ See 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.
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    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.
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    \8\ 15 U.S.C. 78f.
    \9\ 15 U.S.C. 78f(b)(4).
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    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.
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    \10\ See CBOE Fee Schedule, QCC Rate Table, Notes at https://www.cboe.com/publish/feeschedule/CBOEFeeSchedule.pdf.
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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.
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    \11\ 15 U.S.C. 78f(b)(8).
    \12\ CBOE 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.
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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,\13\ and subparagraph (f)(2) of Rule 19b-4 
thereunder,\14\ because it establishes a due, fee, or other charge 
imposed by ISE.
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    \13\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \14\ 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

[[Page 4712]]

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.
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    \15\ 17 CFR 200.30-3(a)(12).

    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