Document ID: SEC-2014-1168-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: ISE Gemini, LLC
Posted Date: 2014-07-14T04:00Z

[Federal Register Volume 79, Number 134 (Monday, July 14, 2014)]
[Notices]
[Pages 40813-40818]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-16362]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72553; File No. SR-ISEGemini-2014-19]

Self-Regulatory Organizations; ISE Gemini, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Related to the 
Price Improvement Mechanism

July 8, 2014.
    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 June 26, 2014, ISE Gemini, LLC (``Exchange'' or ``ISE Gemini'') 
filed with the Securities and Exchange Commission (``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 its rules regarding the Price 
Improvement Mechanism (``PIM'').
    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 this proposed rule change is to amend the Exchange's 
rules regarding the PIM functionality. The Exchange proposes to make 
two changes

[[Page 40814]]

to its PIM rules. The first change is based on a proposal recently 
submitted by NASDAQ OMX PHLX LLC (``PHLX''), and approved by the 
Commission,\3\ pursuant to which orders of any size may initiate the 
price improvement auction (``PIXL'') on PHLX at a price which is at or 
better than the national best bid or offer (``NBBO''), even in 
instances where PHLX has resting interest on the opposite side and thus 
not at least one cent better than PHLX's own best bid or offer as 
required in the past. The second change proposed in this filing relates 
to how responses are addressed in the PIM. With this proposed change, 
the manner in which response messages are treated will be similar to 
how they are treated in the price improvement auctions operated at 
other exchanges.\4\
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    \3\ See Securities Exchange Act Release No. 70654 (October 10, 
2013), 78 FR 62891 (October 22, 2013) (SR-PHLX-2013-76).
    \4\ See Securities Exchange Act Release No. 72009 (April 23, 
2014), 79 FR 24032 (April 29, 2014) (Notice of Filing of Amendment 
No. 1 and Order Granting Accelerated Approval of a Proposed Rule 
Change, as Modified by Amendment No. 1, To Adopt the MIAX PRIME 
Price Improvement Mechanism and the MIAX PRIME Solicitation 
Mechanism) (``MIAX Filing''). See also PHLX Rule 1080(n)(ii)(A)(6).
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    The PIM is a process that allows Electronic Access Members 
(``EAM'') to provide price improvement opportunities for a transaction 
wherein the Member seeks to execute an agency order as principal or 
execute an agency order against a solicited order (a ``Crossing 
Transaction'').\5\ A Crossing Transaction is comprised of the order the 
EAM represents as agent (the ``Agency Order'') and a counter-side order 
for the full size of the Agency Order (the ``Counter-Side Order''). The 
Counter-Side Order may represent interest for the Member's own account, 
or interest the Member has solicited from one or more other parties, or 
a combination of both.
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    \5\ See Securities Exchange Act Release Nos. 70050 (July 26, 
2013), 78 FR 46622 (August 1, 2013) (Order Granting the Application 
of Topaz Exchange, LLC for Registration as a National Securities 
Exchange).
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    Currently under Rule 723, a Crossing Transaction must be entered 
only at a price that is better than the ISE Gemini best bid or offer 
(``ISE Gemini BBO'') and equal to or better than the national best bid 
or offer (``NBBO''). Under Supplementary Material .08 to Rule 723, when 
the ISE Gemini BBO is equal to the NBBO, a Crossing Transaction may be 
entered where the price of the Crossing Transaction is equal to the ISE 
Gemini BBO if the Agency Order is on the opposite side of the market 
from the ISE Gemini BBO. In this case, the Agency Order is 
automatically executed against the ISE Gemini BBO. If the Agency Order 
is not fully executed after the ISE Gemini BBO is fully exhausted and 
is no longer at a price equal to the Crossing Transaction, the PIM is 
initiated for the balance of the order as provided in Rule 723.
    The Exchange now proposes to modify PIM so that Members may enter a 
Crossing Transaction at a price that is at or better than the NBBO on 
either side of the Agency Order and better than the limit order or 
quote on the ISE Gemini order book on the same side of the Agency 
Order. Members are not required to improve the ISE Gemini BBO on the 
opposite side of the Agency Order to initiate a PIM. Any resting 
interest on the ISE Gemini order book on the opposite side of the 
Agency Order will participate at the end of the auction in accordance 
with Rule 723(d). With this proposed rule change, PIM will now operate 
similar to the PIXL functionality at PHLX in terms of the price at 
which a PIM can be initiated.\6\ The proposed change to the start price 
of a PIM will not impact the current execution priority. However, as 
discussed in detail below, the Exchange is also proposing to make PIM 
auctions blind. In addition, the Exchange is proposing that Member 
orders will no longer yield priority to non-Member orders.\7\
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    \6\ See PHLX Rule 1080(n).
    \7\ Priority Customer interest will continue to be executed 
first followed by Professional Orders and Member interest. See 
proposed Rule 723(d)(2).
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    The Exchange believes the proposed rule change will allow a greater 
number of orders to receive price improvement that might not currently 
be afforded any price improvement. By auctioning the entire quantity in 
the PIM, the opportunity for price improvement over the prevailing NBBO 
is extended to the whole order, rather than only the portion that does 
not interact with the resting liquidity at the auction price level. As 
before, Priority Customers will continue to have priority at each price 
level in accordance with Rule 723(d). At each given price point, ISE 
Gemini will execute Priority Customer interest in a price/time fashion 
such that all Priority Customer interest which was resting on the order 
book is satisfied before any other interest that arrived after the PIM 
was initiated. After Priority Customer interest at a given price point 
has been satisfied, remaining contracts will be allocated among all 
Exchange quotes and orders in accordance with the execution rules set 
forth in Rule 723(d). Interest, whether resting prior to the 
commencement of the auction or arriving during the auction process, 
will continue to be executed in accordance with Rule 723(d).
    The Exchange believes using the allocation method that it currently 
does is a fair distribution because the Counter-Side Order provides 
significant value to the market. The EAM guarantees the Crossing 
Transaction price improvement, and is subject to market risk while the 
order is exposed to other market participants. The EAM may only improve 
the price where it stopped the agency side, and may not cancel its 
order once the PIM commences. Other market participants are free to 
modify or cancel their quotes and orders at any time during the 
auction. The Exchange believes that the EAM provides an important role 
in facilitating the price improvement opportunity for market 
participants.
    The following examples illustrate how the proposed rule change 
would operate:
Example 1
    ISE Gemini BBO is 2.48-2.51 (60x30) (10 of the 30 on the offer is a 
Priority Customer; 20 of the 30 on the offer is a market maker (MM1); 
all 60 on the bid is a MM). NBBO is 2.48-2.51 (100x100). Under the 
proposed rule change, an Agency Order to buy may be entered into the 
PIM at any price between and including 2.49 and 2.51.
    Assume a Priority Customer or non-Priority Customer order to buy 
100 contracts is submitted into the PIM with a stop price of 2.51. The 
PIM auction will commence with a notification being sent to market 
participants. Assume, during the auction, two market makers (MM2 and 
MM3) respond. MM2 responds to sell 10 contracts at 2.50 and MM3 
responds to sell 20 contracts at 2.51. At the end of the auction, the 
agency side of the order will buy 10 contracts from MM2 at 2.50, 
leaving 90 to be allocated at the original order limit of 2.51. The 
allocation process would continue and 10 contracts will be allocated to 
the Priority Customer on the book at 2.51, leaving 80 contracts to be 
allocated among the Counter-Side Order at 2.51 and the two market 
makers offering at 2.51. The remaining 80 contracts will be allocated 
at a price of 2.51 with 40 contracts (40% of the original order 
quantity) being allocated to the Counter-Side Order, 20 contracts 
allocated to MM1 and 20 contracts allocated to MM3.
    The Exchange believes the proposed rule change will attract new 
order flow that might not currently be afforded any price improvement 
opportunity. Moreover, the Exchange notes that the Boston Options 
Exchange (``BOX'') currently has rules that allow it to

[[Page 40815]]

commence its price improvement auction, called the Price Improvement 
Period (``PIP''), at a price equal to the NBBO.\8\ When a PIP is 
initiated at a price equal to the NBBO, regardless of size, the resting 
quotes and orders on BOX are considered for allocation at the end of 
the auction. BOX executes interest that existed on the BOX order book 
prior to the commencement of a PIP before executing any interest which 
joined during the auction. This behavior aligns with the BOX standard 
trade allocation rules as they employ a price/time allocation 
algorithm.
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    \8\ See BOX Rules Chapter V, Section 18(e).
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    Similar to BOX, the ISE Gemini proposed rule change will allow 
orders of any size to initiate an auction at a price which is equal to 
or better than the NBBO where ISE Gemini may have resting interest. ISE 
Gemini will execute a Crossing Transaction against any interest, 
resting prior to the commencement of an auction or interest which 
arrived during the auction, in accordance with the rules as stated and 
illustrated with the example above. While this is different than the 
allocation algorithm that BOX employs, this behavior is consistent with 
the ISE Gemini PIM rules in place today. This proposal will continue to 
afford the same price improvement opportunities for Priority Customer 
and non-Priority Customer Crossing Transactions as is in operation 
today, but with the ability to initiate such price improving auctions 
at a price that is equal to the NBBO, and therefore permitting more of 
such orders to receive price improvement.
    Further, as noted above, under Supplementary Material .08 to Rule 
723, when the ISE Gemini BBO is equal to the NBBO, a Crossing 
Transaction may currently be entered where the price of the Crossing 
Transaction is equal to the ISE Gemini BBO if the Agency Order is on 
the opposite side of the market from the ISE Gemini BBO. However, with 
this proposed rule change, if a Crossing Transaction is entered at a 
price equal to the ISE Gemini BBO on the opposite side of the market, 
the Agency Order will no longer automatically execute and the Agency 
Order will trade against any interest, resting prior to the 
commencement of an auction or interest which arrived during the 
auction, in accordance with rule 723(d). The Exchange, therefore, 
proposes to delete Supplementary Material .08 to Rule 723.
    The second change proposed in this filing is to modify the PIM 
functionality so responses sent by Members during a PIM auction are not 
visible to other auction participants. With this proposed change, 
responses will be treated in the same way they are treated in price 
improvement auctions operated by other exchanges.\9\
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    \9\ See supra note 4.
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    Currently, upon entry of a Crossing Transaction into the PIM, a 
broadcast message that includes the series, price and size of the 
Agency Order, and whether it is to buy or sell, is sent to all Members. 
Members are then given 500 milliseconds to indicate the size and price 
at which they want to participate in the execution of the Agency Order 
(``Improvement Orders''). Improvement Orders may be entered by all 
Members for their own account or for the account of a Public Customer 
in one-cent increments at the same price as the Crossing Transaction or 
at an improved price for the Agency Order, and for any size up to the 
size of the Agency Order. During the exposure period, Improvement 
Orders cannot be canceled, but can be modified to (1) increase the size 
at the same price, or (2) improve the price of the Improvement Order 
for any size up to the size of the Agency Order. During the exposure 
period, the aggregate size of the best prices (including the Counter-
Side Order, Improvement Orders, and any changes to either) are 
continually updated and broadcast to all Members.
    Because the PIM permits Members to continually receive broadcast 
messages, the Exchange adopted rules pursuant to which EAMs and 
Exchange Market Makers are required to yield priority to all non-Member 
orders \10\ which the Commission found to be consistent with the 
requirements in Section 11(a) of the Act. At the time PIM on ISE Gemini 
was approved, although the ``effect versus execute'' exemption under 
Section 11(a) existed and was available to ISE Gemini Members, because 
of the manner in which the PIM was designed, ISE Gemini Members were 
not able to comply with that exemption. Instead, the PIM was designed 
to rely on yielding by Members to non-Member orders to be consistent 
with Section 11(a) of the Act. The Exchange notes the options markets 
have evolved and some options exchanges that have adopted a price 
improvement auction rely now on the ``effect versus execute'' exemption 
under Section 11(a) and yield execution priority to Priority Customers 
only. As a competitive response, the Exchange now proposes to delete 
relevant parts of Rule 723 to modify the PIM functionality so that 
responses submitted during a PIM auction will no longer be continually 
updated and broadcast to all Members.\11\ Doing so will allow ISE 
Gemini Members to rely on the ``effect versus execute'' exemption under 
Section 11(a) of the Act when utilizing the PIM.
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    \10\ See Securities Exchange Act Release Nos. 70050 (July 26, 
2013), 78 FR 46622 (August 1, 2013). In connection with the current 
proposal to make PIM auctions blind, the Exchange proposes to delete 
reference to non-Member Professional Orders from its rules.
    \11\ A number of exchanges currently operate price improvement 
auctions where responses submitted by a member are blind, i.e., not 
visible to other auction participants. For example, MIAX Rule 
515A(a)(2)(i)(E) notes that ``responses shall not be visible to 
other Auction participants.'' See Securities Exchange Act Release 
No. 72009 (April 23, 2014), 79 FR 24032 (April 29, 2014). 
Additionally, PHLX Rule 1080(n)(ii)(A)(6) similarly provides that 
``responses will not be visible to Auction participants.'' See PHLX 
Rule 1080(n)(ii)(A)(6).
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    Section 11(a) of the Exchange Act prohibits any member of a 
national securities exchange from effecting transactions on that 
exchange for its own account, the account of an associated person, or 
an account over which it or its associated persons exercises discretion 
(``covered accounts''), unless an exception applies.\12\ Section 
11(a)(1) contains a number of exceptions for principal transactions by 
members and their associated persons. As set forth below, the Exchange 
believes that with the proposed change, the PIM rules are now 
consistent with the requirements in Section 11(a) and the rules 
thereunder.
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    \12\ 15 U.S.C. 78k(a)(1).
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    In this regard, Section 11(a)(1)(A) provides an exception from the 
prohibitions in Section 11(a) for dealers acting in the capacity of 
market makers. With respect to Market Makers on the Exchange, the 
Exchange believes that orders sent by them for covered accounts to the 
proposed PIM would qualify for this exception from Section 11(a).
    In addition to this Market Maker exception, Rule 11a2-2(T) under 
the Exchange Act, known as the ``effect versus execute'' rule, provides 
exchange members with an exception from Section 11(a) by permitting 
them, subject to certain conditions, to effect transactions for covered 
accounts by arranging for an unaffiliated member to execute the 
transactions on the exchange.\13\ To comply with the ``effect versus 
execute'' rule's conditions, a member: (i) Must transmit the order from 
off the exchange floor; (ii) may not participate in the execution of 
the transaction once it has been transmitted to the member performing 
the execution;\14\ (iii) may not be affiliated

[[Page 40816]]

with the member executing the transaction on the floor through the 
facilities of the Exchange; and (iv) with respect to an account over 
which the member has investment discretion, neither the member nor its 
associated person may retain any compensation in connection with 
effecting the transaction except as provided in the rule.\15\
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    \13\ 17 CFR 240.11a2-2(T).
    \14\ The member, however, may participate in clearing and 
settling the transaction. See Securities Exchange Act Release No. 
14563 (March 14, 1978), 43 FR 11542 (March 17, 1978).
    \15\ 17 CFR 240.11a2-2(T).
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    The Exchange believes that orders sent by Members for covered 
accounts to the proposed PIM would qualify for this ``effect versus 
execute'' exception from Section 11(a), as described below. In this 
regard, the first condition of Rule 11a2-2(T) is that orders for 
covered accounts be transmitted from off the exchange floor. The ISE 
Gemini trading system and the PIM receives all orders electronically 
through remote terminals or computer-to-computer interfaces. The 
Exchange represents that orders for covered accounts from Members will 
be transmitted from a remote location directly to the PIM auction by 
electronic means. In the context of other automated trading systems, 
the Commission has found that the off-floor transmission requirement is 
met if a covered account order is transmitted from a remote location 
directly to an exchange's floor by electronic means.\16\ The second 
condition of Rule 11a2-2(T) requires that the member not participate in 
the execution of its order once the order is transmitted to the floor 
for execution.\17\ The Exchange represents that, upon submission to the 
PIM, an order will be executed automatically pursuant to the rules set 
forth for the mechanism. In particular, execution of an order sent to 
the mechanism depends not on the Member entering the order, but rather 
on what other orders are present and the priority of those orders. 
Thus, at no time following the submission of an order is a Member able 
to acquire control or influence over the result or timing of order 
execution.\18\ Rule 11a2-2(T)'s third condition requires that the order 
be executed by an exchange member who is unaffiliated with the member 
initiating the order. The Commission has stated that the requirement is 
satisfied when automated exchange facilities, such as the PIM, are 
used, as long as the design of these systems ensures that members do 
not possess any special or unique trading advantages in handling their 
orders after transmitting them to the exchange.\19\ The Exchange 
represents that the PIM is designed so that no Member has any special 
or unique trading advantage in the handling of its orders after 
transmitting its orders to the mechanism. Rule 11a2-2(T)'s fourth 
condition requires that, in the case of a transaction effected for an 
account with respect to which the initiating member or an associated 
person thereof exercises investment discretion, neither the initiating 
member nor any associated person thereof may retain any compensation in 
connection with effecting the transaction, unless the person authorized 
to transact business for the account has expressly provided otherwise 
by written contract referring to Section 11(a) of the Act and Rule 
11a2-2(T) thereunder.\20\ The Exchange recognizes that Members relying 
on Rule 11a2-2(T) for transactions effected through the PIM must comply 
with this condition of the Rule.
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    \16\ See, e.g., Securities Exchange Act Release Nos. 59154 
(December 23, 2008), 73 FR 80468 (December 31, 2008) (SR-BSE-2008-
48); 57478 (March 12, 2008), 73 FR 14521 (March 18, 2008) (SR-
NASDAQ-2007-004 and SR-NASDAQ-2007-080); 49068 (January 13, 2004), 
69 FR 2775 (January 20, 2004) (SR-BSE-2002-15); 15533 (January 29, 
1979), 44 FR 6084 (January 31, 1979) (``1979 Release''); 14563 
(March 14, 1978), 43 FR 11542 (March 17, 1978) (``1978 Release'').
    \17\ The description above covers the universe of the types of 
Members (i.e., Market Makers, EAMs).
    \18\ The Exchange notes that a Member may cancel or modify the 
order, or modify the instructions for executing the order, but that 
such instructions would be transmitted from off the floor of the 
Exchange. The Commission has stated that the non-participation 
requirement is satisfied under such circumstances so long as such 
modifications or cancellations are also transmitted from off the 
floor. See 1978 Release (stating that the ``non-participation 
requirement does not prevent initiating members from canceling or 
modifying orders (or the instructions pursuant to which the 
initiating member wishes to be executed) after the orders have been 
transmitted to the executing member, provided that any such 
instructions are also transmitted from off the floor'').
    \19\ In considering the operation of automated execution systems 
operated by an exchange, the Commission noted that, while there is 
not an independent executing exchange member, the execution of an 
order is automatic once it has been transmitted into the system. 
Because the design of these systems ensures that members do not 
possess any special or unique trading advantages in handling their 
orders after transmitting them to the exchange, the Commission has 
stated that executions obtained through these systems satisfy the 
independent execution requirement of Rule 11a2-2(T). See 1979 
Release.
    \20\ See 17 CFR 240.11a2-2(T)(a)(2)(iv). In addition, Rule 11a2-
2(T)(d) requires a member or associated person authorized by written 
contract to retain compensation, in connection with effecting 
transactions for covered accounts over which such member or 
associated persons thereof exercises investment discretion, to 
furnish at least annually to the person authorized to transact 
business for the account a statement setting forth the total amount 
of compensation retained by the member in connection with effecting 
transactions for the account during the period covered by the 
statement which amount must be exclusive of all amounts paid to 
others during that period for services rendered to effect such 
transactions. See also 1978 Release (stating ``[t]he contractual and 
disclosure requirements are designed to assure that accounts 
electing to permit transaction-related compensation do so only after 
deciding that such arrangements are suitable to their interests'').
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2. Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Securities Exchange Act of 1934 (the ``Act'') \21\ in 
general, and furthers the objectives of Section 6(b)(5) of the Act \22\ 
in particular, in that it is designed to promote just and equitable 
principles of trade, to remove impediments to and perfect the mechanism 
for a free and open market and a national market system, and, in 
general, to protect investors and the public interest by creating 
positive, beneficial incentives for EAMs to provide price improvement 
opportunities to market participants. With the proposed change to the 
start price of a PIM auction, Members will not be required to improve 
the ISE Gemini BBO on the opposite side of the Agency Order to initiate 
a PIM. Further, any resting interest on the ISE Gemini order book on 
the opposite side of the Agency Order will now participate at the end 
of the auction. As a result, the proposed rule change will remove 
impediments to and perfect the mechanism for a free and open market and 
will result in more orders being executed in the PIM, thus providing an 
increased probability of price improvement for all orders, regardless 
of their size. With this proposed rule change, market participants 
would be incentivized to introduce more orders to the PIM for the 
opportunity to receive price improvement. Furthermore, Priority 
Customers will continue to have priority at each price level in 
accordance with ISE Gemini Rule 723(d). While currently non-Member 
Professional Orders are executed after Priority Customer interest and 
before Member interest, with this proposal, which in part amends ISE 
Gemini rules to make PIM a blind auction, all Professional Orders will 
now be at par with Member interest and will be executed after Priority 
Customer orders are executed. The Exchange believes it is appropriate 
to give Professionals Orders the same priority that is given to broker-
dealer orders because professional customers and broker-dealers 
essentially behave the same, i.e., the type of trading professional 
customers engage in largely resembles that of a broker-dealer. The 
Exchange believes it is appropriate to treat these market participants 
at par with one another.
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    \21\ 15 U.S.C. 78f(b).
    \22\ 15 U.S.C. 78f(b)(5).
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    In particular, the Exchange believes that using the same allocation 
process as

[[Page 40817]]

is used today for Crossing Transactions is fair and equitable because 
of the value the EAM brings to the marketplace. Specifically, by 
stopping the Crossing Transaction at or better than the NBBO, the EAM 
facilitates a process that protects investors and is in the public 
interest by providing an opportunity for price improvement. The 
Exchange believes the proposed rule change generally will benefit 
investors by offering more opportunities for orders to receive price 
improvement. For these reasons, the Exchange believes that the proposal 
is fair, reasonable and equitable for all market participants.
    The Exchange believes its proposal to amend the manner in which 
responses in the PIM auction are addressed is consistent with Section 
6(b) of the Act. The proposal to make responses in the PIM blind to 
other auction participants and the corresponding change to the priority 
rules for the PIM are similar to existing priority rules that 
distinguish between Priority Customers, Market Makers, and Professional 
interest in a manner that will help ensure a fair and orderly market by 
maintaining priority of orders and quotes while still affording the 
opportunity for price improvement is both reasonable and appropriate.
    The Exchange believes the proposed rule change is appropriate in 
the [sic] price improvement auctions are widely recognized by market 
participants as invaluable, both as a tool to access liquidity, and a 
mechanism to help meet their best execution obligations. The proposed 
rule change will further the ability of market participants to carry 
out these strategies. Finally, as noted above, the proposed changes are 
a competitive response to how price improvement auctions on other 
exchanges currently operate and with this proposal, the Exchange will 
be on a more equal footing to compete with other exchanges for orders 
to be executed in the PIM.

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 Exchange's proposal to 
amend its rules regarding the start price of a PIM auction will not 
impose a burden on competition because it will increase the number of 
orders that may be executed in the PIM and thereby receive price 
improvement opportunities that were not previously available to them. 
Further, the Exchange's proposal to make PIM a blind auction will allow 
ISE Gemini to compete with other options exchanges that already have 
blind auctions which most options exchanges that operate a price 
improvement auction do. Finally, the Exchange's proposal to amend the 
execution priority rules will not be a burden on competition because 
the proposed change will allow the Exchange to compete with other 
options exchanges that operate a price improvement auction and whose 
rules already permit its members to rely on the ``effect versus 
execute'' exemption when utilizing the price improvement auction of 
those markets. The changes proposed to Rule 723 will offer 
opportunities found on other options exchanges and create systems that 
embolden market participants to seek out price improvement 
opportunities for customers. Accordingly, the proposed rule change will 
have no impact on competition other than to strengthen competition 
among the options exchanges that provide price improvement 
opportunities.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A)(ii) of the Act \23\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\24\
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    \23\ 15 U.S.C. 78s(b)(3)(a)(ii).
    \24\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires the Exchange to give the Commission written notice of the 
Exchange's intent to file the proposed rule change along with a 
brief description and text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission. The 
Exchange has satisfied this requirement.
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    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 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 Number SR-ISEGemini-2014-19 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-ISEGemini-2014-19. 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 ISE. 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-ISEGemini-2014-19 and should 
be submitted on or before August 4, 2014.

[[Page 40818]]

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-16362 Filed 7-11-14; 8:45 am]
BILLING CODE 8011-01-P