Document ID: SEC-2017-0411-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2017-03-15T04:00Z

[Federal Register Volume 82, Number 49 (Wednesday, March 15, 2017)]
[Notices]
[Pages 13899-13901]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-05086]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80185; File No. SR-ISE-2017-17]

Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change To Modify the Qualified Contingent Cross and Solicitation Rebate 
Tiers

March 9, 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 27, 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 a rule change to amend the Schedule of Fees 
to modify the Qualified Contingent Cross and Solicitation rebate tiers.
    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
    Currently, members using QCC and/or other solicited crossing 
orders, including solicited orders executed in the Solicitation, 
Facilitation or Price Improvement Mechanisms, receive rebates for each 
originating contract side in all symbols traded on the Exchange. Once a 
member reaches a certain volume threshold in QCC orders and/or 
solicited crossing orders during a month, the Exchange provides rebates 
to that Member for all of its QCC and solicited crossing order traded 
contracts for that month. The applicable rebates are applied on QCC and 
solicited crossing order traded contracts once the 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 solicited 
orders between two Priority Customers. QCC and solicited orders between 
two Priority Customers receive the ``Customer to Customer'' rebate or 
``Customer to Customer'' Rebate PLUS, respectively.\3\ Non-``Customer 
to Customer'' and ``Customer to Customer'' volume is aggregated in 
determining the applicable volume tier.

[[Page 13900]]

The current volume threshold and corresponding rebates are as follows:
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    \3\ The PLUS rebate is for Members with total monthly 
unsolicited originating Facilitation contract side volume of 175,000 
or more.

----------------------------------------------------------------------------------------------------------------
                                                                                                 ``Customer to
               Originating contract sides                Non-``Customer to    ``Customer to    Customer'' rebate
                                                          Customer''rebate  Customer'' rebate         PLUS
----------------------------------------------------------------------------------------------------------------
0 to 99,999............................................              $0.00              $0.00              $0.00
100,000 to 199,999.....................................             (0.05)             (0.01)             (0.05)
200,000 to 499,999.....................................             (0.07)             (0.01)             (0.05)
500,000 to 699,999.....................................             (0.08)             (0.03)             (0.05)
700,000 to 999,999.....................................             (0.09)             (0.03)             (0.05)
1,000,000+.............................................             (0.11)             (0.03)             (0.05)
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    The Exchange now proposes to make two changes to the QCC and 
Solicitation rebate. First, the Exchange proposes to aggregate volume 
from affiliates in determining the Member's tier for purposes of the 
QCC and Solicitation rebate. As proposed, all eligible volume from 
affiliated Members will be aggregated in determining QCC and 
Solicitation volume totals, provided there is at least 75% common 
ownership between the Members as reflected on each Member's Form BD, 
Schedule A. The Exchange believes that aggregating volume across 
Members that share at least 75% common ownership will allow Members to 
continue to execute trades on the Exchange through separate broker-
dealer entities for different types of volume, while receiving rebates 
based on the aggregate volume being executed across such entities. The 
Exchange currently aggregates volume from affiliated Members in 
determining applicable fees and rebates, including, for example, the 
Crossing Fee Cap,\4\ and believes that it is appropriate to now extend 
this treatment to the QCC and Solicitation rebate.
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    \4\ See Securities Exchange Act Release No. 70873 (November 14, 
2013), 78 FR 69714 (November 20, 2013) (SR-ISE-2013-56).
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    In addition, the Exchange proposes to eliminate the current tier 
4--i.e., from 500,000 to 699,999 originating contract sides--and merge 
this tier into current tier 5. With this proposed change, Members that 
execute between 500,000 and 999,999 originating contract sides of 
eligible volume will earn the current tier 5 rebates--i.e., a Non-
``Customer to Customer'' rebate of $0.09 per originating contract side, 
a ``Customer-to-Customer'' rebate of $0.03 per originating contract 
side and a ``Customer-to-Customer'' rebate PLUS of $0.05 per 
originating contract side. The Exchange believes that this change will 
incentivize members to execute more QCC and/or other solicited crossing 
orders on the Exchange in order to qualify for enhanced rebates. The 
new tier schedule and rebates are shown in the following table:

----------------------------------------------------------------------------------------------------------------
                                                         Non-``Customer to                       ``Customer to
               Originating contract sides                    Customer''       ``Customer to    Customer'' rebate
                                                               rebate       Customer'' rebate         PLUS
----------------------------------------------------------------------------------------------------------------
0 to 99,999............................................              $0.00              $0.00              $0.00
100,000 to 199,999.....................................             (0.05)             (0.01)             (0.05)
200,000 to 499,999.....................................             (0.07)             (0.01)             (0.05)
500,000 to 999,999.....................................             (0.09)             (0.03)             (0.05)
1,000,000+.............................................             (0.11)             (0.03)             (0.05)
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\5\ in general, and Section 
6(b)(4) of the Act,\6\ 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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    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that it is reasonable, equitable, and not 
unfairly discriminatory to aggregate volume amongst corporate 
affiliates for purposes of the QCC and Solicitation rebate as this 
change is intended to avoid disparate treatment of firms that have 
divided their various business activities between separate corporate 
entities as compared to firms that operate those business activities 
within a single corporate entity. By way of example, many firms that 
are Members of the Exchange operate several different business lines 
within the same corporate entity. In contrast, other firms may be part 
of a corporate structure that separates those business lines into 
different corporate affiliates, either for business, compliance or 
historical reasons. Those corporate affiliates, in turn, are required 
to maintain separate memberships with the Exchange in order to access 
the Exchange. The Exchange currently aggregates volume executed by 
affiliates for other fees and rebates,\7\ and now proposes to similarly 
aggregate volume executed by affiliates for purposes of the QCC and 
Solicitation rebate. The proposed definition of ``affiliate'' to be 
used to aggregate volume for the QCC and Solicitation rebate is 
consistent with definitions used by the Exchange in other contexts.\8\
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    \7\ See e.g., supra note 4.
    \8\ Id.
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    In addition, the Exchange believes that the proposed changes to the 
QCC and Solicitation rebate tier schedule are reasonable and equitable 
as the proposed changes simplify the Exchange's tier structure, and 
provide more favorable rebates to members due to the reduced volume 
thresholds for achieving current tier 5 rebates. As explained above, 
the Exchange is eliminating the current tier 4 and merging it into 
current tier 5, thereby giving members a higher rebate for the same 
volume. The Exchange believes that this change will incentivize members 
to bring additional QCC and/or other solicited crossing order volume to 
the Exchange in order to benefit from the enhanced rebates. The 
Exchange also believes that the proposed changes

[[Page 13901]]

to the tier schedule are not unfairly discriminatory as all members 
will be able to attain higher rebates by executing the required volume 
of QCC and/or other solicited crossing orders on the Exchange.

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

    In accordance with Section 6(b)(8) of the Act,\9\ 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 proposed 
rule change merely allows for the aggregation of volume from affiliates 
for purposes of the QCC and Solicitation rebate, consistent with 
treatment of volume for other purposes in the Schedule of Fees, and 
with volume aggregation on other options markets. 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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    \9\ 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

    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,\10\ and Rule 19b-4(f)(2) \11\ 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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    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \11\ 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:

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-2017-17 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-2017-17. 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 SR-ISE-2017-17 and should be 
submitted on or before April 5, 2017.
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    \12\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-05086 Filed 3-14-17; 8:45 am]
BILLING CODE 8011-01-P