Document ID: SEC-2014-1797-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: ISE Gemini, LLC
Posted Date: 2014-10-27T04:00Z

[Federal Register Volume 79, Number 207 (Monday, October 27, 2014)]
[Notices]
[Pages 63994-63995]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-25429]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73393; File No. SR-ISEGemini-2014-27]

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

October 21, 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 October 10, 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 to adopt a 
route-out fee for Non-Customer orders routed to away markets. 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 to adopt a route-out fee for Non-Customer orders \3\ routed to 
away markets. The Exchange's Schedule of Fees has separate 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.
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    \3\ A Non-Customer Order is an order for the account of a person 
or entity that is a broker or dealer in securities. See ISE Gemini 
Rules 100(a)(27)-(28).
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    The Exchange presently charges a route-out fee applicable to 
Priority Customer \4\ and Professional Customer \5\ orders routed to 
away markets pursuant to the Options Order Protection and Locked/
Crossed Market Plan (the ``Plan''). Specifically, Priority Customer 
orders pay a route-out fee of $0.50 per contract in Penny Symbols 
(including SPY),\6\ and $0.90 per contract in Non-Penny Symbols.\7\ 
Professional Customer orders pay a fee of $0.55 per contract in Penny 
Symbols (including SPY), and $0.95 per contract in Non-Penny Symbols. 
On July 31, 2014 the Exchange's sister exchange, the International 
Securities Exchange, LLC (``ISE''), filed a proposed rule change that 
introduced linkage routing for Non-Customer orders, which became 
effective on September 1, 2014.\8\ Thereafter, the Exchange filed its 
own proposed rule change, which noted that certain of the rules adopted 
in the ISE filing are incorporated by reference into ISE Gemini rules, 
and adopted other related rules in chapters that are not incorporated 
by reference, effective as of September 18, 2014.\9\ In connection with 
this new functionality, the Exchange now proposes to adopt a route-out 
fee for Non-Customer orders routed to other options exchanges. The 
proposed route-out fee will be $0.55 per contract in Penny Symbols 
(including SPY), and $0.95 per contract in Non-Penny Symbols, in line 
with the rates described above for Professional Customer orders, and 
will be applicable to all Market Maker,\10\ Non-ISE Gemini Market 
Maker,\11\ and Firm Proprietary \12\/Broker-Dealer \13\ orders routed 
to away markets pursuant to the Plan.
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    \4\ A Priority Customer is defined in ISE Gemini Rule 
100(a)(37A) as 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\ A Professional Customer is a person who is not a broker/
dealer and is not a Priority Customer.
    \6\ ``Penny Symbols'' are options overlying all symbols listed 
on ISE Gemini that are in the Penny Pilot Program
    \7\ ``Non- Penny Symbols'' are options overlying all symbols 
excluding Penny Symbols.
    \8\ See Securities Exchange Act Release No. 72816 (August 12, 
2014), 79 FR 48811 (August 18, 2014) (SR-ISE-2014-37).
    \9\ See Securities Exchange Act Release No. 72919 (August 26, 
2014) 79 FR 52096 (September 2, 2014) (SR-ISE Gemini-2014-22).
    \10\ The term ``Market Makers'' refers to ``Competitive Market 
Makers'' and ``Primary Market Makers'' collectively. See ISE Gemini 
Rule 100(a)(25).
    \11\ A Non-ISE Gemini Market Maker, or Far Away Market Maker 
(``FARMM''), is a market maker as defined in Section 3(a)(38) of the 
Securities Exchange Act of 1934 registered in the same options class 
on another options exchange.
    \12\ A ``Firm Proprietary'' order is an order submitted by a 
member for its own proprietary account.
    \13\ A Broker-Dealer order is an order submitted by a Member for 
a non-Member broker-dealer account.
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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,\14\ in general, and 
Section 6(b)(4) of the Act,\15\ 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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    \14\ 15 U.S.C. 78f.
    \15\ 15 U.S.C. 78f(b)(4).
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    In particular, the Exchange believes the proposed route-out fee is 
reasonable and equitable as it offsets costs incurred by the Exchange 
in connection with using unaffiliated broker-dealers to access other 
exchanges for linkage executions. As the Exchange recently expanded its 
linkage routing capabilities to include Non-Customer orders, the 
Exchange believes that it is appropriate to adopt corresponding fees at 
this time. The fees proposed herein are lower than those charged by 
some of the Exchange's competitors, including, for example, NASDAQ OMX 
PHLX (``PHLX''), which charges a fee of $0.97 per contract for routing 
Non-Customer orders to away markets.\16\
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    \16\ See PHLX Fee Schedule, Section V, Routing Fees.
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    Furthermore, the Exchange believes that the proposed fees are not 
unfairly discriminatory because these fees are equivalent to fees 
currently charged for Professional Customer orders routed by the 
Exchange to other options markets, and would therefore be uniformly 
applied to all Professional Customer and Non-Customer orders. As has 
historically been the case, Priority

[[Page 63995]]

Customer orders will continue to pay lower route-out fees than orders 
from other market participants, including Professional Customer and, 
now, Non-Customer orders. The Exchange believes that it is equitable 
and not unfairly discriminatory to charge lower fees for Priority 
Customer orders than Professional Customer and Non-Customer orders as 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 and Non-Customers, who will generally 
submit a higher number of orders (many of which do not result in 
executions) than Priority Customers. Moreover, the Exchange notes that 
Priority Customer orders are often charged lower taker fees than 
Professional Customer and Non-Customer orders on other options 
exchanges, meaning that the execution costs to the Exchange for routing 
these orders is correspondingly lower. As such, the Exchange believes 
that it is equitable and not unfairly discriminatory to pass on this 
cost savings to the firms entering these orders.
    The Exchange has determined to charge fees for regular orders in 
Mini Options at a rate that is 1/10th the rate of fees the Exchange 
currently provides for trading in Standard Options. The Exchange 
believes it is reasonable and equitable and not unfairly discriminatory 
to assess lower fees to provide market participants an incentive to 
trade Mini Options on the Exchange. The Exchange believes the proposed 
fees 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, levying fees 
that are 1/10th of what market participants pay to trade Standard 
Options. As a result, routing fees for Mini Options will continue to be 
charged at 1/10th the rate of fees of Standard Options.

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 intermarket or intramarket competition that is not 
necessary or appropriate in furtherance of the purposes of the Act as 
it simply adopts fees for routing Non-Customer orders to other options 
exchanges, in connection with the introduction of linkage routing for 
these orders. 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 to remain competitive with 
other exchanges. For the reasons described above, the Exchange believes 
that the proposed fee change reflects this competitive environment.

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,\17\ and subparagraph (f)(2) of Rule 19b-4 
thereunder,\18\ because it establishes a due, fee, or other charge 
imposed by ISE Gemini.
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    \17\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \18\ 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-ISEGemini-2014-27 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-2014-27. 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-ISEGemini-2014-27 and should 
be submitted by November 17, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-25429 Filed 10-24-14; 8:45 am]
BILLING CODE 8011-01-P