
[Federal Register Volume 81, Number 47 (Thursday, March 10, 2016)]
[Notices]
[Pages 12770-12775]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-05322]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77292; File No. SR-ISEMercury-2016-02]


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

March 4, 2016.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'' or ``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\ 
notice is hereby given that on February 18, 2016, ISE Mercury, LLC (the 
``Exchange'' or ``ISE Mercury'') filed with the Securities and Exchange 
Commission (``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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    ISE Mercury proposes to establish a Schedule of Fees by adopting 
fees and rebates for all Regular Orders in standard options traded on 
ISE Mercury, and adopting route-out fees and marketing 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 filing is to establish a Schedule 
of Fees by adopting fees and rebates for Regular Orders \3\ in standard 
options traded on ISE Mercury, and adopting route-out fees and 
marketing fees.
---------------------------------------------------------------------------

    \3\ A Regular Order is an order that consists of only a single 
option series and is not submitted with a stock leg.
---------------------------------------------------------------------------

Regular Order Fees and Rebates
    The Exchange proposes to assess per contract transaction fees and 
rebates in all option classes traded on the Exchange to market 
participants that trade on the Exchange. The fees and rebates depend on 
the category of market participant submitting orders to the Exchange 
and the type of orders submitted to the Exchange.
    The proposed Schedule of Fees identifies the following categories 
of market participants: (1) Market Maker; \4\ (2) Non-ISE Mercury 
Market Maker; \5\ (3) Firm Proprietary \6\/Broker-Dealer; \7\ (4) 
Professional Customer; \8\ (5) Priority

[[Page 12771]]

Customer; \9\ and (6) Retail.\10\ The fees and rebates to be assessed 
for Regular Orders in standard options that are in the Penny Pilot \11\ 
are: (1) $0.20 fee per contract for Market Maker orders,\12\ (2) $0.47 
fee per contract for Non-ISE Mercury Market Maker, Firm Proprietary/
Broker-Dealer, and Professional Customer orders; and (3) ($0.18) rebate 
per contract for Priority Customer orders. The transaction fees and 
rebates to be assessed for Regular Orders in standard options that are 
not in the Penny Pilot are: (1) $0.20 fee per contract for Market Maker 
orders; (2) $0.90 fee per contract for Non-ISE Mercury Market Maker, 
Firm Proprietary/Broker-Dealer, and Professional Customer orders; and 
(3) ($0.18) rebate per contract for Priority Customer orders.
---------------------------------------------------------------------------

    \4\ The term Market Makers 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 at the same level as Market Maker orders.
    \5\ A Non-ISE Mercury 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, as amended (``Exchange Act''), 
registered in the same options class on another options exchange.
    \6\ A Firm Proprietary order is an order submitted by a member 
for its own proprietary account.
    \7\ A Broker-Dealer order is an order submitted by a member for 
a non-member broker-dealer account.
    \8\ A Professional Customer is a person who is not a broker/
dealer and is not a Priority Customer.
    \9\ 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).
    \10\ A Retail order is a Priority Customer order that originates 
from a natural person, provided that no change is made to the terms 
of the order with respect to price or side of market and the order 
does not originate from a trading algorithm or any other 
computerized methodology. On ISE Mercury, Retail orders will be 
charged the same fee and receive the same rebate as Priority 
Customer orders.
    \11\ Under the Penny Pilot, the minimum price variation for all 
participating options classes, except for the Nasdaq-100 Index 
Tracking Stock (``QQQ''), the SPDR S&P 500 Exchange Traded Fund 
(``SPY'') and the iShares Russell 2000 Index Fund (``IWM''), is 
$0.01 for all quotations in options series that are quoted at less 
than $3 per contract and $0.05 for all quotations in options series 
that are quoted at $3 per contract or greater. The proposed fees and 
rebates for Penny Pilot symbols apply to all classes in the Penny 
Pilot, i.e., to series that are quoted at less than $3 that have a 
minimum price variation of $0.01 and to series that are quoted at $3 
or more that have an minimum price variation of $0.05. QQQ, SPY, and 
IWM are quoted in $0.01 increments for all options series.
    \12\ This fee applies to ISE Mercury Market Maker orders sent to 
the Exchange by Electronic Access Members.
---------------------------------------------------------------------------

    The fees and rebates noted above also apply to orders that are 
exposed at the National Best Bid or Offer (NBBO) by the Exchange 
(``Flash Order'').\13\ When ISE Mercury is not at the NBBO, certain 
orders are exposed to members to give them an opportunity to match the 
NBBO before those orders are sent for execution pursuant to intermarket 
linkage rules. For all Flash Orders, the Exchange will charge the 
applicable fee.
---------------------------------------------------------------------------

    \13\ See ISE Mercury Rule 1901, Supplementary Material .02.
---------------------------------------------------------------------------

    The Exchange proposes to adopt a fee of $0.20 per contract for 
Crossing Orders \14\ in all symbols traded on the Exchange for all 
market participants, except Priority Customers who will be charged 
$0.00 per contract for Crossing Orders. A Crossing Order is an order 
executed in the Exchange's Facilitation Mechanism, Solicited Order 
Mechanism, Price Improvement Mechanism (``PIM''), or submitted as a 
Qualified Contingent Cross order. Orders executed in the Block Order 
Mechanism are also considered Crossing Orders. As an exception to the 
fees for Crossing Orders, the Exchange proposes to adopt a fee of $0.05 
per contract for PIM orders of 500 or fewer contracts in all symbols 
traded on the Exchange for all market participants, except that 
Priority Customer orders on the originating side of a PIM auction will 
receive a rebate of ($0.13) per contract. Priority Customer orders on 
the contra-side of a PIM auction will pay no fee and receive no rebate. 
PIM orders greater than 500 contracts will pay the Fee for Crossing 
Orders, described above.
---------------------------------------------------------------------------

    \14\ These fees apply to both originating and contra orders.
---------------------------------------------------------------------------

    The Exchange believes the proposed Fees for Crossing Orders are 
competitive with fees charged by other options exchanges that have 
functionality for crossing orders. For example, International 
Securities Exchange, LLC's (``ISE'') \15\ and ISE Gemini, LLC's (``ISE 
Gemini'') \16\ Fees for Crossing Orders in all symbols are almost 
identical to those charged by ISE Mercury in all symbols. Additionally, 
ISE Mercury's Fees for PIM Orders of 500 or Fewer Contracts are similar 
to ISE's Fee for PIM Orders of 100 or Fewer Contracts,\17\ except that 
Priority Customers on ISE Mercury receive a rebate rather than not 
being charged. Rebates for orders of 500 contracts or fewer are 
designed to increase Priority Customer order flow to the Exchange.
---------------------------------------------------------------------------

    \15\ See ISE Fee Schedule, I. Regular Order Fees and Rebates, 
Fee for Crossing Orders at http://www.ise.com/assets/documents/OptionsExchange/legal/fee/ISE_fee_schedule.pdf.
    \16\ See ISE Gemini Fee Schedule, I. Regular Order Fees and 
Rebates, Fee for Crossing Orders at http://www.ise.com/assets/gemini/documents/OptionsExchange/legal/fee/Gemini_Fee_Schedule.pdf.
    \17\ See ISE Fee Schedule, I. Regular Order Fees and Rebates, 
Fee for PIM Orders of 100 or Fewer Contracts at http://www.ise.com/assets/documents/OptionsExchange/legal/fee/ISE_fee_schedule.pdf.
---------------------------------------------------------------------------

    The Exchange also proposes to adopt Fees for Responses to Crossing 
Orders. A Response to a Crossing Order is any contra-side interest 
(i.e., orders and quotes) submitted after the commencement of an 
auction in the Exchange's Facilitation Mechanism, Solicited Order 
Mechanism, Block Order Mechanism, or PIM. The Exchange proposes to 
adopt a fee of (1) $0.20 per contract for Market Maker orders and (2) 
$0.50 per contract for Non-ISE Mercury Market Maker, Firm Proprietary/
Broker-Dealer, Professional Customer, and Priority Customer orders.
    The Exchange also believes the proposed fees for Responses to 
Crossing Orders are competitive with fees charged by other options 
exchanges that have functionality for crossing orders. ISE Mercury's 
Fees for Responses to Crossing Orders in all symbols are in line with 
those on ISE,\18\ except that ISE Mercury offers a reduced fee to 
Market Makers because they have requirements and obligations to the 
Exchange that the other market participants do not (such as quoting 
requirements). Market Makers are also charged Marketing Fees, discussed 
below, which are not assessed to other market participants. The 
Exchange therefore believes it is appropriate to charge these fees for 
Responses to Crossing Orders.
---------------------------------------------------------------------------

    \18\ See id. at I. Regular Order Fees and Rebates, Fee for 
Responses to Crossing Orders.
---------------------------------------------------------------------------

Route-Out Fees
    The Exchange proposes to adopt a Route-Out Fee of $0.55 per 
contract for executions of all market participant orders for standard 
options in symbols that are in the Penny Pilot that are routed to one 
or more exchanges in connection with the Options Order Protection and 
Locked/Crossed Market Plan. The Exchange further proposes to adopt a 
Route-Out Fee of $0.96 per contract for executions of all market 
participant orders for standard options in symbols that are not in the 
Penny Pilot that are routed to one or more exchanges in connection with 
the Options Order Protection and Locked/Crossed Market Plan. No 
additional transaction fees are added to the Route-Out Fees, unlike 
other exchanges, which, in addition to a fixed route-out fee, assess 
the actual transaction fees charged by the exchange the order is routed 
to.\19\
---------------------------------------------------------------------------

    \19\ See MIAX Fee Schedule, (1) Transaction Fees, (c) Fees and 
Rebates for Customer Orders Routed to Another Options Exchange at 
https://www.miaxoptions.com/sites/default/files/MIAX_Options_Fee_Schedule_02012016B.pdf and PHLX Fee Schedule, V. 
Routing Fees, at http://www.nasdaqtrader.com/Micro.aspx?id=phlxpricing.
---------------------------------------------------------------------------

    The Route-Out Fees offset costs incurred by the Exchange in 
connection with using unaffiliated broker-dealers to access other 
exchanges for linkage executions and are therefore appropriate because 
market participants that are submitting these orders can route them 
directly to away exchanges, if desired, and should not be able to forgo 
an away market fee by directing their orders to the Exchange. The 
Exchange therefore believes it is appropriate to charge these orders 
the proposed fee in order to

[[Page 12772]]

recoup costs associated with routing out these orders.
Marketing Fees
    The Exchange proposes Marketing Fees that help its Market Makers 
establish marketing fee arrangements with Electronic Access Members 
(``EAM'') in exchange for EAMs routing some or all of their order flow 
to those Market Makers. This program is funded through a fee paid by 
Exchange Market Makers for each Priority Customer contract they execute 
against in the symbols that are subject to their respective Marketing 
Fees.\20\ In particular, ISE Mercury proposes to charge Market Makers 
$0.25 per contract for options classes that are in the Penny Pilot and 
$0.70 per contract for options classes not in the Penny Pilot when 
trading against a Priority Customer order.\21\ These fees are the same 
as those charged by NASDAQ OMX PHLX (``PHLX''),\22\ which calls these 
fees Payment for Order Flow Fees. The Exchange believes these fees are 
appropriate.
---------------------------------------------------------------------------

    \20\ Marketing Fees apply to ISE Mercury Market Makers for each 
Regular Priority Customer contract executed. Marketing Fees are 
waived for Flash Order responses.
    \21\ These Marketing Fees will be rebated proportionately to the 
members that paid the fee such that on a monthly basis the marketing 
fee fund balance administered by a Primary Market Maker for a group 
of options established under Rule 802(b) does not exceed $100,000 
and the marketing fee fund balance administered by a preferenced 
Competitive Market Maker for such a Group does not exceed $100,000. 
A preferenced Competitive Market Maker that elects not to administer 
a fund will not be charged the marketing fee. The Exchange also 
assesses an administrative fee of .45% on the total amount of the 
fund collected each month.
    \22\ See PHLX Fee Schedule, II. Multiply Listed Options Fees, 
Payment For Order Flow Fees at http://www.nasdaqtrader.com/Micro.aspx?id=phlxpricing.
---------------------------------------------------------------------------

FINRA Web CRD Fees
    The Exchange proposes to adopt regulatory fees related to Web CRD, 
which are collected by the Financial Industry Regulatory Authority 
(``FINRA'') (``FINRA Web CRD Fees'').\23\ The proposed fees are 
collected and retained by FINRA via Web CRD for the registration of 
employees of ISE Mercury members that are not FINRA members (``Non-
FINRA members''). The Exchange is merely listing these fees on its 
Schedule of Fees. The Exchange does not collect or retain these fees.
---------------------------------------------------------------------------

    \23\ FINRA operates Web CRD, the central licensing and 
registration system for the U.S. securities industry. FINRA uses Web 
CRD to maintain the qualification, employment and disciplinary 
histories of registered associated persons of broker-dealers.
---------------------------------------------------------------------------

    The FINRA Web CRD Fees listed on the ISE Mercury Schedule of Fees 
consists of General Registration Fees of $100 (for each initial Form U4 
filed for the registration of a representative or principal), $110 (for 
the additional processing of each initial or amended Form U4, Form U5 
or Form BD that includes the initial reporting, amendment or 
certification of one of more disclosure events or proceedings), and $45 
(annual system processing fee assessed only during renewals). The FINRA 
Web CRD Fees also consist of Fingerprint Processing Fees for the 
initial, second and third submissions. There is a separate fee for 
electronic submissions and paper submissions. The initial electronic 
and paper submission fees are $27.75 and $42.75, respectively. The 
second electronic and paper submission fees are $15.00 and $30.00, 
respectively. The third electronic and paper submission fees are $27.75 
and $42.75, respectively. Finally, there is a $30 processing fee for 
fingerprint results submitted by self-regulatory organizations other 
than FINRA. The FINRA Web CRD Fees are user-based and there is no 
distinction in the cost incurred by FINRA if the user is a FINRA member 
or a Non-FINRA member. Accordingly, the proposed fees mirror those 
currently assessed by FINRA.\24\
---------------------------------------------------------------------------

    \24\ See Securities Exchange Act Release No. 67247 (June 25, 
2012), 77 FR 38866 (June 29, 2012) (SR-FINRA-2012-030) (the ``FINRA 
Fee Filing'').
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\25\ in general, and 
Section 6(b)(4) of the Act,\26\ 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.
---------------------------------------------------------------------------

    \25\ 15 U.S.C. 78f.
    \26\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange believes the fees proposed for transactions on ISE 
Mercury are reasonable. ISE Mercury will operate within a highly 
competitive market in which market participants can readily send order 
flow to any of the thirteen other competing venues if they deem fees at 
a particular venue to be excessive. The proposed fee structure is 
intended to attract order flow to ISE Mercury by offering certain 
market participants incentives to submit their orders to ISE Mercury.
Regular Order Fees and Rebates
    The Exchange believes that its proposal to assess a per contract 
fee or rebate for Market Maker, Non-ISE Mercury Market Maker, Firm 
Proprietary/Broker-Dealer, Professional Customer, and Priority Customer 
orders is reasonable and equitable because the proposed fees are within 
the range of fees assessed by other exchanges employing similar pricing 
schemes. For example, the fees in the Penny Pilot on ISE Mercury for 
all market participants, except Priority Customers, are similar to the 
non-Priority Customer fees charged on PHLX,\27\ which range from $0.22 
to $0.49 \28\ per contract. Further, the rebate provided for Priority 
Customer orders on ISE Mercury is competitive with the rebates offered 
by MIAX Options Exchange (``MIAX'') in its Priority Customer Rebate 
Program. MIAX offers members a per contract rebate as high as ($0.24) 
in MIAX select symbols and ($0.21) in non-MIAX select symbols for 
Priority Customer orders when the member reaches MIAX's highest rebate 
tier.\29\ Additionally, the fees for symbols not in the Penny Pilot for 
Non-ISE Mercury Market Maker, Firm Proprietary/Broker-Dealer, and 
Professional Customer orders are similar to those on ISE Gemini, which 
are $0.89 per contract.\30\ The Exchange believes the proposed fees and 
rebates are not unfairly discriminatory because they would apply 
uniformly to similarly situated market participants and they are 
competitive with the fees charged by other exchanges.
---------------------------------------------------------------------------

    \27\ See PHLX Fee Schedule, II. Multiply Listed Options Fees, at 
http://www.nasdaqtrader.com/Micro.aspx?id=phlxpricing.
    \28\ See id. at I. Rebates and Fees for Adding and Removing 
Liquidity in SPY, Part A. Simple Order.
    \29\ See MIAX Fee Schedule, (1) Transaction Fees, (a) Exchange 
Fees, (iii) Priority Customer Rebate program at https://www.miaxoptions.com/sites/default/files/MIAX_Options_Fee_Schedule_01012015C.pdf.
    \30\ See ISE Gemini Fee Schedule, I. Regular Order Fees and 
Rebates, Non-Penny Symbols, Taker Fee Tiers 1-4 at http://www.ise.com/assets/gemini/documents/OptionsExchange/legal/fee/Gemini_Fee_Schedule.pdf.
---------------------------------------------------------------------------

    The Exchange believes the proposed Fees for Crossing Orders are 
reasonable and equitably allocated because the proposed fees are also 
within the range of fees assessed by other exchanges. For example, 
ISE's \31\ and ISE Gemini's \32\ Fees for Crossing Orders in all 
symbols are almost identical to those proposed by ISE Mercury. Further, 
the Exchange believes the proposed Fee for Crossing Orders is not 
unfairly discriminatory because it would uniformly apply to all market 
participants, except Priority Customers, who historically have paid

[[Page 12773]]

lower fees than other market participants as an incentive to attract 
that order flow to the Exchange.
---------------------------------------------------------------------------

    \31\ See ISE Fee Schedule, I. Regular Order Fees and Rebates, 
Fee for Crossing Orders at http://www.ise.com/assets/documents/OptionsExchange/legal/fee/ISE_fee_schedule.pdf.
    \32\ See ISE Gemini Fee Schedule, I. Regular Order Fees and 
Rebates, Fee for Crossing Orders at http://www.ise.com/assets/gemini/documents/OptionsExchange/legal/fee/Gemini_Fee_Schedule.pdf.
---------------------------------------------------------------------------

    The Exchange believes the proposed Fees for PIM Orders of 500 or 
Fewer Contracts are reasonable and equitably allocated because the 
proposed fees are also within the range of fees assessed by other 
exchanges. ISE Mercury's Fee for PIM Orders of 500 or Fewer Contracts 
are the same as ISE's Fee for PIM Orders of 100 or Fewer Contracts,\33\ 
except that Priority Customers orders on ISE Mercury receive a rebate 
while ISE does not charge a fee for Priority Customer orders. For 
example, in all symbols, ISE charges $0.05 for all non-Priority 
Customers orders and does not charge a fee for Priority Customer 
orders. While ISE Mercury's rebate is specifically targeted towards 
Priority Customer orders, the Exchange does not believe that this is 
unfairly discriminatory. Priority Customer orders on the Exchange are 
generally entitled to lower or no fees and the Exchange believes that 
attracting more liquidity from Priority Customers will benefit all 
market participants that trade on ISE Mercury.
---------------------------------------------------------------------------

    \33\ See ISE Fee Schedule, I. Regular Order Fees and Rebates, 
Fee for PIM Orders of 100 or Fewer Contracts at http://www.ise.com/assets/documents/OptionsExchange/legal/fee/ISE_fee_schedule.pdf.
---------------------------------------------------------------------------

    The Exchange further believes it is reasonable and equitable to 
charge the proposed Fees for Responses to Crossing Orders because an 
execution resulting from a Response to a Crossing Order is akin to an 
execution and therefore its proposal to establish execution fees is 
reasonable and equitable. The Exchange believes that while the 
differential between the fees charged for Crossing Orders and the Fees 
for Responses to Crossing Orders is significant, the differential on 
ISE Mercury is similar to the differential that currently exists on 
other exchanges that offer a similar functionality. For example, as 
noted above, ISE's Fees for Crossing Orders, which are $0.20 per 
contract in all symbols for all market participants, except Market 
Makers in non-select symbols,\34\ are identical to those proposed by 
ISE Mercury.\35\ And, ISE's fees for Responses to Crossing Orders, 
which are $0.47 per contract for all market participants in all 
symbols, \36\ are in line with those on ISE Mercury, except that ISE 
Mercury charges a lower fee to Market Makers. ISE Mercury charges a 
lower fee to Market Maker orders because Market Makers have 
requirements and obligations to the Exchange that the other market 
participants do not (such as quoting requirements). Market Makers are 
also charged Marketing Fees, which are not assessed to other market 
participants. Therefore, the Exchange believes the proposed fees are 
reasonable and equitably allocated because they are within the range of 
fees assessed by other exchanges employing similar pricing schemes.
---------------------------------------------------------------------------

    \34\ These Market Maker fees are subject to tier discounts on 
ISE. See ISE Fee Schedule, IV. Other Options Fees and Rebates, C. 
ISE Market Maker Discount Tiers at http://www.ise.com/assets/documents/OptionsExchange/legal/fee/ISE_fee_schedule.pdf.
    \35\ See id. at I. Regular Order Fees and Rebates, Fee for 
Crossing Orders.
    \36\ Id. at I. Regular Order Fees and Rebates, Fee for Responses 
to Crossing Orders.
---------------------------------------------------------------------------

    The Exchange is not introducing a novel pricing scheme for Crossing 
Orders or for Responses to Crossing Orders. This functionality is 
currently available on a number of exchanges, all of which have pricing 
differentials that promote internalizing customer orders. The Exchange 
believes these are not unfairly discriminatory because they would 
uniformly apply to all similarly situated market participants.
    The Exchange further believes charging lower fees and providing 
higher rebates to Priority Customer orders attracts that order flow to 
the Exchange and thereby creates liquidity to the benefit of all market 
participants who trade on the Exchange. Further, the Exchange believes 
that it is equitable and not unfairly discriminatory to assess lower 
fees to Priority Customer orders. 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 on the Exchange whose behavior is substantially similar to 
that of market professionals, including Professional Customers, Non-ISE 
Mercury Market Makers, and Firm Proprietary/Broker-Dealers, who will 
generally submit a higher number of orders (many of which do not result 
in executions) than Priority Customers. Further, Professional Customers 
engage in trading activity similar to that conducted by Market Makers 
and proprietary traders. Finally, the Exchange believes that the 
proposed rebates are competitive with rebates provided by other 
exchanges, as discussed above, and are therefore reasonable and 
equitable.
    Finally, the Exchange believes that the price differentiation 
between the other market participants is justified. With respect to 
fees for Market Maker orders, as noted above, the Exchange believes 
that the price differentiation between the other market participants is 
appropriate and not unfairly discriminatory because Market Makers have 
requirements and obligations to the Exchange that the other market 
participants do not (such as quoting requirements). Market makers also 
incur Marketing Fees, which the other market participants do not. The 
Exchange believes that it is equitable and not unfairly discriminatory 
to assess a higher fee to certain market participants that do not have 
such requirements and obligations that Exchange Market Makers do. The 
Exchange believes that the proposed fees are fair, equitable, and not 
unfairly discriminatory because the proposed fees are consistent with 
price differentiation that exists today at other options exchanges.\37\
---------------------------------------------------------------------------

    \37\ See PHLX Fee Schedule, II. Multiply Listed Options Fees at 
http://www.nasdaqtrader.com/Micro.aspx?id=phlxpricing.
---------------------------------------------------------------------------

Route-Out Fees
    The Exchange believes the proposed route-out fees are reasonable 
and equitable as they provide the Exchange the ability to recover costs 
associated with using unaffiliated broker-dealers to route orders to 
other exchanges for linkage executions. The Exchange also believes that 
the proposed fees are not unfairly discriminatory because these fees 
would be uniformly applied to all market participant orders. As fees to 
access liquidity for orders have risen at other exchanges, it has 
become necessary for the Exchange to adopt routing fees in order to 
recoup the costs associated with routing linkage orders. The Exchange 
notes that a number of other exchanges currently charge a variety of 
routing related fees associated with customer and non-customer orders 
that are subject to linkage handling. The Exchange also notes that the 
fees proposed herein are within the range of fees charged by other 
Exchanges.\38\
---------------------------------------------------------------------------

    \38\ See ISE Fee Schedule, IV. Other Options Fees and Rebates, 
F. Route-Out Fees at http://www.ise.com/assets/documents/OptionsExchange/legal/fee/ISE_fee_schedule.pdf and ISE Gemini Fee 
Schedule, II. Other Options Fees and Rebates, A. Route-Out Fees at 
http://www.ise.com/assets/gemini/documents/OptionsExchange/legal/fee/Gemini_Fee_Schedule.pdf.
---------------------------------------------------------------------------

Marketing Fees
    The Exchange believes the proposed Marketing Fees are reasonable 
and equitable because the proposed fees will allow the Exchange and its 
Market Makers to better compete for order flow since the Exchange will 
now collect the same amount of fees as PHLX in options classes that are 
subject to its Payment for Order Flow Fees.\39\ The Exchange

[[Page 12774]]

believes that with these proposed fees, Market Makers will have greater 
incentive to trade on ISE Mercury in the symbols that are subject to 
Marketing Fees and thus enhance competition.
---------------------------------------------------------------------------

    \39\ See PHLX Fee Schedule, II. Multiply Listed Options Fees, 
Payment for Order Flow Fees at http://www.nasdaqtrader.com/Micro.aspx?id=phlxpricing.
---------------------------------------------------------------------------

FINRA Web CRD Fees
    The Exchange believes that its proposal to adopt the FINRA Web CRD 
Fees is reasonable because the proposed fees are identical to those 
adopted by FINRA for use of Web CRD for disclosure and the registration 
of FINRA members and their associated persons. In the FINRA Fee Filing, 
FINRA noted that it believed that its fees are reasonable based on the 
increased costs associated with operating and maintaining Web CRD, and 
listed a number of enhancements made to Web CRD in support of its fee 
change. These costs are borne by FINRA when a Non-FINRA member uses Web 
CRD. FINRA further noted its belief that the fees are reasonable 
because they help to ensure the integrity of the information in Web 
CRD, which is very important because the Commission, FINRA, other self-
regulatory organizations and state securities regulators use Web CRD to 
make licensing and registration decisions, among other things. The 
Exchange notes that the proposed rule change is reasonable because the 
amount of the fees are those provided by FINRA, and the Exchange does 
not collect or retain these fees. The proposed rule change is also 
equitable and not unfairly discriminatory because the Exchange will not 
be collecting or retaining these fees, therefore will not be in a 
position to apply them in an inequitable or unfairly discriminatory 
manner.
    The Exchange notes that all of the proposed fees and rebates, 
discussed above, are intended to establish ISE Mercury as an attractive 
venue for market participants to direct their order flow as the 
proposed fees and rebates are competitive with those established by 
other exchanges for similar trading activities. The Exchange will be 
operating in a highly competitive market in which market participants 
can readily direct order flow to another exchange if they deem fees at 
a particular exchange to be too high, or in the case of rebates, not 
high enough. For the reasons noted above, the Exchange believes that 
the proposed fees are fair, equitable, and not unfairly discriminatory.

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

    In accordance with Section 6(b)(8) of the Act,\40\ 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.
---------------------------------------------------------------------------

    \40\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    The Exchange notes that the difference between the Fees for 
Crossing Orders and the Fees for Responses to Crossing Orders are not 
unfairly discriminatory and do not impose an undue burden on 
competition. The Exchange believes the crossing mechanisms on ISE 
Mercury provide incentives for market participants to submit customer 
order flow to the Exchange and thus, creates a greater opportunity for 
customers to receive better executions. The crossing mechanisms on ISE 
Mercury provide an opportunity for market participants to compete for 
customer orders, and have no limitations regarding the number of and 
type of market participant that can participate and compete for such 
orders. ISE Mercury notes that its market model and fees are generally 
intended to attract a specific segment of the options industry and the 
Exchange is competing with other exchanges that currently attract that 
segment.
    Unilateral action by ISE Mercury in establishing fees for services 
provided to its members and others using its facilities will not have 
any adverse impact on competition. As a new entrant in the already 
highly competitive environment for equity options trading, ISE Mercury 
does not have the market power necessary to set prices for services 
that are inequitably allocated, unreasonable or unfairly discriminatory 
in violation of the Act. ISE Mercury's proposed fees and rebates, as 
described herein, are comparable to fees charged and rebates provided 
by other options exchanges for the same or similar services. To the 
extent the proposed fees and rebates fail to attract order flow away 
from its competitors, ISE Mercury may have to adjust level of fees and 
rebates.

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,\41\ and subparagraph (f)(2) of Rule 19b-4 
thereunder,\42\ because it establishes a due, fee, or other charge 
imposed by ISE Mercury.
---------------------------------------------------------------------------

    \41\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \42\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    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 Number SR-ISEMercury-2016-02 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-ISEMercury-2016-02. 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

[[Page 12775]]

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-ISEMercury-2016-02, and should be submitted on or before 
March 31, 2016.
---------------------------------------------------------------------------

    \43\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\43\
Brent J. Fields,
Secretary.
[FR Doc. 2016-05322 Filed 3-9-16; 8:45 am]
 BILLING CODE 8011-01-P


