[Federal Register Volume 76, Number 108 (Monday, June 6, 2011)]
[Notices]
[Pages 32382-32383]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-13855]
[[Page 32382]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64562; File No. SR-ISE-2011-29]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change Relating to Second Market Fees
May 27, 2011.
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 May 18, 2011, the International Securities Exchange, LLC (the
``Exchange'' or the ``ISE'') filed with the Securities and Exchange
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 ISE is proposing to amend its fees for executions in the
Exchange's Second Market. The text of the proposed rule change is
available on the Exchange's Web site (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 self-regulatory organization
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 Exchange currently has rules for the listing and trading of
low-volume option classes that qualify for listing under ISE Rule 502.
These option classes trade in the Exchange's ``Second Market.'' \3\ The
Exchange currently lists eligible equity option classes (excluding
options on exchange traded funds) that trade on another options
exchange and that have an average daily volume below 500 contracts over
a six-month period in the Second Market. When the Exchange launched the
Second Market, it adopted Second Market fees that varied from those
that were and still are currently applicable to the Exchange's primary
market. Specifically, for Second Market transactions, Members are
currently charged an execution fee of $.05 per contract for Priority
Customer \4\ orders. Priority Customer orders executed in the
Exchange's primary market, on the other hand, are, for the most part,
not charged an execution fee.\5\
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\3\ See Exchange Act Release No. 34-54580 (October 6, 2006), 71
FR 60781 (October 16, 2006) (SR-ISE-2006-40).
\4\ A Priority Customer is defined in ISE 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\ Priority Customer orders in Singly Listed Indexes, Singly
Listed ETFs and FX Options that are not a part of the FX Options
Incentive Plan are charged $0.18 per contract. Priority Customer
orders in FX Options that are part of the FX Options Incentive Plan
are charged $0.40 per contract.
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Further, the Exchange currently has a payment-for-order-flow
(``PFOF'') program that helps its market makers establish PFOF
arrangements with an Electronic Access Member (``EAM'') in exchange for
that EAM preferencing some or all of its order flow to that market
maker. The Exchange's PFOF fees are currently set at $0.65 per contract
for all option classes that are not in the penny pilot program. For
penny pilot classes, the Exchange charges a PFOF fee of $0.25 per
contract. The Exchange currently does not charge a PFOF fee for option
classes that are subject to the Exchange's maker/taker fees.\6\ And
since the launch of the Second Market, ISE has not charged and
currently does not charge a PFOF fee for Second Market transactions.
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\6\ The exclusion applies to option classes that are subject to
Rebates and Fees for Adding and Removing Liquidity in Select
Symbols.
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The Exchange now proposes to amend its Second Market fees to
standardize them with the fees charged for executions in the Exchange's
primary market. Specifically, ISE proposes to lower the execution fee
for Priority Customer orders in the Second Market from $0.05 per
contract to $0.00 per contract. The Exchange also proposes to adopt a
PFOF fee for Second Market transactions. In addition to standardizing
theses fees, the Exchange believes these fee changes will make the
Exchange's transaction fees simpler and more concise to Exchange
Members. The Exchange believes that the proposed fee changes for Second
Market transactions will encourage more order flow to the Exchange and
also allow ISE market makers to better compete for order flow.
The Exchange has designated this proposal to be operative on June
1, 2011.
2. Basis
The Exchange believes that its proposal to amend its Schedule of
Fees is consistent with Section 6(b) of the Act \7\ in general, and
furthers the objectives of Section 6(b)(4) of the Act \8\ in
particular, in that it is an equitable allocation of reasonable dues,
fees and other charges among Exchange members. The Exchange believes
that the proposed fee changes will generally allow the Exchange and its
market makers to better compete for order flow and thus enhance
competition. More specifically, the Exchange believes that its proposal
to assess a $0.00 per contract fee for Second Market transactions is
equitable and reasonable as it will standardize the fee charged by the
Exchange for all market participants that trade in Second Market
options. The Exchange believes that its proposal to assess a PFOF fee
for Second Market transactions is also equitable and reasonable because
the fee will serve to encourage order flow to the Exchange much like
the PFOF fee does for option classes in the Exchange's primary market.
Finally, the Exchange believes the proposed fee changes are equitable
and reasonable as they will apply universally to all market
participants who trade in Second Market options on the Exchange.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The proposed rule change does not impose any burden on competition
that is not necessary or appropriate in furtherance of the purposes of
the Act.
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.
[[Page 32383]]
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.\9\ 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.
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\9\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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 e-mail to [email protected]. Please include
File No. SR-ISE-2011-29 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-ISE-2011-29. This file
number should be included on the subject line if e-mail 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 website viewing and
printing in the Commission's Public Reference Room. Copies of such
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-ISE-2011-29 and should be submitted by June 27, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-13855 Filed 6-3-11; 8:45 am]
BILLING CODE 8011-01-P