[Federal Register Volume 76, Number 153 (Tuesday, August 9, 2011)]
[Notices]
[Pages 48933-48935]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-20099]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65021; File No. SR-ISE-2011-45]
Self-Regulatory Organizations; International Securities
Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change Relating to Fees for Complex Orders
August 3, 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 August 1, 2011, the International Securities Exchange, LLC (the
``Exchange'' or ``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 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
The ISE is proposing to amend fees for certain complex orders
executed on the Exchange. 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 assesses per contract transaction charges
and credits to market participants that add or remove liquidity from
the Exchange (``maker/taker fees'') in a number of options classes (the
``Select Symbols'').\3\
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\3\ Options classes subject to maker/taker fees are identified
by their ticker symbol on the Exchange's Schedule of Fees. See
Securities Exchange Act Release Nos. 61869 (April 7, 2010), 75 FR
19449 (April 14, 2010) (SR-ISE-2010-25), 62048 (May 6, 2010), 75 FR
26830 (May 12, 2010) (SR-ISE-2010-43), 62282 (June 11, 2010), 75 FR
34499 (June 17, 2010) (SR-ISE-2010-54), 62319 (June 17, 2010), 75 FR
36134 (June 24, 2010) (SR-ISE-2010-57), 62508 (July 15, 2010), 75 FR
42809 (July 22, 2010) (SR-ISE-2010-65), 62507 (July 15, 2010), 75 FR
42802 (July 22, 2010) (SR-ISE-2010-68), 62665 (August 9, 2010), 75
FR 50015 (August 16, 2010) (SR-ISE-2010-82), 62805 (August 31,
2010), 75 FR 54682 (September 8, 2010) (SR-ISE-2010-90), 63283
(November 9, 2010), 75 FR 70059 (November 16, 2010) (SR-ISE-2010-
106), 63534 (December 13, 2010), 75 FR 79433 (December 20, 2010)
(SR-ISE-2010-114); 63664 (January 6, 2011), 76 FR 2170 (January 12,
2011) (SR-ISE-2010-120); and 64303 (April 15, 2011), 76 FR 22425
(April 21, 2011) (SR-ISE-2011-18).
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For complex orders in the Select Symbols, the Exchange currently
charges a ``take'' fee of: (i) $0.30 per contract for Market Maker,\4\
Market Maker Plus,\5\ Firm Proprietary and
[[Page 48934]]
Customer (Professional) \6\ orders; and (ii) $0.35 per contract for
Non-ISE Market Maker \7\ orders. Priority Customer \8\ orders are not
charged a take fee for complex orders. For complex orders, the Exchange
currently charges a ``make'' fee of: (i) $0.10 per contract for Market
Maker, Market Maker Plus, Firm Proprietary and Customer (Professional)
orders; and (ii) $0.20 per contract for Non-ISE Market Maker orders.
Priority Customer orders are not charged a make fee for complex orders.
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\4\ Market Makers who remove liquidity in the Select Symbols
from the Complex Order Book by trading with orders preferenced to
them are charged $0.28 per contract.
\5\ A Market Maker Plus is a market maker who is on the National
Best Bid or National Best Offer 80% of the time for series trading
between $0.03 and $5.00 (for options whose underlying stock's
previous trading day's last sale price was less than or equal to
$100) and between $0.10 and $5.00 (for options whose underlying
stock's previous trading day's last sale price was greater than
$100) in premium in each of the front two expiration months and 80%
of the time for series trading between $0.03 and $5.00 (for options
whose underlying stock's previous trading day's last sale price was
less than or equal to $100) and between $0.10 and $5.00 (for options
whose underlying stock's previous trading day's last sale price was
greater than $100) in premium across all expiration months in order
to receive the rebate. The Exchange determines whether a market
maker qualifies as a Market Maker Plus at the end of each month by
looking back at each market maker's quoting statistics during that
month. If at the end of the month, a market maker meets the
Exchange's stated criteria, the Exchange rebates $0.10 per contract
for transactions executed by that market maker during that month.
The Exchange provides market makers a report on a daily basis with
quoting statistics so that market makers can determine whether or
not they are meeting the Exchange's stated criteria.
\6\ A Customer (Professional) is a person who is not a broker/
dealer and is not a Priority Customer.
\7\ A Non-ISE 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.
\8\ 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).
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Additionally, the Exchange provides a rebate of $0.25 per contract
to Priority Customer complex orders that trade with non-customer orders
in the Complex Order Book.
The Exchange now proposes to extend the fees and credits for
complex orders applicable to the Select Symbols to all symbols that are
in the Penny Pilot Program.\9\ Thus, pursuant to this proposed rule
change, for complex orders in the Penny Pilot Symbols, the Exchange
will charge a ``take'' fee of: (i) $0.30 per contract for Market Maker,
Market Maker Plus, Firm Proprietary and Customer (Professional) orders;
and (ii) $0.35 per contract for Non-ISE Market Maker orders. Priority
Customer orders will not be charged a take fee for complex orders. For
complex orders in the Penny Pilot Symbols, the Exchange will charge a
``make'' fee of: (i) $0.10 per contract for Market Maker, Market Maker
Plus, Firm Proprietary and Customer (Professional) orders; and (ii)
$0.20 per contract for Non-ISE Market Maker orders. Priority Customer
orders will not be charged a make fee for complex orders.
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\9\ The Penny Pilot Program, which commenced on January 26,
2007, permits ISE and all of the other options exchanges to quote
certain option classes in pennies. The current pilot is scheduled to
expire on December 31, 2011. The following options classes are
currently in the Penny Pilot Program: A, AA, AAPL, ABK, ABT, ABX,
ACAS, ACI, ADBE, ADM, ADSK, AEM, AET, AFL, AGO, AIG, AKAM, AKS, ALL,
AMAT, AMD, AMED, AMGN, AMLN, AMR, AMZN, ANF, ANR, APA, APC, APOL,
APWR, ARNA, ATPG, ATVI, AUY, AXP, BA, BAC, BAX, BBBY, BBD, BBT, BBY,
BCRX, BHI, BHP, BIDU, BK, BMY, BP, BPOP, BRCD, BRCM, BRKB, BSX, BTU,
BUCY, BX, C, CAT, CB, CELG, CENX, CF, CHK, CI, CIEN, CIT, CL, CLF,
CMA, CMCSA, CNX, COF, COP, COST, CREE, CRM, CSCO, CSX, CTIC, CVS,
CVX, CX, DAL, DCTH, DD, DE, DELL, DHI, DIA, DIS, DNDN, DO, DOW,
DRYS, DTV, DVN, EBAY, EEM, EFA, EK, EMC, ENER, EOG, EP, ERTS, ESI,
ESRX, ETFC, EWJ, EWT, EWW, EWY, EWZ, F, FAS, FAZ, FCX, FDX, FFIV,
FIS, FITB, FLEX, FNM, FRE, FSLR, FWLT, FXE, FXI, FXP, GDX, GE, GFI,
GG, GGP, GILD, GIS, GLD, GLW, GM, GMCR, GME, GNW, GPS, GRMN, GS,
HAL, HBAN, HBC, HD, HES, HGSI, HIG, HK, HL, HOG, HON, HOT, HPQ, HSY,
IBM, IBN, INTC, IOC, IP, ITMN, IWM, IYR, JCP, JDSU, JNJ, JNPR, JOYG,
JPM, JWN, KBH, KEY, KFT, KGC, KMP, KO, KRE, LCC, LDK, LEAP, LEN,
LLY, LNC, LO, LOW, LVS, M, MA, MBI, MCD, MCO, MCP, MDT, MDVN, MEE,
MET, MGM, MJN, MMM, MMR, MNKD, MNX, MO, MON, MOS, MRK, MRO, MRVL,
MS, MSFT, MSI, MT, MTG, MU, MYL, NBR, NE, NEM, NFLX, NKE, NLY, NOK,
NOV, NTAP, NUE, NVDA, NYX, OIH, ORCL, OXY, PARD, PBR, PCL, PCX, PEP,
PFE, PG, PHM, PM, PNC, POT, PRU, PXP, QCOM, QID, QLD, QQQ, RCL, RF,
RIG, RIMM, RMBS, RSH, RTN, RVBD, S, SBUX, SD, SDS, SEED, SHLD, SIRI,
SKF, SLB, SLM, SLV, SLW, SMH, SNDK, SO, SPG, SPWRA, SPY, SQNM, SRS,
SSO, STEC, STI, STP, STT, STX, SU, SUN, SVNT, SWN, SYMC, T, TBT,
TCK, TEVA, TGT, TIF, TIVO, TLB, TLT, TM, TSL, TSO, TWX, TXN, TXT,
TYC, TZA, UAL, UNG, UNH, UNP, UPS, URE, USB, USO, UTX, UUP, UYG, V,
VALE, VLO, VRSN, VVUS, VXX, VZ, WAG, WDC, WFC, WFM, WFR, WFT, WHR,
WIN, WLP, WLT, WMB, WMT, WYNN, X, XHB, XL, XLB, XLE, XLF, XLI, XLK,
XLNX, XLP, XLU, XLV, XLY, XME, XOM, XOP, XRT, XRX, YHOO, YRCW, YUM
and ZION (the ``Penny Pilot Symbols'').
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Additionally, the Exchange currently provides a rebate of $0.25 per
contract to Priority Customer complex orders that trade with non-
customer orders in the Complex Order Book and proposes to extend this
rebate to the Penny Pilot Symbols. Finally, the Exchange currently
charges a Payment for Order Flow (PFOF) fee of $0.25 per contract for
each customer order executed in the Penny Pilot Symbols, including
complex orders. As part of this proposed rule change, the Exchange
proposes not to charge a PFOF fee for customer complex orders
transacted in the Penny Pilot Symbols.
The Exchange has designated this proposal to be operative on August
1, 2011.
2. Statutory Basis
The Exchange believes that its proposal to amend its Schedule of
Fees is consistent with Section 6(b) of the Act \10\ in general, and
furthers the objectives of Section 6(b)(4) of the Act \11\ in
particular, in that it is an equitable allocation of reasonable dues,
fees and other charges among Exchange members and other persons using
its facilities. The impact of the proposal upon the net fees paid by a
particular market participant will depend on a number of variables,
most important of which will be its propensity to add or remove
liquidity in options overlying the symbols that are subject to the
Exchange's maker/taker fees.
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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that its complex order fees and credits
remain competitive with fees charged by other exchanges and therefore
are reasonable and equitably allocated to those members that opt to
direct orders to the Exchange rather than to a competing exchange. The
Exchange believes that its proposal to extend its complex order pricing
to all Penny Pilot Symbols is reasonable because doing so will attract
additional order flow to the Exchange. The complex order pricing
employed by the Exchange for the Select Symbols has proven to be an
effective pricing mechanism and attractive to Exchange participants and
their customers. The Exchange believes extending that pricing structure
will attract additional complex order business while at the same time
creating standardization in complex order pricing across symbols that
make up the majority of daily volume in options trading. The Exchange
further believes that the amounts of the proposed fees are reasonable
because they are identical to fees assessed by the Exchange for
execution of complex orders in the Select Symbols.
The Exchange believes it is reasonable to eliminate the PFOF fee
for customer complex orders in the Penny Pilot Symbols because the
Exchange does not charge a PFOF fee for symbols that are subject to the
Exchange's maker/taker pricing, i.e., the Select Symbols. PFOF fees are
pricing incentives offered by exchanges to attract order flow. Since
the Exchange is proposing to adopt maker/taker pricing for complex
orders, which provides incentives to attract order flow in the form of
rebates, the Exchanges does not have a need to charge PFOF fees for
these orders.
The Exchange also believes that extending the maker/taker pricing
to complex orders in the Penny Pilot Symbols is reasonable and
equitable because the Exchange is not changing its maker/taker pricing
structure; it is merely extending it to additional symbols, i.e., Penny
Pilot Symbols. The Exchange also believes that eliminating
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the PFOF fee for complex orders in the Penny Pilot Symbols is
reasonable and equitable because it will benefit customers. The
Exchange further believes that the Exchange's maker/taker fees are not
unfairly discriminatory because the fee structure is consistent with
fee structures that exist today at other options exchanges.
Finally, 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 option
exchanges. Additionally, the Exchange believes it remains an attractive
venue for market participants to trade complex orders despite its
proposed fee change as its fees remain competitive with those charged
by other exchanges for similar trading strategies. The Exchange
operates in a highly competitive market in which market participants
can readily direct order flow to another exchange if they deem fee
levels at a particular exchange to be excessive.
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.
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.\12\ 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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\12\ 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 rule-comments@sec.gov. Please include
File Number SR-ISE-2011-45 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-ISE-2011-45. 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 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
a.m. and 3 p.m. Copies of such filings 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 No. SR-ISE-2011-45 and should be
submitted on or before August 30, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-20099 Filed 8-8-11; 8:45 am]
BILLING CODE 8011-01-P