[Federal Register Volume 76, Number 198 (Thursday, October 13, 2011)]
[Notices]
[Pages 63693-63695]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-26436]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65499; File No. SR-ISE-2011-64]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change Relating to Professional Customer Fees
October 6, 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 September 26, 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 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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[[Page 63694]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The ISE proposes to amend its Schedule of Fees relating to certain
professional customer 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
ISE proposes to increase the execution fee for ``professional
customers,'' who execute orders as a result of taking liquidity from
ISE's order book in certain option classes, from $0.18 per contract to
$0.20 per contract. This proposed fee change is applicable to option
classes that are not subject to the Exchange's modified maker/taker
pricing structure (``Non-Select Symbols''). In addition to the Non-
Select Symbols, this proposed fee change shall also apply to non-
complex orders in option classes that are in the Penny Pilot
program.\3\
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\3\ The Exchange recently extended its maker/taker pricing
structure to all complex orders in option classes that are in the
Penny Pilot program. See Exchange Act Release No. 65021 (August 3,
2011), 76 FR 48933 (August 9, 2011) (SR-ISE-2011-45). 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. See Exchange Act Release No. 55161 (January 24, 2007),
72 FR 4754 (February 1, 2007) (SR-ISE-2006-62). The current pilot is
scheduled to expire on December 31, 2011. See Exchange Act Release
No. 63437 (December 6, 2010), 75 FR 77032 (December 10, 2010) (SR-
ISE-2010-116).
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ISE rules distinguish between Priority Customer Orders \4\ and
Professional Orders.\5\ For purpose of this discussion, ``professional
customers'' are non-broker/dealer participants who enter at least 390
orders per day on average during a calendar month for their own
beneficial account(s). The Exchange notes that the level of trading
activity by professional customers more resembles that of broker/
dealers, i.e., proprietary traders, than it does of a retail, or
``Priority'' customer. As a result, professional customers are on
parity with broker/dealers and generally pay the same transaction fees
as broker/dealers. For example, for years broker/dealer orders have
been charged an execution fee of $0.20 per contract in the Non-Select
Symbols. And recently, the Exchange began charging professional
customers who execute orders as a result of posting liquidity to ISE's
order book in the Non-Select Symbols $0.20 per contract.\6\
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\4\ A Priority Customer is defined in ISE Rule 100(a)(37A) as a
person or entity that is 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).
\5\ A Professional Order is defined in ISE Rule 100(a)(37C) as
an order that is for the account of a person or entity that is not a
Priority Customer.
\6\ See Securities Exchange Act Release No. 61434 (January 27,
2010), 75 FR 5826 (February 4, 2010).
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With this proposed fee change, the Exchange seeks to standardize
the fee charged to professional customers for trading on the Exchange
in the Non-Select Symbols as all professional customers will now pay
$0.20 per contract, regardless of whether they are posting liquidity or
taking liquidity in the Non-Select Symbols and for non-complex orders
in option classes that are in the Penny Pilot program. The Exchange
believes that the proposed fees for professional customers will allow
the Exchange to remain competitive with other options exchanges who
apply fees to professional customers. Further, in addition to
standardizing theses [sic] fees, the Exchange believes the proposed fee
change will make the Exchange's transaction fees simpler and more
concise to Exchange Members.
The Exchange has designated this proposal to be operative on
October 3, 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 \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 to
better compete for professional customer order flow and thus enhance
competition. Specifically, the Exchange believes that its proposal to
assess a $0.20 per contract fee for professional customers who take
liquidity from the Exchange's order book in the Non-Select Symbols and
for non-complex orders in option classes that are in the Penny Pilot
program is equitable and reasonable as it will standardize fees charged
by the Exchange for all professional customers that engage in a similar
activity. The Exchange further believes it is reasonable, equitable and
not unfairly discriminatory to charge professional customers the same
level of fees that the Exchange charges broker/dealers as both groups
of market participants essentially engage in similar trading activity.
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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.
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) of the Act \9\ and Rule 19b-4(f)(2) \10\ thereunder. 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.
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\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 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:
[[Page 63695]]
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 Number SR-ISE-2011-64 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-2011-64. 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 the 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-2011-64 and should be
submitted on or before November 3, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-26436 Filed 10-12-11; 8:45 am]
BILLING CODE 8011-01-P