[Federal Register Volume 76, Number 199 (Friday, October 14, 2011)]
[Notices]
[Pages 63964-63966]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-26535]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65522; File No. SR-ISE-2011-56]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change Relating to Fees and Rebates for Certain Orders Executed on the
Exchange
October 7, 2011.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that, on September 23, 2011, the International Securities Exchange, LLC
(the ``Exchange'' or the ``ISE'') filed with the Securities and
Exchange Commission (the ``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 transaction fees and rebates for
certain 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 a per contract transaction charge
to market participants that add or remove liquidity from the Exchange
(``maker/taker fees'') in 103 options classes (the ``Select
Symbols'').\3\ For removing liquidity in the Select Symbols, the
Exchange currently charges a take fee of: (i) $0.25 per contract for
Market Maker and Market Maker Plus orders.\4\ The Exchange now proposes
to change the take fees for Market Maker and Market Maker Plus orders
in the Select Symbols from $0.25 per contract to $0.26 per contract.
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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); 64303 (April 15, 2011), 76 FR 22425 (April
21, 2011) (SR-ISE-2011-18); 64992 (July 29, 2011), 76 FR 47279
(August 4, 2011) (SR-ISE-2011-43); 65021 (August 3, 2011), 76 FR
48933 (August 9, 2011) (SR-ISE-2011-45); 65087 (August 10, 2011), 76
FR 50783 (August 16, 2011) (SR-ISE-2011-47); 65327 (September 13,
2011), 76 FR 58068 (September 19, 2011) (SR-ISE-2011-48); 65084
(August 10, 2011), 76 FR 50805 (September August 16, 2011) (SR-ISE-
2011-49); and 65297 (September 8, 2011), 76 FR 56844 (September 14,
2011) (SR-ISE-2011-54).
\4\ 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.
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As an incentive for members to direct customer order flow to the
Exchange, Priority Customer complex orders in a select number of
options classes (``Designated Symbols''),\5\ currently receive a rebate
of $0.26 per contract on
[[Page 63965]]
all legs when these orders trade with non-customer orders in the
Exchange's complex order book. The Exchange proposes to increase this
rebate to $0.27 per contract. The Exchange believes it is necessary to
increase the rebate for Priority Customer complex orders in the
Designated Symbols in order to continue to attract Priority Customer
complex order flow to the Exchange as NASDAQ OMX PHLX, Inc. (``PHLX'')
recently increased a similar rebate from $0.26 to $0.27 per
contract.\6\
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\5\ The Designated Symbols are AAPL, BAC, C, F, GLD, INTC, IWM,
JPM, QQQ, SLV, SPY and XLF.
\6\ See Securities and Exchange Act Release No. 65312 (September
9, 2011) (SR-PHLX-2011-126).
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2. Statutory Basis
The Exchange believes that its proposal to amend its Schedule of
Fees is consistent with Section 6(b) of the Securities and Exchange Act
of 1934 (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 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
Select Symbols and Designated Symbols, as applicable.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that the proposed rebate for options
overlying the Designated Symbols remain competitive with fees charged
by other exchanges and are therefore 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
assess a $0.26 per contract take fee for Market Maker and Market Maker
Plus orders in the Select Symbols is reasonable and equitably allocated
because the fee is within the range of fees assessed by other exchanges
employing similar pricing schemes and the proposed nominal increase
will bring this fee closer to the fee the Exchange currently charges to
other market participants that employ a similar trading strategy. The
Exchange further notes that with this proposed increase, the fee
charged to Market Maker and Market Maker Plus orders will remain lower
than the fee currently charged by the Exchange to other market
participants. The Exchange believes that the price differentiation
between the various market participants is justified because market
makers have obligations to the market that the other market
participants do not. The Exchange believes that it is equitable to
assess a nominally higher fee to market participants that do not have
the quoting requirements that Exchange market makers do.
The Exchange also believes that it is reasonable and equitable to
provide a rebate for Priority Customer complex orders in the Designated
Symbols because paying a rebate would continue to attract additional
order flow to the Exchange and thereby create liquidity in the
Designated Symbols that ultimately will benefit all market participants
who trade on the Exchange. The proposed increased rebate of $0.27 per
contract for Priority Customer complex orders in the Designated Symbols
is identical to a proposal recently submitted by PHLX.\9\
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\9\ See supra note 6.
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Moreover, 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. 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. 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
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.\10\ At any time within 60 days of the
filing of the 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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\10\ 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 Number SR-ISE-2011-56 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-2011-56. 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 Exchange. All
comments received will be posted without change; the
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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-
2011-56 and should be submitted on or before November 4, 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. 2011-26535 Filed 10-13-11; 8:45 am]
BILLING CODE 8011-01-P