[Federal Register Volume 76, Number 204 (Friday, October 21, 2011)]
[Notices]
[Pages 65555-65557]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-27305]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65583; File No. SR-ISE-2011-68]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change to Amend the Volume Threshold for Tier-Based Rebates for
Qualified Contingent Cross Orders and Solicitation Orders Executed on
the Exchange
October 18, 2011.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby
given that, on October 3, 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
[[Page 65556]]
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 lower the threshold levels for tier-based
rebates for Qualified Contingent Cross (``QCC'') orders and
Solicitation orders. 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 purpose of this proposed rule change is to lower the threshold
contract levels for tier-based rebates to encourage members to submit
greater numbers of QCC orders and Solicitation orders to the Exchange.
The Exchange currently provides a rebate to Members who reach a certain
volume threshold in QCC orders and/or Solicitation orders during a
month.\3\ Once a Member reaches the volume threshold, the Exchange
provides a rebate to that Member for all of its QCC and Solicitation
traded contracts for that month. The rebate is paid to the Member
entering a qualifying order, i.e., a QCC order and/or a Solicitation
order. The rebate applies to QCC orders and Solicitation orders in all
symbols traded on the Exchange. Additionally, the threshold levels are
based on the originating side so if, for example, a Member submits a
Solicitation order for 1,000 contracts, all 1,000 contracts are counted
to reach the established threshold even if the order is broken up and
executed with multiple counter parties.
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\3\ See Exchange Act Release No. 65087 (August 10, 2011), 76 FR
50783 (August 16, 2011) (SR-ISE-2011-47).
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The current volume threshold and corresponding rebate per contract
is:
------------------------------------------------------------------------
Rebate
Originating Contract Sides per
Contract
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0-1,999,999.................................................. $0.00
2,000,000-3,499,999.......................................... 0.03
3,500,000-3,999,999.......................................... 0.05
4,000,000+................................................... 0.07
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The Exchange now proposes to lower the volume threshold levels to
attract additional order flow in QCC and Solicitation orders and make
it easier for more firms to reach the levels and receive the
corresponding rebate. The Exchange proposes to only lower the number of
contracts that Members need to reach in order to receive the rebate; no
change is proposed to the amount of rebate per contract. The proposed
lower volume threshold is:
------------------------------------------------------------------------
Rebate
Originating Contract Sides per
Contract
------------------------------------------------------------------------
0-1,699,999.................................................. $0.00
1,700,000-2,499,999.......................................... 0.03
2,500,000-3,499,999.......................................... 0.05
3,500,000+................................................... 0.07
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Further, 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 select number of options
classes (the ``Select Symbols'').\4\ For Solicitation orders in the
Select Symbols, the Exchange currently provides a rebate of $0.15 to
contracts that do not trade with the contra order in the Solicited
Order Mechanism. The Exchange does not propose any change to that
rebate and that rebate will continue to apply.
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\4\ Options classes subject to maker/taker fees are identified
by their ticker symbol on the Exchange's Schedule of Fees.
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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 Exchange Act \5\ in
general, and furthers the objectives of Section 6(b)(4) of the Exchange
Act \6\ 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 change will generally allow the
Exchange and its Members to better compete for order flow and thus
enhance competition. Specifically, the Exchange believes that its
proposal to lower the volume threshold is reasonable as it will
encourage Members to direct their QCC and Solicitation orders to the
Exchange instead of sending this order flow to a competing exchange.
The Exchange notes that it currently has other incentive programs to
promote and encourage growth in specific business areas. For example,
the Exchange has lower fees (or no fees) for customer orders; \7\ and
tiered pricing that reduces rates for market makers based on the level
of business they bring to the Exchange.\8\ This proposed rule change
targets a particular segment in which the Exchange seeks to garnish
greater order flow. The Exchange further believes that the rebate
currently in place for QCC and Solicitation orders is reasonable
because it is designed to give Members who trade significant volume on
the Exchange a benefit by way of a lower transaction fee. As noted
above, once a Member reaches the proposed new threshold, all of the
trading activity in the specified order type by that Member will be
subject to the corresponding rebate.
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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(4).
\7\ For example, the customer fee is $0.00 per contract for
products other than Singly Listed Indexes, Singly Listed ETFs and FX
Options. For Singly Listed Options, Singly Listed ETFs and FX
Options, the customer fee is $0.18 per contract. The Exchange also
currently has an incentive plan in place for certain specific FX
Options which has its own pricing. See ISE Schedule of Fees.
\8\ The Exchange currently has a sliding scale fee structure
that ranges from $0.01 per contract to $0.18 per contract depending
on the level of volume a Member trades on the Exchange in a month.
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The Exchange also believes that its rebate program for QCC and
Solicitation orders is equitable because it would uniformly apply to
all Members engaged in QCC and Solicitation trading in all option
classes traded on the Exchange.
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 Exchange 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 65557]]
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 Exchange 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 Exchange 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 Exchange 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-2011-68 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-2011-68. 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 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-2011-68 and should be
submitted on or before November 14, 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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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-27305 Filed 10-20-11; 8:45 am]
BILLING CODE 8011-01-P