[Federal Register Volume 76, Number 238 (Monday, December 12, 2011)]
[Notices]
[Pages 77279-77281]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-31735]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65898; File No. SR-ISE-2011-78]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change to Amend the Threshold Levels for Tier-Based Rebates for
Qualified Contingent Cross Orders and Solicitation Orders Executed on
the Exchange
December 6, 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 November 22, 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 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 amend the threshold
contract levels 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 Nos. 65087 (August 10, 2011), 76 FR
50783 (August 16, 2011) (SR-ISE-2011-47); 65583 (October 18, 2011),
76 FR 65555 (October 21, 2011) (SR-ISE-2011-68); and 65705 (November
8, 2011), 76 FR 70789 (November 15, 2011) (SR-ISE-2011-70).
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The current volume threshold and corresponding rebate per contract
is:
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Rebate per
Originating contract sides contract
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0-99,999................................................ $0.00
100,000-1,699,999....................................... 0.01
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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The Exchange now proposes to amend the current tiers by: (1)
Increasing the threshold for Members to qualify for a rebate, from a
minimum of 100,000 qualifying contracts to 200,000 qualifying
contracts. While the Exchange proposes to increase the minimum
threshold level, the Exchange also proposes to increase the rebate
payable for this tier, from $0.01 per contract to $0.02 per contract;
(2) lowering the contract threshold level for the middle tier while
maintaining the rebate at $0.03 per contract; (3) lowering the contract
threshold and the per contract rebate for the fourth tier; and (4)
lowering the amount of qualifying contracts a Member must trade to
qualify for the maximum per contract
[[Page 77280]]
rebate, from 3,500,000 qualifying contracts to 2,000,000 qualifying
contracts. To accommodate the proposed lower threshold, the Exchange
also proposes to lower the rebate payable for this tier, from $0.07 per
contract to $0.05 per contract. With the proposed changes to the tiers,
the Exchange is attempting to strike the right balance between the
number of qualifying contracts and its corresponding rebate to ensure
that the incentive program achieves its intended purpose of attracting
greater order flow from its Members.
With the proposed amended tiers, the volume threshold and
corresponding rebate per contract will be as follows:
------------------------------------------------------------------------
Rebate per
Originating contract sides contract
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0-199,999............................................... $0.00
200,000-999,999......................................... 0.02
1,000,000-1,699,999..................................... 0.03
1,700,000-1,999,999..................................... 0.04
2,000,000+.............................................. 0.05
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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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The Exchange has designated this proposal to be operative on
December 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 Securities Exchange Act of
1934 (``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, which among other things, lowers the
threshold level for Members to qualify for the highest per contract
rebate payable, is reasonable as it will encourage Members who direct
their QCC and Solicitation orders to the Exchange to continue to do so
instead of sending this order flow to a competing exchange. The
Exchange believes that with the proposed amended tiers, more Members
are now likely to qualify for higher rebates for sending their QCC and
Solicitation orders to the Exchange.
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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(4).
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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 a minimum of 200,000
qualifying contracts in QCC and Solicitation orders on the Exchange a
benefit by way of a lower transaction fee. As noted above, once a
Member reaches an established volume 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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\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.
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 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 email to [email protected]. Please include
File Number SR-ISE-2011-78 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-2011-78. This file
number should be included on the subject line if email 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
[[Page 77281]]
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-2011-78 and should be submitted on
or before January 3, 2012.
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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-31735 Filed 12-9-11; 8:45 am]
BILLING CODE 8011-01-P