[Federal Register Volume 77, Number 137 (Tuesday, July 17, 2012)]
[Notices]
[Pages 42036-42038]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-17328]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67400; File No. SR-ISE-2012-63]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change To Amend Fees and Rebates for Certain Complex Orders Executed on
the Exchange
July 11, 2012.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\
notice is hereby given that on July 2, 2012, 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, II, and III 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 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 fees and
rebates to market participants that add or remove liquidity from the
Exchange (``maker/taker fees and rebates'') in a number of options
classes (the ``Select Symbols'').\3\ The Exchange's maker/taker fees
and rebates are applicable to regular and complex orders executed in
the Select Symbols. The Exchange also currently assesses maker/taker
fees and rebates for complex orders in all symbols that are not in the
Penny Pilot Program (``Non-Penny Pilot Symbols'').\4\ The purpose of
this proposed rule change is to amend maker/taker fees and rebates for
complex orders in the Non-Penny Pilot Symbols.
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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.
\4\ See Exchange Act Release Nos. 66084 (January 3, 2012), 77 FR
1103 (January 9, 2012) (SR-ISE-2011-84); 66392 (February 14, 2012),
77 FR 10016 (February 21, 2012) (SR-ISE-2012-06); and 66962 (May 10,
2012), 77 FR 28917 (May 16, 2012) (SR-ISE-2012-35).
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For complex orders in the Non-Penny Pilot Symbols, the Exchange
currently charges a ``taker'' fee of: (i) $0.73 per contract for ISE
Market Maker,\5\ Firm Proprietary and Customer (Professional) \6\
orders; and (ii) $0.78 per contract for Non-ISE Market Maker \7\
orders. Priority Customer \8\ orders are not charged a ``taker'' fee
for complex orders in the Non-Penny Pilot Symbols. For complex orders
in these same symbols, the Exchange currently charges a ``maker'' fee
of $0.10 per contract for ISE Market Maker, Non-ISE Market Maker, Firm
Proprietary and Customer (Professional) orders. Priority Customer
orders are not charged a ``maker'' fee for complex orders in these
symbols.
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\5\ The term ``Market Makers'' refers to ``Competitive Market
Makers'' and ``Primary Market Makers'' collectively. See ISE Rule
100(a)(25).
\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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The Exchange now proposes to increase the ``taker'' fee for complex
orders in the Non-Penny Pilot Symbols to (i) [sic] $0.75 per contract
for ISE
[[Page 42037]]
Market Maker, Firm Proprietary and Customer (Professional) orders. The
Exchange is not proposing any change to the ``taker'' fees for Non-ISE
Market Maker and Priority Customer orders.
Further, the Exchange currently provides volume-based tiered
rebates for Priority Customer complex orders in the Non-Penny Pilot
Symbols when these orders trade with non-Priority Customer orders in
the complex order book. Specifically, the Exchange currently provides a
rebate of $0.57 per contract, per leg, for Priority Customer complex
orders when these orders trade with non-Priority Customer complex
orders in the complex order book. Additionally, Members who achieve
certain average daily volume (ADV) of Priority Customer complex order
contracts across all symbols executed during a calendar month are
provided a rebate of $0.59 per contract per leg, if a Member achieves
an ADV of 75,000 Priority Customer complex order contracts; $0.61 per
contract per leg, if a Member achieves an ADV of 125,000 Priority
Customer complex order contracts; and $0.615 per contract per leg, if a
Member achieves an ADV of 250,000 Priority Customer complex order
contracts. The highest rebate amount achieved by the Member for the
current calendar month applies retroactively to all Priority Customer
complex order contracts that trade with non-Priority Customer complex
orders in the complex order book executed by the Member during such
calendar month.
In order to enhance the Exchange's competitive position and to
incentivize Members to increase the amount of Priority Customer complex
orders that they send to the Exchange, the Exchange now proposes to
increase the base amount of the rebate to $0.62 per contract.
Additionally, the Exchange proposes to increase the amount of that
rebate even further, on a month-by-month and Member-by-Member basis, if
such Member achieves an ADV of Priority Customer complex order
contracts across all symbols executed during the calendar month, as
follows: If the Member achieves an ADV of 75,000 Priority Customer
complex order contracts, the rebate amount shall be $0.64 per contract
per leg; if the Member achieves an ADV of 125,000 Priority Customer
complex order contracts, the rebate amount shall be $0.66 per contract
per leg; and if the Member achieves an ADV of 250,000 Priority Customer
complex order contracts, the rebate amount shall be $0.67 per contract
per leg.
Additionally, the Exchange provides ISE Market Makers with a two
cent discount when trading against orders that are preferenced to them.
This discount is applicable when ISE Market Makers remove liquidity in
the Non-Penny Pilot Symbols from the complex order book. With the
proposed increase to the ``taker'' fee for complex orders in the Non-
Penny Pilot Symbols, ISE Market Makers who remove liquidity in the Non-
Penny Pilot Symbols from the complex order book by trading with orders
that are preferenced to them will be charged $0.73 per contract.
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 \9\ in
general, and furthers the objectives of Section 6(b)(4) of the Exchange
Act \10\ 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
interact with and respond to certain types of orders.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(4).
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The Exchange believes it is reasonable and equitable to charge ISE
Market Maker, Firm Proprietary and Customer (Professional) orders a
``taker'' fee of $0.75 per contract for complex orders in the Non-Penny
Pilot Symbols because the Exchange is seeking to recoup the cost
associated with paying increased rebates for Priority Customer complex
orders. The Exchange believes the proposed fees are also reasonable and
equitably allocated because they are within the range of fees assessed
by other exchanges employing similar pricing schemes.
The Exchange believes that it is reasonable and equitable to
provide rebates for Priority Customer complex orders when these orders
trade with Non-Priority Customer complex orders in the complex order
book because paying a rebate would continue to attract additional order
flow to the Exchange and create liquidity in the symbols that are
subject to the rebate, which the Exchange believes ultimately will
benefit all market participants who trade on ISE. The Exchange already
provides these types of rebates, and is now merely proposing to
increase those rebate amounts. The Exchange believes that the proposed
rebates are competitive with rebates provided by other exchanges and
are therefore reasonable and equitably allocated to those members that
direct orders to the Exchange rather than to a competing exchange.
The Exchange believes that it is reasonable and equitable to
provide a two cent discount to ISE Market Makers on preferenced orders
as an incentive for them to quote in the complex order book. The
Exchange notes that PHLX currently provides a similar discount.
Accordingly, ISE Market Makers who remove liquidity in the Non-Penny
Pilot Symbols from the complex order book will be charged $0.73 per
contract when trading with orders that are preferenced to them. The
Exchange notes that with this proposed fee change, the Exchange, while
increasing this fee, will continue to maintain a two cent differential
that was previously in place.
The complex order pricing employed by the Exchange has proven to be
an effective pricing mechanism and attractive to Exchange participants
and their customers. The Exchange believes that increasing its complex
order rebates will attract additional complex order business to the
Exchange. The Exchange further believes that the Exchange's complex
order rebates and its maker/taker fees are not unfairly discriminatory
because these fee structures are consistent with fee structures that
exist today at other options exchanges. Additionally, the Exchange
believes that the proposed fees and rebates are fair, equitable and not
unfairly discriminatory because the proposed fees and rebates are
consistent with price differentiation that exists today at other option
exchanges. 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. With this proposed rebate change, the Exchange believes it
remains an attractive venue for market participants to trade complex
orders.
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.
[[Page 42038]]
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.\11\ 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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\11\ 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-2012-63 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-2012-63. 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 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
10:00 a.m. and 3:00 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-2012-63 and should be
submitted on or before August 7, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-17328 Filed 7-16-12; 8:45 am]
BILLING CODE 8011-01-P