[Federal Register Volume 77, Number 206 (Wednesday, October 24, 2012)]
[Notices]
[Pages 65034-65037]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-26146]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68068; File No. SR-ISE-2012-86]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change To Amend Maker Fees for Certain Complex Orders Executed on the
Exchange
October 18, 2012.
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 October 10, 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 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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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The ISE is proposing to amend maker fees 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
provides rebates to market participants that add or remove liquidity
from the Exchange (``maker/taker fees and rebates'') in a number of
option 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 \4\ and in the Special Non-Select Penny Pilot
Symbols.\5\ The Exchange also currently assesses maker/taker fees and
rebates for complex orders in symbols that are in the Penny Pilot
program but are not a Select Symbol (``Non-Select Penny Pilot
Symbols'') \6\ and for complex orders in all symbols that are not in
the Penny Pilot Program (``Non-Penny Pilot Symbols'').\7\ The purpose
of this
[[Page 65035]]
proposed rule change is to amend the complex order maker fees charged
by the Exchange for certain complex orders executed on the Exchange.
Specifically, the Exchange proposes to adopt complex order maker fees
for orders that trade against Priority Customer orders in the Select
Symbols, SPY, Non-Select Penny Pilot Symbols and Non-Penny Pilot
Symbols. Section II of the current Schedule of Fees provides the fees
and rebates for complex orders traded on the Exchange, with the rebates
provided in one table and the fees in another. With this proposed rule
change, the Exchange is separating the fees table into two tables, one
for maker fees and another for taker fees with the latter retaining the
other fees applicable to complex orders, i.e., Fee for Crossing Orders
and Fees for Responses to Crossing Orders. The Exchange is not
proposing any change to the complex order taker fees or rebates
applicable for executions in these symbols.
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\3\ Options classes subject to maker/taker fees and rebates are
identified by their ticker symbol on the Exchange's Schedule of
Fees.
\4\ These fees also apply to SPY. While the Exchange currently
has a distinct taker fee for SPY, the maker fee for SPY is currently
the same as the maker fee for all Select Symbols, as SPY is a Select
Symbol.
\5\ See Exchange Act Release Nos. 67201 (June 14, 2012), 77 FR
37082 (June 20, 2012) (SR-ISE-2012-49); and 67627 (August 9, 2012),
77 FR 49046 (August 15, 2012) (SR-ISE-2012-70).
\6\ See Exchange Act Release No. 65724 (November 10, 2011), 76
FR 71413 (November 17, 2011) (SR-ISE-2011-72).
\7\ 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); 66961 (May 10,
2012), 77 FR 28914 (May 16, 2012) (SR-ISE-2012-38); and 67400 (July
11, 2012), 77 FR 42036 (July 17, 2012) (SR-ISE-2012-63).
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For Select Symbols (including SPY) and Penny Pilot symbols, the
Exchange currently charges a complex order maker fee of: (i) $0.10 per
contract for Market Maker,\8\ Firm Proprietary/Broker-Dealer and
Professional Customer \9\ orders; (ii) $0.20 per contract for Non-ISE
Market Maker \10\ orders; and (iii) $0.00 per contract for Priority
Customer \11\ orders. For Non-Penny Pilot Symbols, the Exchange
currently charges a complex order maker fee of: (i) $0.10 per contract
for Market Maker, Firm Proprietary/Broker-Dealer, Professional Customer
and Non-ISE Market Maker orders; and (ii) $0.00 for Priority Customer
orders.
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\8\ The term ``Market Makers'' refers to ``Competitive Market
Makers'' and ``Primary Market Makers'' collectively. See ISE Rule
100(a)(25).
\9\ A Professional Customer is a person who is not a broker/
dealer and is not a Priority Customer.
\10\ 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.
\11\ 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 amend the maker fee for the group of
symbols noted above when orders in these symbols trade against Priority
Customer complex orders. Specifically, the Exchange proposes to adopt
the following maker fees for complex orders that trade against Priority
Customer orders in the Select Symbols (excluding SPY):
$0.37 per contract for Market Maker orders;
$0.39 for Firm Proprietary/Broker-Dealer, Professional
Customer and Non-ISE Market Maker orders;
$0.00 for Priority Customer orders.
For complex orders that trade against Priority Customer complex
orders in SPY, the Exchange proposes to adopt the following maker fees:
$0.38 per contract for Market Maker orders;
$0.40 for Firm Proprietary/Broker-Dealer, Professional
Customer and Non-ISE Market Maker orders;
$0.00 for Priority Customer orders.
For complex orders that trade against Priority Customer complex
orders in Non-Select Penny Pilot Symbols, the Exchange proposes to
adopt the following maker fees:
$0.37 per contract for Market Maker orders;
$0.39 for Firm Proprietary/Broker-Dealer, Professional
Customer and Non-ISE Market Maker orders;
$0.00 for Priority Customer orders.
For orders that trade against Priority Customer complex orders in
Non-Penny Pilot Symbols, the Exchange proposes to adopt the following
complex order maker fees:
$0.80 per contract for Market Maker orders;
$0.83 for Firm Proprietary/Broker-Dealer, Professional
Customer and Non-ISE Market Maker orders;
$0.00 for Priority Customer orders.
The Exchange also proposes to increase the maker fee for Non-ISE
Market Maker orders in the Non-Penny Pilot Symbols from $0.10 per
contract to $0.20 per contract when trading against a non-Priority
Customer. With this change, the Exchange seeks to standardize the maker
fee for complex orders in Non-Penny Pilot Symbols with the fee
currently charged for complex orders in Select Symbols and Penny Pilot
Symbols for Non-ISE Market Maker orders when trading against a non-
Priority Customer order.
Additionally, the Exchange provides Market Makers with a two cent
discount when trading against Priority Customer orders that are
preferenced to them. This discount is currently applicable when Market
Makers remove liquidity in the Select Symbols, SPY, Non-Select Penny
Pilot Symbols and Non-Penny Pilot Symbols from the complex order book.
The Exchange also currently provides Market Makers with a two-cent
discount when they make liquidity in a select group of option classes
(``Complex Quoting Symbols'').\12\ The Exchange now proposes to provide
Market Makers with a two-cent discount when they also add liquidity in
the Select Symbols, SPY, Non-Select Penny Pilot Symbols and Non-Penny
Pilot Symbols when trading against Priority Customer orders.
Accordingly, Market Makers that add or remove liquidity from the
complex order book by trading against Priority Customer orders that are
preferenced to them will be charged: (i) $0.35 per contract in the
Select Symbols; (ii) $0.36 per contract in SPY; (iii) $0.35 per
contract in the Non-Select Penny Pilot Symbols; and iv) $0.78 per
contract in the Non-Penny Pilot Symbols Select Symbols.
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\12\ See Exchange Act Release Nos. 65958 (December 15, 2011), 76
FR 79236 (December 21, 2012 [sic]) (SR-ISE-2011-81); 66406 (February
16, 2012), 77 FR 10579 (February 22, 2012) (SR-ISE-2012-07); and
67316 (June 29, 2012), 77 FR 40136 (July 6, 2012) (SR-ISE-2012-59).
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The maker fees proposed herein are identical to the taker fees
currently charged by the Exchange.\13\ With this proposed rule change,
complex orders that trade against Priority Customer orders in the
Select Symbols, SPY, Non-Select Penny Pilot Symbols, and Non-Penny
Pilot Symbols will now be charged the same fee for making and taking
liquidity.
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\13\ The Exchange has submitted a proposed rule change to
increase the taker fees for complex orders in Select Symbols, SPY,
Non-Select Penny Pilot Symbols and Non-Penny Pilot Symbols that
mirror the proposed maker fees in this filing. See SR-ISE-2012-85.
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With this proposed rule change, the Exchange will be better
positioned to maintain its attractive rebate structure for Priority
Customer complex orders. The number of non-Priority Customer maker
participants has continued to grown, separately and in addition to the
growth in symbols where the Exchange allows complex quoting and has
already implemented a fee structure where makers trading against
Priority Customer orders pay the taker fee equivalent. This has
resulted in an increased number of non-Priority Customer complex maker
orders trading with Priority Customer Complex orders. Charging non-
Priority Customer orders the equivalent of the taker fee when
interacting with Priority Customer complex orders will allow the
Exchange to support this model and continue to attract additional
orders and liquidity to its Complex Orderbook.
Since the rate changes to the Schedule of Fees pursuant to this
proposal will be effective upon filing, for the transactions occurring
in October 2012 prior to the effective date of this filing members will
be assessed the rates in effect immediately prior to those proposed by
this filing. For transactions occurring in October 2012 on and after
the effective date of this filing, members will be
[[Page 65036]]
assessed the rates proposed by this filing.
The Exchange's maker/taker fees and rebates for complex orders have
proven to be an effective method of attracting order flow to the
Exchange. The Exchange believes this proposed rule change will also
serve to enhance its competitive position and enable it to attract
additional volume in these symbols.
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 \14\ in
general, and furthers the objectives of Section 6(b)(4) of the Exchange
Act \15\ 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 the symbols that are subject to the fees
proposed herein.
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\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(4).
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The Exchange believes it is reasonable and equitable to charge a
maker fee of $0.37 per contract for Market Maker orders that trade
against Priority Customer interest in the Select Symbols and Penny
Pilot symbols and $0.39 per contract for Non-ISE Market Maker, Firm
Proprietary/Broker-Dealer, and Professional Customer orders that trade
against Priority Customer interest in the Select Symbols and Non-Select
Penny Pilot Symbols. The Exchange believes it is reasonable and
equitable to charge a maker fee of $0.38 per contract for Market Maker
orders that trade against Priority Customer interest in SPY and $0.40
per contract for Non-ISE Market Maker, Firm Proprietary/Broker-Dealer,
and Professional Customer orders that trade against Priority Customer
interest in SPY. The Exchange believes it is reasonable and equitable
to charge a maker fee of $0.80 per contract for Market Maker orders
that trade against Priority Customer interest in the Non-Penny Pilot
Symbols and $0.83 per contract for Non-ISE Market Maker, Firm
Proprietary/Broker-Dealer, and Professional Customer orders that trade
against Priority Customer interest in the Non-Penny Pilot Symbols.
The Exchange notes that it already charges an identical maker and
taker fee for Complex Quoting Symbols and is now simply extending that
pricing model to complex orders in the Select Symbols, SPY, in the Non
Select Penny Pilot Symbols and in the Non-Penny Pilot Symbols. The
Exchange believes that it is reasonable and equitable to charge the
fees proposed herein as they are already applicable to complex orders
in the Complex Quoting Symbols; with this proposed rule change, the
Exchange is simply extending its current pricing model to complex
orders in a larger group of option classes.
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 adopting distinct maker
fees for orders that trade against Priority Customer orders in the
Select Symbols, SPY, Non Select Penny Pilot Symbols and Non-Penny Pilot
Symbols will attract additional business to the Exchange. 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. 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. 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.\16\ 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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\16\ 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 email to [email protected]. Please include
File Number SR-ISE-2012-86 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-2012-86. 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
[[Page 65037]]
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-2012-86 and should be
submitted on or before November 14, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-26146 Filed 10-23-12; 8:45 am]
BILLING CODE 8011-01-P