[Federal Register Volume 77, Number 225 (Wednesday, November 21, 2012)]
[Notices]
[Pages 69905-69908]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-28260]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68240; File No. SR-ISE-2012-88]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change To Amend the Schedule of Fees
November 15, 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 November 6, 2012, the International Securities Exchange, LLC
(the ``ISE'' or the ``Exchange'') filed with the Securities and
Exchange Commission (``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 its Schedule of Fees. 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 93 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 symbols that are in the Penny
Pilot program but are not a Select Symbol (``Non-Select Penny Pilot
Symbols'') \4\ and in all symbols that are not in the Penny Pilot
Program (``Non-Penny Pilot Symbols'').\5\ The Exchange also currently
assesses maker/taker fees and rebates for certain regular orders in 62
option classes (``Special Non-Select Penny Pilot Symbols'').\6\
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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\ See Exchange Act Release Nos. 65724 (November 10, 2011), 76
FR 71413 (November 17, 2011) (SR-ISE-2011-72); 66597 (March 14,
2012), 77 FR 16295 (March 20, 2012) (SR-ISE-2012-17); 66961 (May 10,
2012), 77 FR 28914 (May 16, 2012) (SR-ISE-2012-38); and 67628
(August 9, 2012), 77 FR 49049 (August 15, 2012) (SR-ISE-2012-71).
\5\ 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); 66962 (May 10,
2012), 77 FR 28917 (May 16, 2012) (SR-ISE-2012-35); 67400 (July 11,
2012), 77 FR 42036 (July 17, 2012) (SR-ISE- 2012-63) and 67628
(August 9, 2012), 77 FR 49049 (August 15, 2012) (SR-ISE-2012-71).
\6\ The Special Non-Select Penny Pilot Symbols are identified by
their ticker symbol on the Exchange's Schedule of Fees. 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).
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The Exchange currently applies maker and taker fees and rebates to
regular orders in the Special Non-Select Penny Pilot Symbols.
Specifically, the Exchange applies the following maker fees and rebates
for orders that trade against Priority and Non-Priority Customer
orders:
For Market Maker,\7\ Firm Proprietary/Broker-Dealer and
Professional Customer \8\ orders, a maker fee of $0.35 per contract;
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\7\ The term ``Market Makers'' refers to ``Competitive Market
Makers'' and ``Primary Market Makers'' collectively. See ISE Rule
100(a)(25).
\8\ A Professional Customer is a person who is not a broker/
dealer and is not a Priority Customer.
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For Non-ISE Market Maker \9\ orders, a maker fee of $0.40
per contract;
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\9\ 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 registered in the same options class
on another options exchange.
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For Priority Customer \10\ orders, a maker rebate of $0.25
per contract.
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\10\ 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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Additionally, the Exchange applies the following taker fees and
rebates for orders that trade against Non-Priority Customer orders:
For Market Maker orders, a taker fee of $0.20 per
contract;
For Non-ISE Market Maker orders, a taker fee of $0.35 per
contract;
For Firm Proprietary/Broker-Dealer and Professional
Customer orders, a taker fee of $0.25 per contract;
For Priority Customer orders, a taker rebate of $0.32 per
contract.
The Exchange also currently applies the following taker fees for
orders that trade against Priority Customer orders:
For Market Maker orders, a taker fee of $0.32 per
contract;
For Non-ISE Market Maker orders, a taker fee of $0.40 per
contract;
For Firm Proprietary/Broker-Dealer and Professional
Customer orders, a taker fee of $0.35 per contract;
For Priority Customer orders, a taker fee of $0.00 per
contract.
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 applicable when Market Makers add
or remove liquidity in the Special Non- Select Penny Pilot Symbols. The
Exchange also currently charges a fee of $0.20 per contract to all
market participants [sic] for Crossing Orders in the Special Non-Select
Penny
[[Page 69906]]
Pilot Symbols, and a fee of $0.40 per contract to all market
participants for Responses to Crossing Orders in the Special Non-Select
Penny Pilot Symbols. Finally, the Exchange also currently provides a
rebate of $0.25 per contract for contracts that are submitted to the
Price Improvement Mechanism that do not trade with their contra order,
and a rebate of $0.15 per contract for contracts that are submitted to
the Facilitation and Solicited Order Mechanisms that do not trade with
their contra order except when those contracts trade against pre-
existing orders and quotes on the Exchange's orderbooks.
The purpose of this proposed rule change is to remove the Special
Non-Select Penny Pilot Symbols category from the Schedule of Fees in
its entirety and to move the Special Non-Select Penny Pilot Symbols
into the Select Symbols category, such that the fees applicable to the
Select Symbols will now be applied to the 62 options classes that had
been categorized as Special Non-Select Penny Pilot Symbols. The
Exchange is proposing this change in order to attract additional order
flow to the Exchange.
Specifically, the Exchange proposes to remove the following sixty-
five (65) symbols from the list of Special Non-Select Penny Pilot
Symbols and add sixty-two (62) of them to the list of Select Symbols:
\11\ ACI, AGNC, AMLN, AMZN, ANR, APA, ARNA, ATPG, AUY, BAX, BTU, CLF,
COP, CRM, CVX, DAL, DD, DE, DIS, DOW, EBAY, FDX, GLW, GM, GMCR, GS, HD,
HGSI, JCP, JOY, KBH, KGC, LULU, MA, MBI, MCP, MDT, MMR, MOS, MRK, NKE,
PEP, QQQ, S, SD, SDS, SHLD, SINA, SIRI, SLW, SSO, TZA, UNP, UPS, USB,
UTX, VLO, WAG, WDC, WLT, WYNN, XHB, XLK, XLU and ZNGA.\12\
Additionally, the Exchange is proposing to delete all references to
Special Non-Select Penny Pilot Symbols and its accompanying notes as
this category will no longer exist.
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\11\ Due to corporate actions, AMLN, ATPG and HGSI are no longer
traded and thus are being removed from the Schedule of Fees.
\12\ [sic]
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With this proposed rule change, the 62 symbols noted above will now
be subject to the fees and rebates for Select Symbols. The Exchange
currently charges the following maker fees and rebates for Select
Symbols: for Market Maker, Non-ISE Market Maker, Firm Proprietary/
Broker-Dealer and Professional Customer orders, $0.10 per contract; for
Priority Customer orders, $0.00 per contract and for Market Maker Plus
orders, a rebate of $0.10 per contract. The Exchange also currently
charges the following taker fees for Select Symbols: For Market Maker
and Market Maker Plus \13\ orders, $0.32 per contract; for Non-ISE
Market Maker orders, $0.36 per contract; for Firm Proprietary/Broker-
Dealer and Professional Customer orders, $0.33 per contract; and for
Priority Customer orders, $0.25 per contract.
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\13\ In order to promote and encourage liquidity in the Select
Symbols, the Exchange currently offers a $0.10 per contract rebate
to Market Makers if the quotes they sent to the Exchange qualify the
Market Maker to become a Market Maker Plus. 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 for all expiration months in that symbol during the current
trading month. A Market Maker's single best and single worst overall
quoting days each month, on a per symbol basis, is excluded in
calculating whether a Market Maker qualifies for this rebate, if
doing so will qualify a Market Maker for the rebate.
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The Exchange currently charges Market Maker, Non-ISE Market Maker,
Firm Proprietary/Broker-Dealer and Professional Customers a fee of
$0.20 per contract ($0.00 per contract for Priority Customers) for
Crossing Orders in the Select Symbols, and a fee of $0.40 per contract
to all market participants for Responses to Crossing Orders in the
Select Symbols. Finally, the Exchange also currently provides a rebate
of $0.25 per contract for contracts that are submitted to the Price
Improvement Mechanism that do not trade with their contra order, and a
rebate of $0.15 per contract for contracts that are submitted to the
Facilitation and Solicited Order Mechanisms that do not trade with
their contra order except when those contracts trade against pre-
existing orders and quotes on the Exchange's orderbooks.
With this proposed rule change, non-Priority Customer market
participants will generally pay lower taker fees as the taker fees
charged for Special Non-Select Penny Pilot Symbols were marginally
higher that the taker fees charged by the Exchange for Select Symbols.
Specifically, the taker fee for Select Symbols is lower in most cases
than the taker fee the Exchange charged market participants when
trading against Priority Customers in the Special Non-Select Penny
Pilot Symbols. The Exchange notes, however, that the taker fees for
Select Symbols are nominally higher than the taker fees charged by the
Exchange to market participants when trading against Non-Priority
Customers. Further, with this proposed rule change, the taker fee
charged to Priority Customer orders will also increase as the taker fee
for Priority Customer orders in the Select Symbols is $0.25 per
contract while Priority Customer orders in the Special Non-Penny Pilot
Symbols received a rebate for both making and taking liquidity.
Priority Customer orders that add liquidity will not pay a fee or
receive a rebate consistent with the fees and rebates applicable to
Select Symbols.
With this proposed rule change, non-Priority Customers will also
pay a lower maker fee as the maker fee charged for Special Non-Select
Penny Pilot Symbols were higher than the maker fees charged by the
Exchange for Select Symbols. The Exchange notes, however, that while
Priority Customer orders in the Special Non-Select Penny Pilot Symbols
received a rebate when trading against other Priority Customer orders
and Non-Priority Customers, this rebate will no longer be payable. With
this proposed rule change, Priority Customer orders in the symbols that
are subject to this proposed rule change will not be charged a maker
fee.
Also, with this proposed rule change, the fee for Crossing Orders
and Responses to Crossing Orders will remain at $0.20 per contract
($0.00 per contract for Priority Customers) and $0.40 per contract,
respectively. Further, the rebate for contracts that are submitted to
the Price Improvement Mechanism that do not trade with their contra
order will also remain at $0.25 per contract as will the rebate for
contracts that are submitted to the Facilitation and Solicited Order
Mechanisms that do not trade with their contra order except when those
contracts trade against pre-existing orders and quotes on the
Exchange's orderbooks. That rebate will also remain at $0.15 per
contract.
Further, the Exchange currently provides a $0.20 per contract fee
credit to Primary Market Makers (PMM) for execution of Priority
Customer orders in the Special Non-Select Penny Pilot Symbols--for
classes in which it serves as a PMM--that send an Intermarket Sweep
Order to other exchanges. This credit is applied regardless of the
transaction fee charged by a destination market. For Select Symbols,
this credit is equal to the fee charged by a destination market and the
symbols that are subject to this proposed rule change will now be
provided with a credit that that is equal to the fee charged by a
destination market.
[[Page 69907]]
The Exchange also currently provides a $0.20 per contract credit
for responses to flash orders in the Special Non-Select Penny Pilot
Symbols when trading against Professional Customers. For Select
Symbols, the per contract fee credit for responses to flash orders is
$0.10 per contract when trading Priority Customers, $0.12 per contract
when trading against Preferenced Priority Customers and $0.10 per
contract when trading against Professional Customers. The symbols that
are subject to this proposed rule change will now be provided the
rebate at levels that are currently in place for Select Symbols, as
described above.
Since the rate changes to the Schedule of Fees pursuant to this
proposal will be effective upon filing, for the transactions occurring
in November 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 November 2012 on
and after the effective date of this filing, members will be assessed
the rates proposed by this filing.
2. Statutory Basis
The Exchange believes that its proposal to amend its Schedule of
Fees is consistent with Section 6(b) of the Act \14\ in general, and
furthers the objectives of Section 6(b)(4) of the Act \15\ in
particular, in that it is an equitable allocation of reasonable fees
and other charges among Exchange members and other persons using its
facilities.
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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 that it is reasonable to remove the Special
Non-Select Penny Pilot Symbols from its Schedule of Fees and add those
symbols to the list of Select Symbols to increase order flow to the
Exchange. Select Symbol pricing has proven beneficial for the Exchange
and its participants and the Exchange believes that moving these
symbols to Select Symbols pricing would enhance liquidity and
participation in the 62 symbols. Additionally, removing the Special
Non-Select Penny Pilot Symbols and adding those names to Select Symbols
would standardize ISE fees.
With this proposed rule change, non-Priority Customer market
participants will generally pay lower taker fees as the taker fees
charged for Special Non-Select Penny Pilot Symbols were marginally
higher that the taker fees charged by the Exchange for Select Symbols.
Specifically, the taker fee for Select Symbols is lower in most cases
than the taker fee the Exchange charged market participants when
trading against Priority Customers in the Special Non-Select Penny
Pilot Symbols. The Exchange notes, however, that the taker fees for
Select Symbols are nominally higher than the taker fees charged by the
Exchange to market participants when trading against Non-Priority
Customers. Further, with this proposed rule change, the taker fee
charged to Priority Customer orders will also increase as the taker fee
for Priority Customer orders in the Select Symbols is $0.25 per
contract while Priority Customer orders in the Special Non-Penny Pilot
Symbols received a rebate for both making and taking liquidity.
Priority Customer orders that add liquidity will not pay a fee or
receive a rebate consistent with the fees and rebates applicable to
Select Symbols.
With this proposed rule change, non-Priority Customers will also
pay a lower maker fee as the maker fee charged for Special Non-Select
Penny Pilot Symbols were higher than the maker fees charged by the
Exchange for Select Symbols. The Exchange notes, however, that while
Priority Customer orders in the Special Non-Select Penny Pilot Symbols
received a rebate when trading against other Priority Customer orders
and Non-Priority Customers, this rebate will no longer be payable. With
this proposed rule change, Priority Customer orders in the symbols that
are subject to this proposed rule change will not be charged a maker
fee.
With this proposed rule change, market participants will generally
pay lower taker fees and lower maker fees while the fees for Crossing
Orders and Responses to Crossing Orders will remain the same. Further,
with this proposed rule change, the break-up rebates for contracts
submitted to the Facilitation Mechanism, Solicited Order Mechanism and
Price Improvement Mechanism will also remain unchanged. With this
proposed rule change, the Exchange will no longer pay certain rebates
that were previously applicable as the Exchange believes incenting
market participants with rebates is no longer necessary to attract
order flow in the symbols that are subject to this proposed rule
change.
The Exchange believes that the proposed changes are non-
discriminatory because the proposal simply collapses a category of fees
into an existing category thereby applying fees currently in effect to
these additional symbols. Further, the Exchange believes that it is
equitable and not unfairly discriminatory to amend its list of Select
Symbols to add the Special Non-Select Penny Pilot Symbols to the Select
Symbols because the fees applicable to the Select Symbols would apply
uniformly to all categories of participants in the same manner. All
market participants who trade the Select Symbols would be uniformly
subject to the fees and rebates applicable to those symbols.
The Exchange believes it remains an attractive venue for market
participants to trade 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. With this proposed fee
change, the Exchange believes it remains an attractive venue for market
participants to trade at favorable prices.
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.
[[Page 69908]]
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-2012-88 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-2012-88. 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-2012-88 and should be
submitted on or before December 12, 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. 2012-28260 Filed 11-20-12; 8:45 am]
BILLING CODE 8011-01-P