[Federal Register Volume 78, Number 71 (Friday, April 12, 2013)]
[Notices]
[Pages 21999-22001]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-08608]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69337; File No. SR-ISE-2013-29]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change To Amend the Schedule of Fees
April 8, 2013.
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 March 27, 2013, the International Securities Exchange, LLC (the
``Exchange'' or the ``ISE'') 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 proposes 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 purpose of this proposed rule change is to amend the manner in
which the fees for Crossing Orders \3\ and the Fee for Responses to
Crossing Orders \4\ is [sic] applied for regular and complex orders
traded on the Exchange. The fee for Crossing Orders and the fee for
Responses to Crossing Orders discussed below apply to both standard
options and Mini options traded on the Exchange. The Exchange's
Schedule of Fees has separate tables for fees and rebates applicable to
standard options and Mini Options. The Exchange notes that while the
discussion below notes the fees and rebates for standard options, the
fees and rebates for Mini Options, which are not discussed below, are
1/10th of the fees and rebates for standard options.\5\
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\3\ A Crossing Order is an order executed in the Exchange's
Facilitation Mechanism, Solicited Order Mechanism, Price Improvement
Mechanism (PIM) or submitted as a Qualified Contingent Cross order.
For purposes of the Schedule of Fees, orders executed in the Block
Order Mechanism are also considered Crossing Orders. See Preface,
ISE Schedule of Fees.
\4\ ``Responses to Crossing Order'' (other than Regular Orders
in Non-Select Symbols) is any contra-side interest submitted after
the commencement of an auction in the Exchange's Facilitation
Mechanism, Solicited Order Mechanism, Block Order Mechanism or PIM.
``Responses to Crossing Order'' (for Regular Orders in Non-Select
Symbols) is any response message entered with respect to a specific
auction in the Exchange's Facilitation Mechanism, Solicited Order
Mechanism, Block Order Mechanism or PIM. See Preface, ISE Schedule
of Fees.
\5\ See SR-ISE-2013-28 (not yet published).
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First, the Exchange currently charges a fee of $0.20 per contract
to Market Maker, Market Maker Plus, Non-ISE Market Maker, Firm
Proprietary/Broker-Dealer and Professional Customer orders (except for
Priority Customer, this fee is currently $0.00 per contract) for
regular Crossing Orders in the Select Symbols.
The Exchange also currently charges a fee of $0.20 per contract
(for largest leg only) to Market Maker, Non-ISE Market Maker, Firm
Proprietary/Broker-Dealer and Professional Customer orders (except for
Priority Customer, this fee is currently $0.00 per contract) for
complex Crossing Orders in all symbols.
As an incentive to attract crossing orders for execution in the
Exchange's various auction mechanisms, the Exchange currently provides
a per contract rebate. This rebate is provided to those contracts that
do not trade with the contra order in the Exchange's Facilitation
Mechanism, Price Improvement Mechanism and Solicited Order Mechanism.
This rebate currently applies to regular and complex orders in the
Select Symbols. For the Facilitation and Solicited Order Mechanisms,
the rebate is currently $0.15 per contract. For the Price Improvement
Mechanism, the rebate is currently $0.25 per contract. The Exchange
does not currently charge an execution fee for contracts that receive
the rebate.
The Exchange now proposes to apply the existing crossing order fees
for the full size of a crossing order, regardless if a portion of the
order also receives a rebate. For example, assume a member enters a
facilitation order for 1000 contracts; a market maker responds and
trades 200 contracts; and the remaining 800 contracts are traded by the
member that entered the order. Currently, the member that entered the
order is charged a crossing fee for the 800 contracts it executed and
receives a rebate for the 200 contracts that were executed by the
market maker. Under this proposed rule change, the member that entered
the order will be charged an
[[Page 22000]]
execution fee for the full size of the order (1000 contracts) and
receive a rebate for any portion of the order it did not execute (200
contracts).
Second, the Exchange currently charges a Fee for Responses to
Crossing Orders for regular orders in Non-Select Symbols, as follows:
(i) $0.20 per contract to Market Maker (for orders sent by Electronic
Access Members), Firm Proprietary/Broker-Dealer, Professional Customer,
Priority Customer and Priority Customer (Singly Listed Symbols) orders;
(ii) $0.45 per contract for Non-ISE Market Maker orders; and (iii)
$0.18 per contract for Market Maker orders. This fee was adopted in
January 2007 and has always been applied to ``response messages''
entered with respect to a particular broadcast message, but not to
orders that are received on the limit order book after an auction
commences.\6\
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\6\ See Exchange Act Release No. 55060 (Jan. 8, 2007), 72 FR
2050 (Jan. 17, 2007) (SR-ISE-2006-72).
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The Exchange later adopted a similar response fee for Regular
Orders in Select Symbols,\7\ for complex orders in Select Symbols \8\
of $0.40 per contract, and for complex orders in Non-Select Symbols \9\
for responses to special orders,\10\ but specified that a ``response''
is any contra-side interest submitted after the commencement of an
auction. Thus, the fees for Regular Orders in Select Symbols and all
complex orders are applied to both response messages and to orders
received on the limit order book after an auction commences, whereas
the fees for Regular Orders in Non-Select Symbols are applied to
response messages.
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\7\ See Exchange Act Release No. 63283 (Nov. 9, 2010), 75 FR
70059 (Nov. 16, 2010) (SR-ISE-2010-106).
\8\ See Exchange Act Release No. 65550 (October 13, 2011), 76 FR
64984 (October 19, 2012 [sic]) (SR-ISE-2011-65). In this filing, the
Exchange also adopted a response fee for complex orders for symbols
that are in the Penny Pilot Program.
\9\ See Exchange Act Release No. 66084 (January 3, 2012), 77 FR
1103 (January 9, 2012) (SR-ISE-2011-84). This fee has since
increased and is currently $0.82 per contract for Market Makers
($0.84 per contract for Non-ISE Market Maker, Firm Proprietary/
Broker-Dealer and Professional Customer orders, and $0.00 per
contract for Priority Customer orders). See Exchange Act Release No.
68627 (January 11, 2013), 78 FR 3934 (January 17, 2013) (SR-ISE-
2013-01).
\10\ The term ``special order'' was changed to ``crossing
order'' when the Exchange re-formatted its Schedule of Fees. See
Exchange Act Release No. 67545 (July 31, 2012), 77 FR 46776 (August
6, 2012) (SR-ISE-2012-65).
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The distinction noted above is reflected in the Preface of the fee
schedule where ``Responses to Crossing Order'' (other than Regular
Orders in Non-Select Symbols) is defined as any contra-side interest
submitted after the commencement of an auction in the Exchange's
Facilitation Mechanism, Solicited Order Mechanism, Block Order
Mechanism or PIM, while ``Responses to Crossing Order'' (for Regular
Orders in Non-Select Symbols) is defined as any response message
entered with respect to a specific auction in the Exchange's
Facilitation Mechanism, Solicited Order Mechanism, Block Order
Mechanism or PIM.
The Exchange now proposes to charge the Fee for Responses to
Crossing Orders in a consistent manner across all symbols. Accordingly,
the Exchange proposes to adopt a single definition that applies to
regular and complex orders in all symbols by removing the term
``Responses to Crossing Order'' (for Regular Orders in Non-Select
Symbols) entirely and renaming the term ``Responses to Crossing Order''
(other than Regular Orders in Non-Select Symbols) as simply ``Responses
to Crossing Order.'' The Exchange is not proposing any change to the
level of fees charged for responses to crossing orders; this proposed
rule change only amends the manner in which the current fee is applied.
The Exchange has designated this proposed rule change to be
operative on April 1, 2013.
2. Basis
The Exchange believes that its proposal to amend its Schedule of
Fees is consistent with Section 6(b) of the Securities and [sic]
Exchange Act of 1934 (the ``Exchange Act'') \11\ in general, and
furthers the objectives of Section 6(b)(4) of the Act \12\ 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.
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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(4).
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The Exchange believes it is reasonable and equitable to charge the
existing crossing order fees to the full size of a crossing order to
recoup some of its costs of providing rebates to crossing orders and
will result in a more equitable distribution among market participants
of the costs associated with crossing orders. The Exchange believes the
proposed fee to charge the existing crossing order fees to the full
size of a crossing order is not unfairly discriminatory because the fee
would apply uniformly to all categories of participants in the same
manner. All market participants who execute crossing orders would be
uniformly subject to these fees and all market participants whose
orders are broken-up will continue to receive the break-up rebate at
current levels.
The Exchange believes that its proposal to modify the application
of the Fee for Responses to Crossing Orders in the Non-Select Symbols
is both reasonable and equitable because the Exchange already applies
this fee to the Select Symbols in the manner in which it proposes to
apply to the Non-Select Symbols. With this proposed rule change, this
fee will now be applied in a consistent manner across all symbols. The
Exchange believes its proposal to uniformly apply the Fee for Responses
to Crossing Order across all symbols is not unfairly discriminatory
because the fee would apply uniformly to all categories of participants
in the same manner. All market participants that submit a contra-side
interest after the commencement of an auction in the Exchange's various
auction mechanisms would be uniformly subject to these fees.
B. Self-Regulatory Organization's Statement on Burden on Competition
ISE does not believe that the proposed rule change will impose any
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. This proposed rule change,
which proposes to apply fees to a full size of a crossing order and
which proposes to apply an existing fee uniformly across all symbols,
does not impose any burden on competition. With this proposed rule
change, market participants that trade on the Exchange will be subject
to fees for the full size of a crossing order and will continue to
receive the rebate for the portion of the order that was not previously
charged a fee. With this proposed rule change, market participants that
respond to crossing orders will be subject to fees that are already in
place on the Exchange. Therefore, this proposed rule change does not
impose any additional burden on competition that is not necessary or
appropriate in furthering 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 22001]]
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 \13\ and subparagraph (f)(2) of Rule 19b-4
thereunder,\14\ because it establishes a due, fee, or other charge
imposed by ISE.
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\13\ 15 U.S.C. 78s(b)(3)(A)(ii).
\14\ 17 CFR 240.19b-4(f)(2).
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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.
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-2013-29 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-2013-29. 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 such filing also will be available
for inspection and copying at the principal office of the ISE. 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-2013-29 and should be
submitted on or before May 3, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-08608 Filed 4-11-13; 8:45 am]
BILLING CODE 8011-01-P