[Federal Register Volume 78, Number 79 (Wednesday, April 24, 2013)]
[Notices]
[Pages 24269-24271]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-09655]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69395; File No. SR-ISE-2013-31]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change To Amend the Schedule of Fees To Increase Certain Complex Order 
Rebates

April 18, 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 April 10, 2013, the International Securities Exchange, LLC (the 
``Exchange'' or the ``ISE'') filed with the Securities and Exchange 
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 to increase certain 
complex order rebates. 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this proposed rule change is to increase the rebate 
levels for Priority Customer complex orders that trade with quotes and 
orders on the regular orderbook in all symbols traded on the Exchange. 
The rebates 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 rebates for standard options, the rebates for mini options, which 
are not discussed below, are and shall continue to be 1/10th of the 
rebates for standard options.\3\
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    \3\ See Securities Exchange Act Release No. 69270 (April 2, 
2013), 78 FR 20988 (April 8, 2013) (SR-ISE-2013-28).
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    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 provides volume-
based tiered rebates for Priority Customer complex orders that trade 
with quotes and orders on the regular order book in all symbols traded 
on the Exchange. Specifically, the Exchange currently provides a base 
rebate of $0.06 per contract, per leg, for Priority Customer complex 
orders in all symbols traded on the Exchange (excluding SPY) when these 
orders trade against quotes or orders in the regular orderbook. The 
current average daily volume (ADV) threshold for the base tier is 0-
39,999 Priority Customer complex contracts and the base rebate of $0.06 
per contract, per leg, applies to this tier. The Exchange is not 
proposing any change to the rebate for this tier. The current ADV 
threshold for the second tier is 40,000-74,999 Priority Customer 
complex contracts. The rebate amount for this tier is currently $0.08 
per contract, per leg. The Exchange proposes to increase the rebate for 
this tier to $0.12 per contract, per leg. The current ADV threshold for 
the third tier is 75,000-124,999 Priority Customer complex contracts. 
The rebate amount for this tier is currently $0.09 per contract, per 
leg. The Exchange proposes to increase the rebate for this tier to 
$0.13 per contract, per leg. The current ADV threshold for the fourth 
tier is 125,000-224,999 Priority Customer complex contracts. The rebate 
amount for this tier is currently $0.10 per contract, per leg. The 
Exchange proposes to increase the rebate for this tier to $0.17 per 
contract, per leg. Finally, the current ADV threshold for the fifth 
tier is 225,000 or more Priority Customer complex contracts. The rebate 
amount for this tier is currently $0.11 per contract, per leg. The 
Exchange proposes to increase the rebate for this tier to $0.18 per 
contract, per leg. The highest rebate amount achieved by the Member for 
the current calendar month applies retroactively to all Priority 
Customer complex orders that trade against quotes or orders in the 
regular orderbook during such calendar month.
    For SPY, the Exchange currently provides a base rebate of $0.07 per 
contract, per leg, for Priority Customer complex orders traded on the 
Exchange when these orders trade against quotes or orders in the 
regular orderbook. The current ADV threshold for the base tier is 0-
39,999 Priority Customer complex contracts and the base rebate of $0.07 
per contract, per leg, applies to this tier. The Exchange is not 
proposing any change to the rebate for this tier. The current ADV 
threshold for the second tier is 40,000-74,999 Priority Customer 
complex contracts. The rebate amount for this tier is currently $0.09 
per contract, per leg. The Exchange proposes to increase the rebate for 
this tier to $0.13 per contract, per leg. The current ADV threshold for 
the third tier is 75,000-124,999 Priority Customer complex contracts. 
The rebate amount for this tier is currently $0.10 per contract, per 
leg. The Exchange proposes to increase the rebate for this tier to 
$0.14 per contract, per leg. The current ADV threshold for the fourth 
tier is 125,000-224,999 Priority Customer complex contracts. The rebate 
amount for this tier is currently $0.11 per contract, per leg. The 
Exchange proposes to increase the rebate for this tier to $0.18 per 
contract, per leg.

[[Page 24270]]

Finally, the current ADV threshold for the fifth tier is 225,000 or 
more Priority Customer complex contracts. The rebate amount for this 
tier is currently $0.12 per contract, per leg. The Exchange proposes to 
increase the rebate for this tier to $0.19 per contract, per leg. The 
highest rebate amount achieved by the Member for the current calendar 
month applies retroactively to all Priority Customer complex orders 
that trade against quotes or orders in the regular orderbook during 
such calendar month.
    The Exchange believes this proposed change will enhance the 
Exchange's competitive position and incentivize Members to increase the 
amount of Priority Customer complex orders that they send to the 
Exchange.
    The Exchange is not proposing any other changes in this filing.
    Since the rate changes to the Schedule of Fees pursuant to this 
proposal will be effective upon filing, for the transactions occurring 
in April 2013 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 April 2013 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 Securities and Exchange Act 
of 1934 (the ``Act'') \4\ in general, and furthers the objectives of 
Section 6(b)(4) of the Act \5\ 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 options overlying the 
symbols that are subject to the Exchange's maker/taker fees and 
rebates.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(4).
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    The Exchange has determined to charge fees and provide rebates for 
regular orders in mini options at a rate that is 1/10th the rate of 
fees and rebates the Exchange currently provides for trading in 
standard options. The Exchange believes it is reasonable and equitable 
and not unfairly discriminatory to assess lower fees and rebates to 
provide market participants an incentive to trade mini options on the 
Exchange. The Exchange believes the proposed fees and rebates are 
reasonable and equitable in light of the fact that mini options have a 
smaller exercise and assignment value, specifically 1/10th that of a 
standard option contract, and, as such, levying fees that are 1/10th of 
what market participants pay today.
    The Exchange believes that it is reasonable and equitable to 
provide rebates for Priority Customer complex orders when these orders 
trade against quotes or orders in the regular orderbook 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 has already established a 
volume-based incentive program, and is now merely proposing to increase 
the rebate amounts in that program. 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 paying these rebates would also attract 
additional order flow to the Exchange.
    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 increases rebate amounts, so Members can qualify for 
larger rebates, is reasonable as it will encourage Members to increase 
the amount of Priority Customer complex orders that they send to the 
Exchange instead of sending this order flow to a competing exchange. 
The Exchange believes that with the proposed rebate levels, Members are 
now likely to qualify for larger rebates.
    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 this proposed rule 
change will continue to attract additional complex order business in 
the symbols that are subject to this proposed rule change.
    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. Additionally, the Exchange believes it remains an 
attractive venue for market participants to direct their order flow in 
the symbols that are subject to this proposed rule change as its fees 
are 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. 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

    ISE believes that the proposed rule change, which will maintain 
fees that are competitive and are within the range of fees charged by 
other exchanges for similar orders, will not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. Indeed, the Exchange believes that the proposed 
changes will promote competition, as they are designed to allow ISE to 
better compete for order flow and improve the Exchange's competitive 
position.
    The Exchange does not believe providing increased rebates to market 
participants is an undue burden on competition as the Exchange already 
provides these rebates and is now merely increasing the level of these 
rebates in response to increased rebates provided by other markets to 
attract Priority Customer order flow. Further, the Exchange believes 
the adjustment of the rebate for Priority Customer orders that trade 
with quotes and orders on the regular orderbook in all symbols reduces 
the burden on competition by providing additional incentives for 
Priority Customer orders traded on the Exchange. This incents 
competition because non-Priority Customers wish to have Priority 
Customer orders attracted to the Exchange by having attractive rebates.
    Finally, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily direct 
their order flow to competing venues. In such an environment, the 
Exchange must continually review, and consider adjusting, its fees and 
rebates to remain competitive with other exchanges. For the reasons 
described above, the Exchange believes that the proposed fee change 
reflects this competitive environment.

[[Page 24271]]

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 \6\ and subparagraph (f)(2) of Rule 19b-4 
thereunder,\7\ because it establishes a due, fee, or other charge 
imposed by ISE.
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    \6\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \7\ 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 rule-comments@sec.gov. Please include 
File Number SR-ISE-2013-31 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-2013-31. 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 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-2013-31, and should be 
submitted on or before May 15, 2013.
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    \8\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-09655 Filed 4-23-13; 8:45 am]
BILLING CODE 8011-01-P