[Federal Register Volume 78, Number 204 (Tuesday, October 22, 2013)]
[Notices]
[Pages 62899-62901]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-24654]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70657; File No. SR-ISE-2013-51]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change To Amend the Schedule of Fees
October 10, 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 September 30, 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 permit ISE to
exclude from its average daily volume calculations any trading day on
which the Exchange is closed for trading due to early closing or a
market-wide trading halt, and to correct a reference to ISE rules in
the ``Flash Order'' definition. 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
[[Page 62900]]
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 is proposing to permit ISE to exclude from its average
daily volume (``ADV'') calculations any trading day on which the
Exchange is closed for trading due to a market-wide trading halt, and
to correct a reference to ISE rules in the ``Flash Order'' definition.
The Exchange currently provides volume-based tiered rebates for
Priority Customer complex orders when these orders trade with non-
Priority Customer orders in the complex order book,\3\ or trade with
quotes and orders on the regular order book.\4\ These complex order
rebates are provided to members in six tiers in both Standard and Mini
Options based on the Member's ADV in Priority Customer complex
contracts.
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\3\ The Exchange offers a rebate in Standard and Mini Options
for Priority Customer complex orders in (i) Select Symbols
(excluding SPY), (ii) SPY, and (iii) Non-Select Symbols, when these
orders trade with non-Priority Customer orders in the complex order
book.
\4\ The Exchange offers a rebate in Standard and Mini Options
for Priority Customer complex orders that trade with quotes and
orders on the regular order book in (i) SPY, and (ii) other symbols
excluding SPY.
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The Exchange is proposing to modify its Schedule of Fees to permit
the Exchange to exclude from its ADV calculation, when determining
applicable rebate tiers, any day that the market is not open for the
entire trading day. This would allow the Exchange to exclude days where
the Exchange declares a trading halt in all securities or honors a
market-wide trading halt declared by another market.\5\ For example,
this would have allowed the Exchange to exclude August 22, 2013 when
trading was halted in Nasdaq-listed securities for three hours across
all exchanges.\6\ The Exchange will provide a notice, and post it on
the Exchange's Web site, to inform Members of any day that is to be
excluded from its ADV calculations in connection with this proposed
rule change. The Exchange is not proposing any changes to the level of
rebates currently being provided on the Exchange, or to the ADV
thresholds required to achieve each rebate tier.
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\5\ The Exchange will not be excluding days on which the
Exchange closes early for holiday observance from its ADV
calculation.
\6\ Trading in Nasdaq-listed securities was halted across all
markets on August 22, 2013 due to a systems issue experienced by the
NASDAQ UTP SIP.
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If the Exchange did not have the ability to exclude aberrant low
volume days when calculating ADV for the month, as a result of the
decreased trading volume, the numerator for the calculation (e.g.,
trading volume) would be correspondingly lower, but the denominator for
the threshold calculations (e.g., the number of trading days) would not
be decreased. This could result in an unintended cost increase. Absent
the authority to exclude days that the market is not open for the
entire trading day, Members will experience an effective decrease in
rebates. The artificially low volumes of trading on such days could
reduce the trading activity of Members both daily and monthly.
Accordingly, excluding such days from the monthly calculation will
diminish the likelihood of an effective increase in the cost of trading
on the Exchange, a result that is unintended and undesirable to the
Exchange and its Members.
The Exchange is also proposing to amend its Schedule of Fees to
correct a reference to ISE rules. The preface to the Schedule of Fees
currently defines a ``Flash Order'' as an order that is exposed at the
National Best Bid or Offer by the Exchange to all members for
execution, as provided under Supplementary Material .02 to ISE Rule
803. The Exchange recently modified its linkage rules referenced above,
and in the process moved the relevant rule text from Supplementary
Material .02 to ISE Rule 803 to Supplementary Material .02 to ISE Rule
1901.\7\ The Exchange is therefore modifying the text of its Schedule
of Fees to match the correct reference to Supplementary Material .02 to
ISE Rule 1901. The Exchange notes that by clarifying this reference it
is not making any substantive changes to the definition of a Flash
Order, or to the fees and credits applicable to Flash Orders or
responses to Flash Orders.
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\7\ See Securities Exchange Act Release No. 69396 (April 18,
2013) 78 FR 24273 (April 24, 2013) (SR-ISE-2013-18).
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\8\ in general, and Section
6(b)(4) of the Act,\9\ in particular, in that it is designed to provide
for the equitable allocation of reasonable dues, fees, and other
charges among its members and other persons using its facilities.
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\8\ 15 U.S.C. 78f.
\9\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that it is equitable and reasonable to permit
the Exchange to eliminate from the calculation days on which the market
is not open the entire trading day because it preserves the Exchange's
intent behind adopting volume-based pricing. The proposed change is
non-discriminatory because it applies equally to all Members and to all
volume tiers.
The Exchange further believes that it is appropriate to correct the
outdated reference to ISE rules in the ``Flash Order'' definition so
that Exchange members and investors have a clear and accurate
understanding of the meaning of the Exchange's rules, which will reduce
investor confusion.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\10\ the Exchange
does not believe that the proposed rule change will impose any burden
on intermarket or intramarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act. With respect to
ADV calculations for rebates, the Exchange notes that there are very
few instances where the rule will actually be invoked, and when
invoked, the Exchange believes the rule will have little or no impact
on trading decisions or execution quality. To the contrary, the
Exchange believes that the proposed modification to its ADV calculation
is pro-competitive and will result in lower total costs to end users, a
positive outcome of competitive markets. Moreover, other options
exchanges have adopted rules that are substantially similar to the
change in ADV calculation being proposed by the Exchange.\11\ With
respect to the ``Flash Order'' definition, the Exchange further
believes that making a technical correction to an outdated reference
here as proposed is non-substantive, and therefore does not implicate
the competition analysis. The Exchange 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
[[Page 62901]]
the reasons described above, the Exchange believes that the proposed
fee changes reflect this competitive environment.
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\10\ 15 U.S.C. 78f(b)(8).
\11\ See e.g. Securities Exchange Act Release No. 70472
(September 23, 2013) (PHLX-2013-93); 70470 (Sept. 23, 2013) (NASDAQ-
2013-117).
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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 \12\ and subparagraph (f)(2) of Rule 19b-4
thereunder,\13\ because it establishes a due, fee, or other charge
imposed by ISE.
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\12\ 15 U.S.C. 78s(b)(3)(A)(ii).
\13\ 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-2013-51 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-2013-51. 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-2013-51 and should be
submitted on or before November 12, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-24654 Filed 10-21-13; 8:45 am]
BILLING CODE 8011-01-P