[Federal Register Volume 78, Number 211 (Thursday, October 31, 2013)]
[Notices]
[Pages 65400-65402]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-25830]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70757; File No. SR-ISE-2013-53]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule
Change To Amend the Schedule of Fees
October 25, 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 October 17, 2013, the International Securities Exchange, LLC
(the ``Exchange'' or ``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 proposes to amend its network 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
[[Page 65401]]
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 Exchange's
network fees. Specifically, the Exchange proposes to adopt a network
fee for a new 40 Gigabit (Gb) low latency Ethernet connectivity option.
The Exchange currently offers three Ethernet connection options, a 1 Gb
connection at a cost of $500 per month, a 10 Gb connection at a cost of
$4,000 per month, and a 10 Gb low latency connection at a cost of
$7,000 per month.
In keeping with changes in technology, the Exchange now proposes to
provide an enhanced bandwidth option to enable a more efficient
connection to the Exchange. The growth in the size of consolidated and
proprietary data feeds has resulted in demand for higher bandwidth. As
the number of feeds available and the size of the feeds increases, the
bandwidth required for market data feeds steadily rises. Through the
use of new, advanced hardware, the proposed new connectivity option
will provide increased bandwidth and improved latency, and will thereby
satisfy demand for more efficient, lower latency connections to the
Exchange's trading system.
The Exchange proposes to charge $12,500 per month for this
connection. ISE has expended significant amount of resources in
developing this infrastructure and the proposed fees will allow the
Exchange to recoup its investment. The Exchange's new network
connectivity option will provide Members the option to select the
bandwidth that is appropriate for their current needs. This new
connectivity option is voluntary and, therefore, the Exchange will
retain the existing connectivity options for those Members who choose
not to utilize the new network connection.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Securities Exchange Act of 1934
(``Act''),\3\ in general, and with Section 6(b)(4) of the Act,\4\ in
particular, in that it provides for the equitable allocation of
reasonable dues, fees and other charges among Exchange members and
other persons using its facilities.
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\3\ 15 U.S.C. 78f.
\4\ 15 U.S.C. 78f(b)(4).
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The Exchange's new low latency 40 Gb Ethernet network connection
will provide Members the ability to increase data transmission and
reduce latency, thereby enhancing their operations. The Exchange
believes the proposed fees for this new connection to the Exchange are
reasonable because the fees charged will allow the Exchange to cover
the hardware, installation, testing and connection costs to maintain
and manage the enhanced connection. The proposed fees will allow the
Exchange to recoup costs associated with providing the low latency 40
Gb connection while aiding Members in making their network connectivity
more efficient, and reducing the potential for data spikes and data
gapping issues that result from the transmission of the growing size of
the consolidated and proprietary market data feeds. Moreover, the
Exchange believes that the proposed fees are reasonable in that they
are lower than the fees charged by other trading venues for similar
connectivity services.\5\
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\5\ For example, NYSE Arca Options charges $20,000 per month for
a 40 Gb liquidity center network connection plus a $15,000 per
connection initial charge. See Securities Exchange Act Release No.
70286 (Aug. 29, 2013) 78 FR 54710 (Sept. 5, 2013) (SR-NYSEARCA-2013-
82). NASDAQ OMX PHLX, LLC charges $15,000 per month for a 40 Gb
fiber connection with an installation fee of $1,500. See Securities
Exchange Act Release No. 66429 (Feb. 21, 2012) 77 FR 11611 (Feb. 27,
2013) (SR-PHLX-2012-20).
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The Exchange further believes that the proposed change is
reasonable because the proposed fees directly relate to the level of
services provided by the Exchange and, in turn, received by Members
connecting to the exchange. In this regard, the fees proposed for 40 Gb
connections are higher than, for example, the fees for 10 Gb
connections because costs for the initial purchase and ongoing
maintenance of the 40 Gb connections are generally higher than those of
the lower-bandwidth connections. However, these costs are not
anticipated to be four times higher than the existing 10 Gb connection.
The Exchange therefore notes that while the proposed bandwidth of the
low latency 40 Gb connection is four times greater than the existing
low latency 10 Gb connection, the proposed fees for the 40 Gb
connection are significantly less than four times the fees for the 10
Gb connection. The Exchange believes that this supports a finding that
the proposed pricing is reasonable because the Exchange anticipates
realizing efficiencies as customers adopt higher-bandwidth connections,
and is in turn reflecting such efficiencies in the pricing for the new
connectivity option.
The Exchange also believes the proposed fee for 40 Gb connectivity
to the Exchange is equitably allocated in that all Members that
voluntarily select this service option will be charged the same amount
to maintain and manage the enhanced connection. Moreover, the Exchange
believes the proposed 40 Gb fee for connectivity to the Exchange is not
unfairly discriminatory in that all Members will have the option of
selecting the 40 Gb connection, and there is no differentiation among
Members with regard to the fees charged for this option.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\6\ the Exchange
believes that the proposed rule change will not impose any burden on
intermarket or intramarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act. Instead, the
Exchange believes that the proposed change will enhance competition by
making a service available to Members and thereby satisfy demand for
more efficient, lower-latency connections. The proposed low latency 40
Gb connection would make a service available to Members that require
the increased bandwidth, but Members that do not require the increased
bandwidth could continue to request an existing lower-bandwidth
connection and pay the correspondingly lower fees.
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\6\ 15 U.S.C. 78f(b)(8).
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The Exchange notes that it operates in a highly competitive market
in which Members can readily direct their order flow to competing
venues if they deem fee levels at a particular venue to be excessive.
In such an environment, the Exchange must continually review, and
consider adjusting, its fees to remain competitive with other
exchanges. For the reasons described above, the Exchange believes that
the proposed fee
[[Page 65402]]
changes reflect this competitive environment.
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) of the Act \7\ and paragraph (f) of Rule 19b-4 \8\
thereunder. At any time within 60 days of the filing of the 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 will institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
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\7\ 15 U.S.C. 78s(b)(3)(A).
\8\ 17 CFR 240.19b-4(f).
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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-2013-53 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-2013-53. 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-2013-53 and should be
submitted on or before November 21, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-25830 Filed 10-30-13; 8:45 am]
BILLING CODE 8011-01-P