[Federal Register Volume 79, Number 4 (Tuesday, January 7, 2014)]
[Notices]
[Pages 863-865]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-31604]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71213; File No. SR-ISE-2013-70]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change To Amend the Schedule of Fees
December 31, 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 December 23, 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 waive CMM
membership application fees for affiliated CMMs, and to charge an
incremental annual regulatory fee for such CMMs. 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 waive Competitive
Market Maker (``CMM'') membership application fees for affiliated CMMs,
i.e., CMMs that share common ownership with another CMM, and to charge
an incremental annual regulatory fee for such CMMs. The Exchange
believes that these changes, which will lower the cost of maintaining
separate CMM memberships for affiliated CMMs, will encourage current
CMMs to register additional broker dealer entities as necessary to act
as Alternative Primary Market Makers (``Alternative PMMs'') on the ISE.
The Exchange currently operates an Alternative PMM program whereby
the ISE appoints CMMs that meet certain qualifications to serve as
Alternative PMMs for options products that have not been allocated to a
willing PMM.\3\ The purpose of this program is to enable the Exchange
to list new products, or continue trading listed products, that are not
supported by a PMM, by offering such allocations to appropriately
qualified CMMs that will have all of the responsibilities and
privileges of a PMM under ISE Rules with respect to appointed options
classes. Each broker dealer entity acting as an Alternative PMM,
however, must be registered as a CMM on the ISE. Due to capital and
other business requirements a CMM may need to house their Alternative
PMM appointments in a separate affiliated broker dealer entity, which
would be required to maintain a separate CMM membership on the ISE.
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\3\ See Exchange Act Release No. 59250 (January 14, 2009), 74 FR
4062 (January 22, 2009) (ISE-2008-90). PMM allocations are voluntary
and require the consent of the PMM being allocated the options
class. See ISE Rule 802.
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Currently, since these affiliated entities operate as distinct
members these firms must pay a one-time CMM application fee of $5,500
for each entity. As the incremental cost associated with processing an
affiliate's membership application is negligible, and given the
significant benefits of attracting CMMs willing to quote unallocated
options classes as Alternative PMMs, the Exchange is proposing to waive
the application fee for CMM applicants that share at least 75% common
ownership with another CMM as reflected on each
[[Page 864]]
firm's Form BD, Schedule A. The waiver will apply only to the one-time
CMM membership application fee, and the affiliated CMM will be subject
to all other fees, such as network and access fees.
The Exchange also charges CMMs an annual regulatory fee in order to
cover the cost of surveilling these members and performing other
regulatory responsibilities. For a CMM that is not also a Primary
Market Maker (``PMM'') this regulatory fee is $5,000 per year for the
first CMM membership and $1,000 per year for each additional CMM
membership. The lower fee charged for additional CMM memberships after
the first reflects the lower incremental cost to the Exchange of
surveilling such additional memberships. As with additional CMM
memberships within the same entity, the Exchange does not have to
dedicate the same level of resources to surveilling the activities of
affiliated CMMs. The Exchange therefore proposes to only charge the
higher $5,000 per year regulatory fee for the first CMM membership
within each group of affiliated companies. Affiliated CMMs will pay the
$1,000 per year incremental regulatory fee charged for additional CMM
memberships after the first. The Exchange is not proposing any changes
to the annual regulatory fee for CMMs that are also PMMs as that fee,
which is $1,000 per year for each CMM membership, already reflects the
incremental regulatory costs of surveilling such members. Again, the
Exchange believes that this change will benefit all market participants
that trade on the Exchange by attracting additional CMMs to act as
Alternative PMMs in options classes not allocated to a PMM.
2. Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\4\ in general, and Section
6(b)(4) of the Act,\5\ 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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\4\ 15 U.S.C. 78f.
\5\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that it is fair and equitable to waive the
membership application fee for affiliated CMMs due to the negligible
cost associated with processing membership applications from such
members. This waiver will allow affiliated CMMs to become members
without incurring additional ``start-up'' fees that do not reflect the
limited resources expended by the ISE in processing their applications,
and will thereby encourage current CMMs to register additional
affiliated CMMs as necessary to act as Alternative PMMs. The Exchange
similarly believes that it is fair and equitable to charge an
incremental regulatory fee to affiliated CMMs due to the incremental
cost of regulating these members. This treatment is consistent with how
the ISE currently charges regulatory fees for additional CMM
memberships within the same entity, and the Exchange is merely
extending this treatment to additional CMM memberships that are held
within the same affiliated group of companies. By charging the higher
initial regulatory fee to only the first CMM membership within each
group of affiliated companies, the ISE believes that it is more
accurately reflecting the costs associated with regulating affiliated
members. Moreover, the Exchange believes that this change will
encourage more affiliated CMMs to maintain memberships on the Exchange
as necessary to support the Alternative PMM program, which, in turn,
will benefit all market participants that trade on the ISE. The
Exchange does not believe that it is unfairly discriminatory to apply
the proposed application fee waiver and incremental regulatory fee only
to CMMs. As explained above, these fee changes are being proposed in
order to encourage CMMs to seek Alternative PMM appointments. The
Exchange believes that reducing the membership application and
regulatory costs for affiliated CMMs will encourage more CMMs to
register additional affiliated broker dealers as CMMs in order to quote
options classes as Alternative PMMs. Greater participation in the
Alternative PMM program will benefit all market participants that trade
on the Exchange as it will allow the ISE to list additional options
products, which will be supported by the Alternative PMMs. Alternative
PMMs have all the responsibilities of regular PMMs, including, among
other things, conducting the opening rotation on a daily basis and
providing continuous quotations in appointed options classes.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\6\ 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. The proposed
rule change should have little competitive impact as it merely aligns
the CMM membership application and regulatory fees with the cost of
processing these applications and regulating these members. While the
proposed rule change only applies to CMMs, the Exchange does not
believe that this will impose a significant burden on competition as
all market participants that trade on the Exchange will benefit from
the resulting allocation of options classes to Alternative PMMs. 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 to remain competitive with other
exchanges. For the reasons described above, the Exchange believes that
the proposed fee changes reflect this competitive environment.
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\6\ 15 U.S.C. 78f(b)(8).
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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 \7\ and subparagraph (f)(2) of Rule 19b-4
thereunder,\8\ because it establishes a due, fee, or other charge
imposed by ISE.
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\7\ 15 U.S.C. 78s(b)(3)(A)(ii).
\8\ 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:
[[Page 865]]
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 No. SR-ISE-2013-70 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-ISE-2013-70. 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 Commissions 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-2013-70 and should be submitted by
January 28, 2014.
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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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-31604 Filed 1-6-14; 8:45 am]
BILLING CODE 8011-01-P [FEDREG][VOL]*[/VOL][NO]*[/NO][DATE]*[/
DATE][NOTICES]