[Federal Register Volume 79, Number 34 (Thursday, February 20, 2014)]
[Notices]
[Pages 9783-9785]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-03668]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71554; File No. SR-ISE-2014-08]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change To Amend the Schedule of Fees
February 14, 2014.
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 February 4, 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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[[Page 9784]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The ISE proposes to amend the 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 Exchange proposes to amend the Schedule of Fees to (1) decrease
the Credit for Responses to Flash Orders for trading against Priority
Customer orders in Select Symbols,\3\ and (2) to remove obsolete
references to Primary Market Maker (``PMM'') linkage handling. Each of
these changes is explained below. The fee changes discussed apply to
both Standard Options and Mini Options traded on ISE. The Exchange's
Schedule of Fees has separate tables for fees applicable to Standard
Options and Mini Options. The Exchange notes that while the discussion
below relates to fees for Standard Options, the fees for Mini Options,
which are not discussed below, are and shall continue to be 1/10th of
the fees for Standard Options.
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\3\ ``Select Symbols'' are options overlying all symbols listed
on the ISE that are in the Penny Pilot Program.
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Credit for Responses to Flash Orders
Currently, when the ISE is not at the National Best Bid or Offer
(``NBBO''), Public Customer and Non-Customer orders are exposed to all
ISE members to give them an opportunity to match the NBBO (``Flash
Orders'') before the order is routed to another exchange for execution
or cancelled. As an incentive to attract Public Customer orders to the
ISE, the Exchange offers a Credit for Responses to Flash Orders when
trading against Priority and Professional Customer orders.\4\ In Select
Symbols, this credit is $0.15 per contract when trading against
Priority Customer orders (or $0.17 per contract when trading against
Preferenced Priority Customer orders),\5\ and $0.10 per contract when
trading against Professional Customer orders. In non-Select Symbols the
credit is $0.20 per contract when trading against Professional Customer
orders only. These fees reflect a recent fee change filed by the ISE on
November 1, 2013 which, among other things, increased the Credit for
Responses to Flash Orders in Select Symbols by $0.05 per contract when
trading against Priority Customer orders.\6\ The Exchange now proposes
to return these credits to their previous levels. In particular, the
Exchange proposes to decrease the Credit for Responses to Flash Orders
in Select Symbols from $0.15 per contract to $0.10 per contract when
trading against Priority Customer orders, and from $0.17 per contract
to $0.12 per contract when trading against Preferenced Priority
Customer orders.\7\ The respective credits for trading against
Professional Customer orders will remain at their current rates.
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\4\ No fee is charged or credit provided when trading against a
non-Customer.
\5\ The credit for responses to Preferenced Priority Customer
orders applies to an ISE Market Maker when trading against a
Priority Customer order that is preferenced to that Market Maker.
\6\ See Securities Exchange Act Release No. 70873 (November 14,
2013), 78 FR 69714 (November 20, 2013) (SR-ISE-2013-56).
\7\ The Exchange does not offer a higher Credit for Responses to
Flash Orders that trade against Preferenced Priority Customer orders
in Mini Options. In Mini Options the credit will be $0.010 per
contract when trading against Priority Customer orders in Select
Symbols regardless of whether the order has been preferenced to a
Market Maker.
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PMM Linkage Handling
On April 18, 2013 the Commission approved a proposed rule change
that modified the ISE's linkage handling procedures under the Options
Order Protection and Locked/Crossed Market Plan.\8\ Prior to this rule
change Primary Market Makers (``PMMs'') were responsible for routing
orders to away markets when necessary to comply with the linkage
handling rules, and would receive credits for performing this function.
Under the newly approved rules, however, the ISE has contracted with
unaffiliated broker dealers to route orders to other exchanges when
necessary to comply with the linkage rules (``Linkage Handlers'').
Since PMMs no longer perform linkage handling, which is now performed
by the Linkage Handlers, the Exchange proposes to remove obsolete text
in its Schedule of Fees related to PMM credits for providing that
service. In particular, the Exchange proposes to remove the Subsection
E of Section VI titled ``PMM Linkage Credit,'' which details the
credits that were previously provided to PMMs in their assigned classes
for orders routed to one or more exchanges in connection with their
linkage handling function. The Exchange also proposes to remove related
footnotes that indicate that PMMs do not receive a maker rebate nor pay
a taker fee when trade reporting a Priority Customer or Professional
Customer order in accordance with their obligation to provide away
market price protection pursuant to ISE Rule 803(c)(2).\9\ As stated
above, PMMs no longer perform this function.
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\8\ See Securities Exchange Act Release No. 69396 (April 18,
2013), 78 FR 24273 (April 24, 2013) (SR-ISE-2013-18).
\9\ ISE Rule 803(c)(2) was removed in connection with the
introduction of Linkage Handlers. See id.
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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,\10\ in general, and
Section 6(b)(4) of the Act,\11\ 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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\10\ 15 U.S.C. 78f.
\11\ 15 U.S.C. 78f(b)(4).
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As explained above, the proposed credits to be provided to Members
who respond to Flash Orders are set at the same level as was applicable
on the ISE prior to November 1, 2013. The Exchange believes that it is
reasonable and equitable to return these credits to their previous
levels as the increased credit was unsuccessful in encouraging market
participants to respond to Flash Orders. Furthermore, the Exchange
notes that the proposed credits for responding to Priority Customer
orders are in line with the credits currently provided by the ISE for
responding to Professional Customer orders. The Exchange does not
believe that the proposed change is unfairly discriminatory as the
credit provided for responses to Priority Customer orders will once
again be consistent with the credit provided for responses to
Professional Customer orders. In addition, the Exchange believes that
it is reasonable, equitable, and not unfairly discriminatory to remove
obsolete text related to PMM linkage handling credits and away market
price protection as PMMs are no longer responsible for performing this
function.
[[Page 9785]]
The Exchange notes that it has determined to charge fees and
provide rebates in Mini Options at a rate that is 1/10th the rate of
fees and rebates the Exchange 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 credits 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, is providing credits for Mini Options that are
1/10th of those applicable to Standard Options.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\12\ 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
change to Credits for Responses to Flash Orders will not have any
significant impact on competition as the credit for trading against
Priority Customer orders will once again be on par with the credit for
trading against Professional Customer orders. In addition, removing
obsolete text related to PMM linkage handling credits and away market
price protection will have no competitive impact as PMMs no longer
perform this function since the ISE now utilizes Linkage Handlers to
route orders to other exchanges as required.
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\12\ 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 \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-2014-08 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-2014-08. 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-2014-08 and should be
submitted on or before March 13, 2014.
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. 2014-03668 Filed 2-19-14; 8:45 am]
BILLING CODE 8011-01-P