[Federal Register Volume 79, Number 58 (Wednesday, March 26, 2014)]
[Notices]
[Pages 16848-16850]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-06600]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71760; File No. SR-ISE-2014-16]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change To Amend the Schedule of Fees
March 20, 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 March 6, 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
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 DTR
approval fees charged to affiliated 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 amend the Schedule
of Fees to waive the Designated Trading
[[Page 16849]]
Representative (``DTR'') \3\ approval fees charged to affiliated
Competitive Market Makers (``CMMs''). On December 23, 2013 the Exchange
filed an immediately effective rule change that waived application fees
for CMM applicants that share common ownership with another CMM, and
adopted an incremental annual regulatory fee for such affiliated
CMMs.\4\ The purpose of that rule change was to encourage current CMMs
to register additional broker dealer entities as necessary to act as
Alternative Primary Market Makers (``Alternative PMMs'') for options
products that have not been allocated to a willing Primary Market Maker
(``PMM'').\5\ Under the Alternative PMM program the ISE may list
options 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.\6\ The Exchange now proposes to further decrease
``start-up'' costs associated with the Alternative PMM program by
waiving DTR approval fees for DTRs that are already registered with an
affiliated CMM. The ISE charges a one-time approval fee of $500 for
each DTR associated with a market maker. Currently each CMM must pay to
register its DTRs, regardless of whether those DTRs are already
registered with an affiliated broker dealer entity. This fee thus
increases start-up costs for CMMs that desire Alternative PMM
appointments, as these CMMs may need to house those appointments in a
separate broker dealer entity due to capital and other business
requirements.\7\ The Exchange therefore proposes to waive DTR approval
fees for affiliated CMMs that share at least 75% common ownership as
reflected on each firm's Form BD, Schedule A. In order to qualify for
this waiver the DTR must already be registered as a DTR for an
affiliated CMM. This will ensure that CMMs will only have to pay once
to register their DTRs across affiliated CMM memberships, and will
encourage current CMMs to participate in the Alternative PMM program.
The Exchange believes that this waiver is appropriate since the
incremental cost associated with processing the new DTR approval is
negligible for traders that have already registered with an affiliated
broker dealer entity.
---------------------------------------------------------------------------
\3\ DTRs may be: (i) Individual Members registered with the
Exchange as market makers, or (ii) officers, partners, employees or
associated persons of Members that are registered with the Exchange
as market makers. See Rule 801(b)(1). Market maker quotations and
orders may be submitted to the Exchange's System only by DTRs. A DTR
is permitted to enter quotes and orders only for the account of the
market maker with which the DTR is associated. See Rule 801(a).
\4\ See Exchange Act Release No. 71213 (December 31, 2013), 79
FR 863 (January 7, 2014) (SR-ISE-2013-70).
\5\ PMM allocations are voluntary and require the consent of the
PMM being allocated the options class. See ISE Rule 802.
\6\ See Exchange Act Release No. 59250 (January 14, 2009), 74 FR
4062 (January 22, 2009) (SR-ISE-2008-90).
\7\ See supra note 2.
---------------------------------------------------------------------------
2. 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.
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78f.
\9\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
The Exchange believes that it is reasonable and equitable to waive
the DTR approval fees for traders already associated with an affiliated
CMM due to the negligible cost of processing these approvals. 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, and will thereby encourage current CMMs to
register additional affiliated CMMs as necessary to act as Alternative
PMMs. The Exchange does not believe that it is unfairly discriminatory
to apply the proposed fee waiver 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 these
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,\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. The proposed
rule change should have little competitive impact as it merely aligns
the DTR approval fees for affiliated CMMs with the cost of processing
DTR registrations. 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.
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------
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 \11\ and subparagraph (f)(2) of Rule 19b-4
thereunder,\12\ because it establishes a due, fee, or other charge
imposed by ISE.
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78s(b)(3)(A)(ii).
\12\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
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
[[Page 16850]]
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 No. SR-ISE-2014-16 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-ISE-2014-16. 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 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-2014-16 and should be submitted by
April 16, 2014.
---------------------------------------------------------------------------
\13\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-06600 Filed 3-25-14; 8:45 am]
BILLING CODE 8011-01-P