[Federal Register Volume 79, Number 97 (Tuesday, May 20, 2014)]
[Notices]
[Pages 28985-28987]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-11570]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72163; File No. SR-ISE-2014-27]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change To Amend the Schedule of Fees
May 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 May 2, 2014, 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 introduce a new
Market Maker Plus rebate for Market Makers that quote certain symbols
in size, and to update the definition of Mini Option to reflect the
recent Google stock split. 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.
[[Page 28986]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to amend the Schedule of
Fees to introduce a new Market Maker Plus rebate for Market Makers that
quote certain symbols in size, and to update the definition of Mini
Option to reflect the recent Google stock split. The fee changes
discussed apply to both Standard Options and Mini Options traded on the
Exchange. 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.
1. Market Maker Plus: BAC, SPY, IWM
In order to promote and encourage liquidity in symbols that are in
the penny pilot program (``Select Symbols''), the Exchange currently
offers Market Makers \3\ who meet the quoting requirements for Market
Maker Plus \4\ a rebate of $0.20 per contract for adding liquidity in
those symbols. In addition, the Exchange pays a higher rebate of $0.22
per contract to Market Makers who meet the quoting requirements for
Market Maker Plus and are affiliated with an Electronic Access Member
(``EAM'') that executes a total affiliated Priority Customer \5\
average daily volume (``ADV'') of 200,000 contracts or more in a
calendar month. The Exchange now proposes to introduce an additional
higher Market Maker Plus rebate for members that meet specified
quotation size requirements on a trade by trade basis in three actively
traded Select Symbols: Bank of America Corp (``BAC''), SPDR S&P 500 ETF
Trust (``SPY''), and the iShares Russell 2000 ETF (``IWM'').\6\ In
particular, Market Makers who qualify as Market Maker Plus in BAC, SPY,
and IWM will earn a rebate of $0.25 per contract if at the time of the
trade their displayed quantity, \7\ in the traded series, \8\ is at
least 1,000 contracts.\9\ Market Makers that achieve Market Maker Plus
will continue to receive the current rebate amounts when the Market
Maker does not have a displayed size of 1,000 contracts or more at the
time of the trade. If a Market Maker that qualifies for the $0.22 per
contract Market Maker Plus rebate based on total affiliated Priority
Customer ADV also qualifies for the new rebate that Market Maker will
receive the higher $0.25 per contract rebate.
---------------------------------------------------------------------------
\3\ The term ``Market Makers'' refers to ``Competitive Market
Makers'' and ``Primary Market Makers'' collectively. See ISE Rule
100(a)(25).
\4\ A Market Maker Plus is a Market Maker who is on the National
Best Bid or National Best Offer at least 80% of the time for series
trading between $0.03 and $3.00 (for options whose underlying
stock's previous trading day's last sale price was less than or
equal to $100) and between $0.10 and $3.00 (for options whose
underlying stock's previous trading day's last sale price was
greater than $100) in premium in each of the front two expiration
months. A Market Maker's single best and single worst quoting days
each month based on the front two expiration months, on a per symbol
basis, will be excluded in calculating whether a Market Maker
qualifies for this rebate, if doing so will qualify a Market Maker
for the rebate.
\5\ A Priority Customer is defined in ISE Rule 100(a)(37A) as a
person or entity that is not a broker/dealer in securities, and does
not place more than 390 orders in listed options per day on average
during a calendar month for its own beneficial account(s).
\6\ The new rebate will only apply to Mini Options on SPY as the
ISE does not offer Mini Options on BAC or IWM.
\7\ There is no trade quantity minimum.
\8\ There is no requirement that the Market Maker maintain a
quote size of 1,000 contracts in all series in order to qualify for
the higher rebate.
\9\ 1,000 contract size requirement applies to both Standard
Options and Mini Options.
---------------------------------------------------------------------------
2. Mini Option Definition: Google Stock Split
The ISE recently amended Supplementary Material .13 to Rule 504,
listing standards for Mini Options, to enable the continued trading of
Mini Options on Google Class A shares, which were assigned a new
symbol, ``GOOGL'', in connection with Google's recent stock split.\10\
The Exchange now proposes to similarly update the definition of ``Mini
Option'' in its Schedule of Fees to indicate that Mini Options include
options overlying ten shares of ``GOOGL''. As proposed, ``Mini
Options'' are options overlying ten (10) shares of AAPL, AMZN, GLD,
GOOGL and SPY.\11\
---------------------------------------------------------------------------
\10\ See Securities Exchange Act Release No. 71932 (April 11,
2014), 79 FR 21816 (April 17, 2014) (SR-ISE-2014-21).
\11\ For purposes of the Schedule of Fees, AAPL, AMZN, GLD and
SPY are Select Symbols and GOOGL is a Non-Select Symbol.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\12\ in general, and
Section 6(b)(4) of the Act, \13\ 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.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78f.
\13\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
1. Market Maker Plus: BAC, SPY, IWM
The Exchange believes that it is reasonable, equitable, and not
unfairly discriminatory to introduce a higher Market Maker Plus rebate
for Market Makers that meet the specified quotation size requirements
in BAC, SPY, and IWM as the higher rebates will encourage Market Makers
to post deep markets in these actively traded symbols, which will
benefit all market participants that trade on the ISE. The Market Maker
Plus rebate is competitive with incentives provided by other exchanges,
and has proven to be an effective incentive for Market Makers to
provide liquidity in Select Symbols. The Exchange believes that the new
rebate will similarly be effective in encouraging Market Makers to post
tighter markets, in size, in BAC, SPY, and IWM. Furthermore, the
Exchange believes that the new Market Maker Plus rebate for these
symbols is not unfairly discriminatory because all Market Makers can
achieve the new higher rebate by satisfying the current quoting
requirements and maintaining quotes of 1,000 contracts or more (at the
time of the trade) in these symbols.
2. Mini Option Definition: Google Stock Split
As part of Google's recent stock split, the symbol ``GOOG'' was
assigned to the new Google Class C shares, while Google Class A shares
were assigned the symbol ``GOOGL''. The Exchange recently updated its
Mini Options rules to clarify that it will continue listing Mini
Options on the Google Class A shares, i.e., GOOGL, and believes that it
is reasonable, equitable, and not unfairly discriminatory to update the
definition of ``Mini Option'' in the Schedule of Fees in order to
eliminate investor confusion about which options classes are tradable
as Mini Options on the Exchange.
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 fees and rebates 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 fees and rebates for Mini
[[Page 28987]]
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, \14\ 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. To the contrary,
the Exchange believes that the proposed rule change is pro-competitive
as it provides an additional incentive for Market Makers to make deep
markets in three actively traded Select Symbols, which will benefit all
market participants that trade on the ISE. In addition, the proposed
change to the definition of Mini Option is a technical change that will
have no competitive impact. 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.
---------------------------------------------------------------------------
\14\ 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 \15\ and subparagraph (f)(2) of Rule 19b-4
thereunder, \16\ because it establishes a due, fee, or other charge
imposed by ISE.
---------------------------------------------------------------------------
\15\ 15 U.S.C. 78s(b)(3)(A)(ii).
\16\ 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
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-2014-27 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-2014-27. 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-2014-27 and should be
submitted by June 10, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
---------------------------------------------------------------------------
\17\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-11570 Filed 5-19-14; 8:45 am]
BILLING CODE 8011-01-P