[Federal Register Volume 76, Number 245 (Wednesday, December 21, 2011)]
[Notices]
[Pages 79236-79238]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-32569]
[[Page 79236]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65958; File No. SR-ISE-2011-81]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change Relating to Fees for Certain Complex Orders Executed on the
Exchange
December 15, 2011.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Exchange Act'' or the ``Act'') \1\ and Rule 19b-4 thereunder,\2\
notice is hereby given that, on November 30, 2011, the International
Securities Exchange, LLC (the ``Exchange'' or the ``ISE'') filed with
the Securities and Exchange Commission (the ``Commission'') the
proposed rule change as described in Items I and II below, which Items
have been prepared by the Exchange. 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 is proposing to amend fees for certain complex orders
executed on the Exchange. 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 currently assesses a per contract transaction fee to
market participants that add or remove liquidity in the Complex Order
Book (``maker/taker fees'') in symbols that are in the Penny Pilot
program. Included therein is a subset of 103 symbols that are assessed
a slightly higher taker fee (the ``Select Symbols'').\3\ Specifically,
the Exchange charges ISE market maker orders,\4\ firm proprietary
orders and Customer (Professional Orders) \5\ $0.10 per contract for
providing liquidity on the Complex Order Book and $0.30 per contract
($0.32 per contract in the Select Symbols) for taking liquidity from
the Complex Order Book. ISE market makers who take liquidity from the
Complex Order Book by trading with orders that are preferenced to them
are charged $0.28 per contract ($0.30 per contract in the Select
Symbols). Non-ISE Market Makers \6\ are currently charged $0.20 per
contract for providing liquidity and $0.35 per contract ($0.36 per
contract in the Select Symbols) for taking liquidity from the Complex
Order Book. Priority Customer orders are not charged a fee for trading
in the Complex Order Book and receive a rebate of $0.25 per contract
($0.30 per contract in the Select Symbols) when those orders trade with
non-customer orders in the Complex Order Book.
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\3\ The Select Symbols are identified by their ticker symbol on
the Exchange's Schedule of Fees.
\4\ The term ``market makers'' refers to ``Competitive Market
Makers'' and ``Primary Market Makers'' collectively. See ISE Rule
100(a)(25).
\5\ The term ``Professional Order'' means an order that is for
the account of a person or entity that is not a Priority Customer.
See ISR Rule 100(a)(37C).
\6\ The term ``Non-ISE Market Maker'' means a market maker as
defined in Section 3(a)(38) of the Securities Exchange Act of 1934
(the ``Act'') [sic] registered in the same options class on another
options exchange. See Schedule of Fees, page 4.
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The Exchange recently received approval to allow market makers to
enter quotations for complex order strategies in the Complex Order
Book.\7\ Given this enhancement to the complex order functionality, and
in order to maintain a competitive fee and rebate structure for
Priority Customer orders, the Exchange now proposes to amend the fees
that apply to transactions in the Complex Order Book in the following
three symbols: XOP, XLB and EFA.\8\ Specifically, the Exchange proposes
to amend its maker fee for complex orders in these three symbols when
these orders interact with Priority Customers.\9\ The Exchange proposes
to increase its maker fee from $0.10 per contract to $0.30 per contract
in XOP ($0.32 per contract in XLB and EFA) for ISE market maker orders,
firm proprietary orders, and Customer (Professional Orders) when these
orders interact with Priority Customer orders. The Exchange proposes to
increase its maker fee from $0.20 per contract to $0.30 per contract in
XOP ($0.32 per contract in XLB and EFA) for Non-ISE Market Makers
orders when these orders interact with Priority Customer orders. The
Exchange is not proposing any change to fees for Priority Customer
orders that trade in the Complex Order Book.
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\7\ See Securities Exchange Act Release No. 65548 (October 13,
2011), 76 FR 64980 (October 19, 2011) (SR-ISE-2011-39).
\8\ The Exchange notes that XOP is currently in the Penny Pilot
program and XLB and EFA are currently Select Symbols.
\9\ The term ``Priority Customer'' means a person or entity that
(i) is not a broker or dealer in securities, and (ii) does not place
more than 390 orders in listed options per day on average during a
calendar month for its own beneficial account. See ISE Rule
100(a)(37A).
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Further, for Priority Customer complex orders in symbols that are
in the Penny Pilot program, the Exchange currently provides a rebate of
$0.25 per contract ($0.30 per contract for Select Symbols) when these
orders trade with non-customer orders in the Complex Order Book. The
Exchange proposes to continue this rebate incentive. As such, Priority
Customer complex orders in XOP will continue to receive a rebate of
$0.25 per contract when these orders trade with non-customer orders in
the Complex Order Book, while Priority Customer complex orders in XLB
and EFA will continue to receive a rebate of $0.30 per contract when
these orders trade with non-customer orders in the Complex Order Book.
Additionally, to incentivize members to trade in the Exchange's
various auction mechanisms, the Exchange currently provides a per
contract rebate to those contracts that do not trade with the contra
order in the Exchange's Facilitation Mechanism,\10\ Price Improvement
Mechanism \11\ and Solicited Order Mechanism.\12\ This rebate currently
applies to all complex orders in symbols that are subject to the
Exchange's maker/taker fees. To clarify the applicability of this
rebate, the Exchange proposes to add footnote 2 to the Complex Order
Maker Fee (Each Leg) for Select Symbols column and the Complex Order
Taker Fee (Each Leg) for Select Symbols column on the Exchange's
Schedule of Fees. For the Facilitation and Solicited Order
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Mechanisms, the rebate is currently $0.15 per contract. For the Price
Improvement Mechanism, the rebate is currently $0.25 per contract. The
Exchange proposes to continue this rebate incentive also. As such, a
per contract rebate at the current levels will continue to apply to
those contracts in XOP, XLB, and EFA that do not trade with the contra
order in the Exchange's Facilitation Mechanism, Price Improvement
Mechanism and Solicited Order Mechanism.
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\10\ See Exchange Act Release No. 61869 (April 7, 2010), 75 FR
19449 (April 14, 2010) (SR-ISE-2010-25).
\11\ See Exchange Act Release No. 62048 (May 6, 2010), 75 FR
26830 (May 12, 2010) (SR-ISE-2010-43). The Exchange subsequently
increased this rebate to $0.25 per contract. See Exchange Act
Release No. 63283 (November 9, 2010), 75 FR 70059 (November 16,
2010) (SR-ISE-2010-106).
\12\ See Exchange Act Release No. 63283 (November 9, 2010), 75
FR 70059 (November 16, 2010) (SR-ISE-2010-106).
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The Exchange also proposes to continue providing ISE market makers
with a two cent discount when trading against orders that are
preferenced to them. Currently, this discount is only applicable when
ISE Market Makers remove liquidity from the Complex Order Book. The
Exchange now proposes to provide this fee discount when ISE Market
Makers add or remove liquidity from the Complex Order Book in XOP, XLB
and EFA. Accordingly, ISE market makers that add or remove liquidity in
XLB and EFA in the Complex Order Book will be charged $0.30 per
contract ($0.28 per contract in XOP) when trading with orders that are
preferenced to them.
The Exchange proposes to make these fee changes operative on
December 1, 2011.
2. Statutory Basis
The Exchange believes that its proposal to amend its Schedule of
Fees is consistent with Section 6(b) of the Act \13\ in general, and
furthers the objectives of Section 6(b)(4) of the Act \14\ in
particular, in that it is an equitable allocation of reasonable dues,
fees and other charges among Exchange members and other persons using
its facilities. The impact of the proposal upon the net fees paid by a
particular market participant will depend on a number of variables,
most important of which will be its propensity to add or remove
liquidity in options overlying the Penny Pilot Symbols and the Select
Symbols in the Complex Order Book, as applicable.
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\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that increasing the fees applicable to orders
executed in the Complex Order Book when trading against Priority
Customers in XOP, XLB and EFA is appropriate given the new
functionality that allows market makers to quote in the Complex Order
Book. Additionally, the Exchange's fees remain competitive with fees
charged by other exchanges and are therefore reasonable and equitably
allocated to those members that opt to direct orders to the Exchange
rather than to a competing exchange. Specifically, the Exchange
believes that its proposal to assess a make fee of $0.30 per contract
for XOP and $0.32 for XLB and EFA when orders in these symbols interact
with Priority Customers is reasonable and equitable because the fee is
within the range of fees assessed by other exchanges employing similar
pricing schemes.
The Exchange also believes that it is reasonable and equitable to
provide a two cent discount to ISE market makers on preferenced orders
because this will provide an incentive for market makers to quote in
the Complex Order Book. The Exchange believes that it is reasonable and
equitable to continue to provide rebates for Priority Customer complex
orders because paying a rebate will continue to attract additional
order flow to the Exchange and thereby create liquidity that ultimately
will benefit all market participants who trade on the Exchange.
Moreover, the Exchange believes that the proposed fees are fair,
equitable and not unfairly discriminatory because the proposed fees are
consistent with price differentiation that exists today at other
options exchanges. Additionally, the Exchange believes it remains an
attractive venue for market participants to trade complex orders
despite its proposed fee change as its fees remain competitive with
those charged by other exchanges for similar trading strategies. The
Exchange operates in a highly competitive market in which market
participants can readily direct order flow to another exchange if they
deem fee levels at a particular exchange to be excessive. For the
reasons noted above, the Exchange believes that the proposed fees are
fair, equitable and not unfairly discriminatory.
B. Self-Regulatory Organization's Statement on Burden on Competition
The proposed rule change does not impose any burden on competition
that is not necessary or appropriate in furtherance of the purposes of
the Exchange Act.
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 Exchange Act.\15\ 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 Exchange Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
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\15\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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-2011-81 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-2011-81. 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
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Reference Room, 100 F Street NE., Washington, DC 20549, on official
business days between the hours of 10 a.m. and 3 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-2011-81 and should be submitted on or before January
11, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-32569 Filed 12-20-11; 8:45 am]
BILLING CODE 8011-01-P