Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Schedule of Fees, 4600-4603 [2015-01509]

Download as PDF 4600 Federal Register / Vol. 80, No. 18 / Wednesday, January 28, 2015 / Notices III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A) of the Act 17 and Rule 19b– 4(f)(6) 18 thereunder. Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act 19 and subparagraph (f)(6) of Rule 19b–4 thereunder.20 A proposed rule change filed under Rule 19b–4(f)(6) normally does not become operative for 30 days after the date of filing.21 However, Rule 19b– 4(f)(6)(iii) permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest.22 The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest because such waiver would allow the pilot program to continue uninterrupted. Accordingly, the Commission hereby grants the Exchange’s request and designates the proposal operative upon filing.23 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act.24 If the Commission takes such action, the Commission shall institute proceedings 17 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6)(iii) requires the Exchange to give the Commission written notice of the Exchange’s intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. 19 15 U.S.C. 78s(b)(3)(A). 20 17 CFR 240.19b–4(f)(6). 21 17 CFR 240.19b–4(f)(6)(iii). 22 Id. 23 For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 24 15 U.S.C. 78s(b)(3)(C). mstockstill on DSK4VPTVN1PROD with NOTICES 18 17 VerDate Sep<11>2014 16:41 Jan 27, 2015 Jkt 235001 to determine whether the proposed rule change should be approved or disapproved.25 IV. Solicitation of Comments For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.26 Brent J. Fields, Secretary. 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: [FR Doc. 2015–01506 Filed 1–27–15; 8:45 am] Electronic Comments [Release No. 34–74117; File No. SR–ISE– 2015–03] • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– BYX–2015–05 on the subject line. Paper Comments • Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–BYX–2015–05. 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 (https://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 a.m. and 3 p.m. Copies of such 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–BYX– 2015–05, and should be submitted on or before February 18, 2015. BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Schedule of Fees January 22, 2015. 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 January 8, 2015, 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. 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 to (1) increase the route-out fee applicable to Priority Customer orders routed to away markets, (2) adopt a stock handling fee for stock-option orders executed against other stock-option orders in the complex order book, (3) increase the Crossing Fee Cap subject to a discount for members that agree in advance to pay the full amount regardless of actual trading volume, and (4) remove certain obsolete text related to PrecISE fees. The text of the proposed rule change is available on the Exchange’s Web site (https://www.ise.com), at the principal office of the Exchange, and at the Commission’s Public Reference Room. 26 17 CFR 200.30–3(a)(12). U.S. C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 25 Id. PO 00000 Frm 00072 Fmt 4703 Sfmt 4703 E:\FR\FM\28JAN1.SGM 28JAN1 Federal Register / Vol. 80, No. 18 / Wednesday, January 28, 2015 / Notices 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 (1) increase the routeout fee applicable to Priority Customer orders routed to away markets, (2) adopt a stock handling fee for stock-option orders executed against other stockoption orders in the complex order book, (3) increase the Crossing Fee Cap subject to a discount for members that agree in advance to pay the full amount regardless of actual trading volume, and (4) remove certain obsolete text related to PrecISE fees. Each of the proposed changes is described in more detail below. The Exchange’s Schedule of Fees has separate 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. mstockstill on DSK4VPTVN1PROD with NOTICES I. Route-Out Fees The Exchange presently charges a route-out fee applicable to orders routed to away markets pursuant to the Options Order Protection and Locked/Crossed Market Plan (the ‘‘Plan’’). For Market Maker,3 Non-ISE Market Maker,4 and Firm Proprietary 5/Broker-Dealer,6 and Professional Customer 7 orders the 3 The term ‘‘Market Makers’’ refers to ‘‘Competitive Market Makers’’ and ‘‘Primary Market Makers’’ collectively. See ISE Rule 100(a)(25). 4 A Non-ISE Market Maker, or Far Away Market Maker (‘‘FARMM’’), is a market maker as defined in Section 3(a)(38) of the Securities Exchange Act of 1934 registered in the same options class on another options exchange. 5 A ‘‘Firm Proprietary’’ order is an order submitted by a member for its own proprietary account. 6 A Broker-Dealer order is an order submitted by a Member for a non-Member broker-dealer account. 7 A Professional Customer is a person who is not a broker/dealer and is not a Priority Customer. VerDate Sep<11>2014 16:41 Jan 27, 2015 Jkt 235001 route-out fee is $0.55 per contract in Select Symbols,8 and $0.95 per contract in Non-Select Symbols.9 For Priority Customer 10 orders in both Select and Non-Select Symbols the route-out fee is $0.45 per contract. The Exchange now proposes to increase the route-out fee to $0.48 per contract for Priority Customer orders in all symbols. The route-out fee for all other market participant types will remain at their current rates described above. II. Stock Handling Fee for Stock-Option Orders When an ISE member enters a stockoption order,11 the Exchange electronically communicates the stock leg of the order to one or more brokerdealers for execution pursuant to Supplementary Material .02 to Rule 722. Currently, the Exchange provides this stock routing functionality as a free service to members, and simply passesthrough fees charged by the brokerdealer.12 The Exchange now proposes to introduce a stock handling fee of $0.0010 per share for the stock leg of stock-option orders executed against other stock-option orders in the complex order book.13 This amount will include any fees charged by the stock venue that prints the trade, and an amount intended to compensate the Exchange for matching these stockoption orders against other stock-option orders on the complex order book. A maximum of $50 per trade will be assessed under this fee in order to ensure that market participants do not pay extremely large fees for the execution of the stock legs of stockoption orders. The Exchange will continue to bill pass-through fees for the stock leg of stock-option orders that trade against liquidity on the stock venue, instead of being matched in the complex order book. 8 ‘‘Select Symbols’’ are options overlying all symbols listed on the ISE that are in the Penny Pilot Program. 9 ‘‘Non-Select Symbols’’ are options overlying all symbols excluding Select Symbols. 10 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). 11 See ISE Rule 722(a)(2). 12 The Exchange charges for execution of the options leg(s) of stock-option orders. 13 The Exchange notes that this stock handling fee, which is for the stock leg of stock-option orders and is therefore charged per share rather than per contract, is the same regardless of whether the options leg(s) is for Standard or Mini Option contracts. PO 00000 Frm 00073 Fmt 4703 Sfmt 4703 4601 III. Crossing Fee Cap The Exchange currently has a Crossing Fee Cap of $65,000 per month which applies to Firm Proprietary and Non-ISE Market Maker transactions that are part of the originating or contra side of a Crossing Order 14 executed by a member or its affiliate, provided there is at least 75% common ownership between the firms as reflected on each firm’s Form BD, Schedule A.15 The Exchange now proposes to increase the Crossing Fee Cap to $75,000 per month; provided, however, that members that commit in advance to paying the full Crossing Fee Cap at the end of each month will instead have these fees capped at the current $65,000 per month. Members that commit to the discounted Crossing Fee Cap must indicate their desire to do so prior to the start of the month in a form determined by the Exchange. By committing to the Crossing Fee Cap, members agree to pay the full $65,000 per month regardless of actual trading volume. IV. PrecISE Fee Waiver: Obsolete Text On October 15, 2014 the Exchange filed an immediately effective proposed rule change that adopted a limited waiver of PrecISE Trade® (‘‘PrecISE’’) fees for Electronic Access Members (‘‘EAMs’’) and sponsored customers that execute a high volume of Crossing Orders in a given month.16 As the proposed rule change was filed in the middle of a calendar month, the PrecISE waiver for the first billing cycle was based on a prorated volume threshold for crossing volume executed from October 16, 2014 to October 31, 2014. As the first billing cycle has now passed, the Exchange proposes to remove this outdated reference from the Schedule of Fees. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,17 in general, and Section 6(b)(4) of the Act,18 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. 14 Crossing Orders are contracts that are submitted as part of a Facilitation, Solicitation, PIM, Block or QCC order. 15 Fees for Responses to Crossing Orders and surcharge fees for licensed products are not included in the calculation of the monthly fee cap. 16 See Securities Exchange Act Release No. 73440 (October 27, 2014), 79 FR 64857 (October 31, 2014) (SR–ISE–2014–48). 17 15 U.S.C. 78f. 18 15 U.S.C. 78f(b)(4). E:\FR\FM\28JAN1.SGM 28JAN1 4602 Federal Register / Vol. 80, No. 18 / Wednesday, January 28, 2015 / Notices mstockstill on DSK4VPTVN1PROD with NOTICES I. Route-Out Fees The Exchange believes the proposed route-out fees are reasonable and equitable as they offset costs incurred by the Exchange in connection with using unaffiliated broker-dealers (‘‘Linkage Handlers’’) to access other exchanges for linkage executions pursuant to Supplementary Material .03 to Rule 1901. Due to increasing taker fees for accessing liquidity on other markets, the Exchange must periodically raise its route-out fees to recoup the higher costs associated with executing orders on away markets. Other exchanges currently charge a variety of routing related fees associated with orders that are subject to linkage handling. The route-out fees proposed herein are within the range of fees charged by these competitor exchanges. Furthermore, the Exchange believes that the proposed fees are not unfairly discriminatory because these fees would be uniformly applied to all Priority Customer orders routed to away markets. As has historically been the case, Priority Customer orders will continue to pay lower route-out fees than orders from other market participants, including Professional Customers. The Exchange believes that it is equitable and not unfairly discriminatory to charge lower fees for Priority Customer orders as a Priority Customer is by definition not a broker or 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). This limitation does not apply to participants whose behavior is substantially similar to that of market professionals, including, Professional Customers, who will generally submit a higher number of orders (many of which do not result in executions) than Priority Customers. Moreover, the Exchange notes that Priority Customer orders are often charged lower taker fees on other options exchanges, meaning that the execution costs to the Exchange for routing these orders is correspondingly lower. As such, the Exchange believes that it is equitable and not unfairly discriminatory to pass on this cost savings to the firms entering these orders. II. Stock Handling Fee for Stock-Option Orders The Exchange believes the proposed stock handling fee for stock-option orders is reasonable and equitable as the proposed fee will cover the costs of developing and maintaining the systems that allow for the matching and processing of the stock legs of stock- VerDate Sep<11>2014 16:41 Jan 27, 2015 Jkt 235001 option orders executed in the complex order book, and fees assessed to the Exchange by broker-dealers contracted to provide stock execution services. The Exchange notes that the Chicago Board Options Exchange, Inc. (‘‘CBOE’’) also charges a similar stock handling fee of $0.0010 per share (capped at $50 per order).19 The Exchange believes that it is reasonable and equitable to charge a similar fee for the execution of stockoption orders on the ISE. In addition, the Exchange believes that the proposed fee is not unfairly discriminatory as it will be uniformly applied to all members that execute stock-option orders on the Exchange. III. Crossing Fee Cap The Exchange believes that it is reasonable and equitable to increase the Crossing Fee Cap, and introduce a discount for members that agree to pay the full Crossing Fee Cap at the end of each month, as these changes are intended to incentivize members to bring Crossing Order flow to the Exchange. Members that do not elect to pay the discounted rate in full at the end of each month will remain eligible to have their fees capped at $75,000— the level previously available on the Exchange before the Crossing Fee Cap was lowered to its current level in August 2014—while also retaining the current benefit of a waived service fee for the execution of orders above the cap.20 At the same time, members that commit to their Crossing Order fees in advance will receive a discounted rate, which will encourage members to bring their Crossing Order flow to the ISE, to the benefit of all members and investors that trade on the Exchange. Furthermore, the Exchange believes that the proposed changes to the Crossing Fee Cap are not unfairly discriminatory because all members will have the option to make the required commitment in order to qualify for the discounted Crossing Fee Cap. The Crossing Fee Cap will be uniformly applied to members based on their election. IV. PrecISE Fee Waiver: Obsolete Text The Exchange believes that it is reasonable, equitable, and not unfairly discriminatory to remove text in the Schedule of Fees related to PrecISE fees for the billing period that ended on November 15, 2014 as this date has passed. Removing the obsolete text will 19 See Securities Exchange Act Release No. 67383 (July 10, 2012), 77 FR 41841 (July 16, 2012) (SR– CBOE–2012–063). 20 See Securities Exchange Act Release No. 72817 (August 12, 2014), 79 FR 48801 (August 18, 2014) (SR–ISE–2014–39). PO 00000 Frm 00074 Fmt 4703 Sfmt 4703 increase the clarity of the Schedule of Fees to the benefit of members and investors that trade on the ISE. 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 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,21 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 fees are similar to—and within the range of—fees charged by the Exchange’s competitors. 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 and rebates to remain competitive with other exchanges. For the reasons described above, the Exchange believes that the proposed fee changes reflect this competitive environment. 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 22 and 21 15 22 15 E:\FR\FM\28JAN1.SGM U.S.C. 78f(b)(8). U.S.C. 78s(b)(3)(A)(ii). 28JAN1 Federal Register / Vol. 80, No. 18 / Wednesday, January 28, 2015 / Notices subparagraph (f)(2) of Rule 19b–4 thereunder,23 because it establishes a due, fee, or other charge imposed by ISE. 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: mstockstill on DSK4VPTVN1PROD with NOTICES Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File No. SR–ISE– 2015–03 on the subject line. Paper Comments • Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–ISE–2015–03. 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 (https://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 a.m. and 3 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–2015–03 and should be submitted on or before February 18, 2015. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.24 Brent J. Fields, Secretary. CFR 240.19b–4(f)(2). VerDate Sep<11>2014 16:41 Jan 27, 2015 Jkt 235001 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 Exchange 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. BILLING CODE 8011–01–P A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change SECURITIES AND EXCHANGE COMMISSION 1. Purpose [FR Doc. 2015–01509 Filed 1–27–15; 8:45 am] [Release No. 34–74113; File No. SR–ISE Gemini-2015–02] Self-Regulatory Organizations; ISE Gemini, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Schedule of Fees January 22, 2015. 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 January 8, 2015, ISE Gemini, LLC (the ‘‘Exchange’’ or ‘‘ISE Gemini’’) 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 selfregulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change ISE Gemini proposes to amend the Schedule of Fees to introduce new fees for Crossing Orders and Responses to Crossing Orders executed in the Price Improvement Mechanism (‘‘PIM’’). The text of the proposed rule change is available on the Exchange’s Internet Web site at https://www.ise.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. 24 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 23 17 4603 PO 00000 Frm 00075 Fmt 4703 Sfmt 4703 The Exchange proposes to amend the Schedule of Fees to introduce new fees for Crossing Orders and Responses to Crossing Orders executed in the PIM. The Exchange’s Schedule of Fees has separate 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. ISE Gemini charges a fee for Crossing Orders executed in the Facilitation Mechanism, Solicited Order Mechanism, Block Order Mechanism, PIM, or submitted as a Qualified Contingent Cross (‘‘QCC’’) order. This fee is currently $0.20 per contract in both Penny 3 and Non-Penny Symbols,4 and applies to Market Maker,5 Non-ISE Gemini Market Maker,6 Firm Proprietary 7/Broker-Dealer,8 and 3 ‘‘Penny Symbols’’ are options overlying all symbols listed on ISE Gemini that are in the Penny Pilot Program. 4 ‘‘Non- Penny Symbols’’ are options overlying all symbols excluding Penny Symbols. 5 The term Market Maker refers to ‘‘Competitive Market Makers’’ and ‘‘Primary Market Makers’’ collectively. Market Maker orders sent to the Exchange by an Electronic Access Member are assessed fees and rebates at the same level as Market Maker orders. See footnote 2, Schedule of Fees, Section I and II. 6 A ‘‘Non-ISE Gemini Market Maker’’ is a market maker as defined in Section 3(a)(38) of the Securities Exchange Act of 1934, as amended, registered in the same options class on another options exchange. 7 A ‘‘Firm Proprietary’’ order is an order submitted by a member for its own proprietary account. 8 A ‘‘Broker-Dealer’’ order is an order submitted by a member for a broker-dealer account that is not its own proprietary account. E:\FR\FM\28JAN1.SGM 28JAN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 80, Number 18 (Wednesday, January 28, 2015)]
[Notices]
[Pages 4600-4603]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-01509]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74117; File No. SR-ISE-2015-03]

Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change To Amend the Schedule of Fees

January 22, 2015.
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 January 8, 2015, 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.
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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 the Schedule of Fees to (1) increase the
route-out fee applicable to Priority Customer orders routed to away
markets, (2) adopt a stock handling fee for stock-option orders
executed against other stock-option orders in the complex order book,
(3) increase the Crossing Fee Cap subject to a discount for members
that agree in advance to pay the full amount regardless of actual
trading volume, and (4) remove certain obsolete text related to PrecISE
fees. The text of the proposed rule change is available on the
Exchange's Web site (https://www.ise.com), at the principal office of
the Exchange, and at the Commission's Public Reference Room.

[[Page 4601]]

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 (1) increase
the route-out fee applicable to Priority Customer orders routed to away
markets, (2) adopt a stock handling fee for stock-option orders
executed against other stock-option orders in the complex order book,
(3) increase the Crossing Fee Cap subject to a discount for members
that agree in advance to pay the full amount regardless of actual
trading volume, and (4) remove certain obsolete text related to PrecISE
fees. Each of the proposed changes is described in more detail below.
The Exchange's Schedule of Fees has separate 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.
I. Route-Out Fees
The Exchange presently charges a route-out fee applicable to orders
routed to away markets pursuant to the Options Order Protection and
Locked/Crossed Market Plan (the ``Plan''). For Market Maker,\3\ Non-ISE
Market Maker,\4\ and Firm Proprietary \5\/Broker-Dealer,\6\ and
Professional Customer \7\ orders the route-out fee is $0.55 per
contract in Select Symbols,\8\ and $0.95 per contract in Non-Select
Symbols.\9\ For Priority Customer \10\ orders in both Select and Non-
Select Symbols the route-out fee is $0.45 per contract. The Exchange
now proposes to increase the route-out fee to $0.48 per contract for
Priority Customer orders in all symbols. The route-out fee for all
other market participant types will remain at their current rates
described above.
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\3\ The term ``Market Makers'' refers to ``Competitive Market
Makers'' and ``Primary Market Makers'' collectively. See ISE Rule
100(a)(25).
\4\ A Non-ISE Market Maker, or Far Away Market Maker
(``FARMM''), is a market maker as defined in Section 3(a)(38) of the
Securities Exchange Act of 1934 registered in the same options class
on another options exchange.
\5\ A ``Firm Proprietary'' order is an order submitted by a
member for its own proprietary account.
\6\ A Broker-Dealer order is an order submitted by a Member for
a non-Member broker-dealer account.
\7\ A Professional Customer is a person who is not a broker/
dealer and is not a Priority Customer.
\8\ ``Select Symbols'' are options overlying all symbols listed
on the ISE that are in the Penny Pilot Program.
\9\ ``Non-Select Symbols'' are options overlying all symbols
excluding Select Symbols.
\10\ 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).
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II. Stock Handling Fee for Stock-Option Orders
When an ISE member enters a stock-option order,\11\ the Exchange
electronically communicates the stock leg of the order to one or more
broker-dealers for execution pursuant to Supplementary Material .02 to
Rule 722. Currently, the Exchange provides this stock routing
functionality as a free service to members, and simply passes-through
fees charged by the broker-dealer.\12\ The Exchange now proposes to
introduce a stock handling fee of $0.0010 per share for the stock leg
of stock-option orders executed against other stock-option orders in
the complex order book.\13\ This amount will include any fees charged
by the stock venue that prints the trade, and an amount intended to
compensate the Exchange for matching these stock-option orders against
other stock-option orders on the complex order book. A maximum of $50
per trade will be assessed under this fee in order to ensure that
market participants do not pay extremely large fees for the execution
of the stock legs of stock-option orders. The Exchange will continue to
bill pass-through fees for the stock leg of stock-option orders that
trade against liquidity on the stock venue, instead of being matched in
the complex order book.
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\11\ See ISE Rule 722(a)(2).
\12\ The Exchange charges for execution of the options leg(s) of
stock-option orders.
\13\ The Exchange notes that this stock handling fee, which is
for the stock leg of stock-option orders and is therefore charged
per share rather than per contract, is the same regardless of
whether the options leg(s) is for Standard or Mini Option contracts.
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III. Crossing Fee Cap
The Exchange currently has a Crossing Fee Cap of $65,000 per month
which applies to Firm Proprietary and Non[hyphen]ISE Market Maker
transactions that are part of the originating or contra side of a
Crossing Order \14\ executed by a member or its affiliate, provided
there is at least 75% common ownership between the firms as reflected
on each firm's Form BD, Schedule A.\15\ The Exchange now proposes to
increase the Crossing Fee Cap to $75,000 per month; provided, however,
that members that commit in advance to paying the full Crossing Fee Cap
at the end of each month will instead have these fees capped at the
current $65,000 per month. Members that commit to the discounted
Crossing Fee Cap must indicate their desire to do so prior to the start
of the month in a form determined by the Exchange. By committing to the
Crossing Fee Cap, members agree to pay the full $65,000 per month
regardless of actual trading volume.
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\14\ Crossing Orders are contracts that are submitted as part of
a Facilitation, Solicitation, PIM, Block or QCC order.
\15\ Fees for Responses to Crossing Orders and surcharge fees
for licensed products are not included in the calculation of the
monthly fee cap.
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IV. PrecISE Fee Waiver: Obsolete Text
On October 15, 2014 the Exchange filed an immediately effective
proposed rule change that adopted a limited waiver of PrecISE
Trade[supreg] (``PrecISE'') fees for Electronic Access Members
(``EAMs'') and sponsored customers that execute a high volume of
Crossing Orders in a given month.\16\ As the proposed rule change was
filed in the middle of a calendar month, the PrecISE waiver for the
first billing cycle was based on a prorated volume threshold for
crossing volume executed from October 16, 2014 to October 31, 2014. As
the first billing cycle has now passed, the Exchange proposes to remove
this outdated reference from the Schedule of Fees.
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\16\ See Securities Exchange Act Release No. 73440 (October 27,
2014), 79 FR 64857 (October 31, 2014) (SR-ISE-2014-48).
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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,\17\ in general, and
Section 6(b)(4) of the Act,\18\ 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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\17\ 15 U.S.C. 78f.
\18\ 15 U.S.C. 78f(b)(4).

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[[Page 4602]]

I. Route-Out Fees
The Exchange believes the proposed route-out fees are reasonable
and equitable as they offset costs incurred by the Exchange in
connection with using unaffiliated broker-dealers (``Linkage
Handlers'') to access other exchanges for linkage executions pursuant
to Supplementary Material .03 to Rule 1901. Due to increasing taker
fees for accessing liquidity on other markets, the Exchange must
periodically raise its route-out fees to recoup the higher costs
associated with executing orders on away markets. Other exchanges
currently charge a variety of routing related fees associated with
orders that are subject to linkage handling. The route-out fees
proposed herein are within the range of fees charged by these
competitor exchanges. Furthermore, the Exchange believes that the
proposed fees are not unfairly discriminatory because these fees would
be uniformly applied to all Priority Customer orders routed to away
markets. As has historically been the case, Priority Customer orders
will continue to pay lower route-out fees than orders from other market
participants, including Professional Customers. The Exchange believes
that it is equitable and not unfairly discriminatory to charge lower
fees for Priority Customer orders as a Priority Customer is by
definition not a broker or 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). This limitation does
not apply to participants whose behavior is substantially similar to
that of market professionals, including, Professional Customers, who
will generally submit a higher number of orders (many of which do not
result in executions) than Priority Customers. Moreover, the Exchange
notes that Priority Customer orders are often charged lower taker fees
on other options exchanges, meaning that the execution costs to the
Exchange for routing these orders is correspondingly lower. As such,
the Exchange believes that it is equitable and not unfairly
discriminatory to pass on this cost savings to the firms entering these
orders.
II. Stock Handling Fee for Stock-Option Orders
The Exchange believes the proposed stock handling fee for stock-
option orders is reasonable and equitable as the proposed fee will
cover the costs of developing and maintaining the systems that allow
for the matching and processing of the stock legs of stock-option
orders executed in the complex order book, and fees assessed to the
Exchange by broker-dealers contracted to provide stock execution
services. The Exchange notes that the Chicago Board Options Exchange,
Inc. (``CBOE'') also charges a similar stock handling fee of $0.0010
per share (capped at $50 per order).\19\ The Exchange believes that it
is reasonable and equitable to charge a similar fee for the execution
of stock-option orders on the ISE. In addition, the Exchange believes
that the proposed fee is not unfairly discriminatory as it will be
uniformly applied to all members that execute stock-option orders on
the Exchange.
---------------------------------------------------------------------------

\19\ See Securities Exchange Act Release No. 67383 (July 10,
2012), 77 FR 41841 (July 16, 2012) (SR-CBOE-2012-063).
---------------------------------------------------------------------------

III. Crossing Fee Cap
The Exchange believes that it is reasonable and equitable to
increase the Crossing Fee Cap, and introduce a discount for members
that agree to pay the full Crossing Fee Cap at the end of each month,
as these changes are intended to incentivize members to bring Crossing
Order flow to the Exchange. Members that do not elect to pay the
discounted rate in full at the end of each month will remain eligible
to have their fees capped at $75,000--the level previously available on
the Exchange before the Crossing Fee Cap was lowered to its current
level in August 2014--while also retaining the current benefit of a
waived service fee for the execution of orders above the cap.\20\ At
the same time, members that commit to their Crossing Order fees in
advance will receive a discounted rate, which will encourage members to
bring their Crossing Order flow to the ISE, to the benefit of all
members and investors that trade on the Exchange. Furthermore, the
Exchange believes that the proposed changes to the Crossing Fee Cap are
not unfairly discriminatory because all members will have the option to
make the required commitment in order to qualify for the discounted
Crossing Fee Cap. The Crossing Fee Cap will be uniformly applied to
members based on their election.
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\20\ See Securities Exchange Act Release No. 72817 (August 12,
2014), 79 FR 48801 (August 18, 2014) (SR-ISE-2014-39).
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IV. PrecISE Fee Waiver: Obsolete Text
The Exchange believes that it is reasonable, equitable, and not
unfairly discriminatory to remove text in the Schedule of Fees related
to PrecISE fees for the billing period that ended on November 15, 2014
as this date has passed. Removing the obsolete text will increase the
clarity of the Schedule of Fees to the benefit of members and investors
that trade on the ISE.
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
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,\21\ 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
fees are similar to--and within the range of--fees charged by the
Exchange's competitors. 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 and rebates to
remain competitive with other exchanges. For the reasons described
above, the Exchange believes that the proposed fee changes reflect this
competitive environment.
---------------------------------------------------------------------------

\21\ 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 \22\ and

[[Page 4603]]

subparagraph (f)(2) of Rule 19b-4 thereunder,\23\ because it
establishes a due, fee, or other charge imposed by ISE.
---------------------------------------------------------------------------

\22\ 15 U.S.C. 78s(b)(3)(A)(ii).
\23\ 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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File No. SR-ISE-2015-03 on the subject line.

Paper Comments

Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.

All submissions should refer to File Number SR-ISE-2015-03. 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 (https://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
a.m. and 3 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-2015-03 and should be
submitted on or before February 18, 2015.
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\24\ 17 CFR 200.30-3(a)(12).

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
Brent J. Fields,
Secretary.
[FR Doc. 2015-01509 Filed 1-27-15; 8:45 am]
BILLING CODE 8011-01-P

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