Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating To Amending the Direct Edge ECN Fee Schedule, 51903-51904 [E9-24263]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 74, Number 194 (Thursday, October 8, 2009)]
[Notices]
[Pages 51903-51904]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-24263]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60769; File No. SR-ISE-2009-68]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change Relating To Amending the Direct Edge ECN Fee Schedule

October 2, 2009.
    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 September 30, 2009, the International Securities Exchange, LLC 
(the ``Exchange'' or the ``ISE'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change as 
described in Items I, II, and III below, which items have been prepared 
by the self-regulatory organization. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Direct Edge ECN's (``DECN'') fee 
schedule for ISE Members \3\ to (i) adopt new fees and rebates and 
associated flags; (ii) amend the criteria for meeting the Ultra Tier; 
(iii) to amend the descriptions of certain flags in the schedule; and 
(iv) to amend its fee schedule to reflect pass through charges of other 
market centers. All of the changes described herein are applicable to 
ISE Members.
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    \3\ References to ISE Members in this filing refer to DECN 
Subscribers who are ISE Members.
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    All of the changes described herein are applicable to ISE Members. 
The text of the proposed rule change is available on the Exchange's 
Internet Web site at https://www.ise.com.

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
    DECN, a facility of ISE, operates two trading platforms, EDGX and 
EDGA. On July 1, 2009,\4\ the Exchange adopted a new Ultra Tier Rebate, 
as defined below, whereby ISE Members are provided a $0.0032 rebate per 
share for securities priced at or above $1.00 when ISE Members add 
liquidity on EDGX if the attributed MPID satisfies one of the following 
criteria on a daily basis, measured monthly: (i) Adding 100,000,000 
shares or more on EDGX; or (ii) adding 50,000,000 shares or more of 
liquidity to EDGX, so long as added liquidity on EDGX is at least 
20,000,000 shares greater than the previous calendar month. The rebate 
described above is referred to as an ``Ultra Tier Rebate'' on the DECN 
fee schedule.
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    \4\ See Securities and Exchange Act Release No. 60232 (July 2, 
2009), 74 FR 33309 (July 10, 2009) (SR-ISE-2009-43).
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    The Exchange is now proposing to amend the criteria for meeting 
this tier by allowing ISE Members to receive a $0.0032 rebate per share 
for securities priced at or above $1.00 when ISE Members add liquidity 
on EDGX if the attributed MPID posts 1% of the Total Consolidated 
Volume (``TCV'') in average daily volume (``ADV''). TCV is defined as 
volume reported by all exchanges and trade reporting facilities to the 
consolidated transaction reporting plans for Tape A, B, and C 
securities. At the same time, the Exchange is proposing to delete the 
Full Sweep Tier, which provided a $0.0035 rebate per share for 
liquidity added on EDGX if the attributed MPID added 50,000,000 shares 
or more on a daily basis, measured monthly, by using the ROUT routing 
strategy.
    The Ultra Tier rebate ($0.0032 per share), which is a higher rebate 
than the Super Tier ($0.0030 per share), is also more difficult to 
reach than the Super Tier rebate, as a higher volume threshold is 
required based on recent TCV figures. For example, 1% of the average 
TCV for July 2009 (8.8 billion) was approximately 88 million shares. 
This threshold far exceeds the criteria to meet the Super Tier rebate. 
In addition, the higher rebate also results in part from lower 
administrative costs associated with higher volume.
    The Exchange also proposes to adopt additional fees and rebates. 
First, the Exchange proposes to add new fee categories for the INET 
order type. When a member routes to Nasdaq using the INET order type 
and removes liquidity on Tapes A or C, the member would incur a fee of 
$0.0030 on either EDGA or EDGX. Such situation would yield new Flag 
``L''. The INET order type sweeps the EDGA or EDGX book, and routes the 
remainder to Nasdaq. If the order is marketable, it will remove 
liquidity from the EDGA or EDGX book, as applicable, first. If the 
order is non-marketable, the order will post on Nasdaq. With regards to 
a Member's use of the INET order type for Tapes A or C securities, 
Members routing an ADV: (i) Less than 5,000,000 shares will be charged 
$0.0030 per share, as described in the schedule; (ii) equal to or 
greater than 5,000,000 shares but less than 20,000,000 shares will be 
charged $0.0027 per share; (iii) equal to or greater than 20,000,000 
shares but less than 30,000,001 shares will be charged $0.0026 per 
share; and (iv) equal to or greater than 30,000,001 shares will be 
charged $0.0025 per share. The rates, in all cases, are calculated for 
shares removed from Nasdaq. The Exchange believes that these tier-based 
rates will incent Members to sweep the EDGA or EDGX book first and then 
offer a discounted rate to Nasdaq's rates if the remainder of the order 
is routed to Nasdaq. These discounted rates arise in part from reduced 
administrative costs associated with certain volume levels.
    Similarly, the Exchange also proposes to add an additional fee 
category for the INET order type when a member routes to Nasdaq using 
the INET order type and removes liquidity on Tape B. Such situation 
would yield new flag ``2''. With regards to a Member's use of the INET 
order type for Tape B securities, Members routing an ADV: (i) Less than 
20,000,000 shares will be charged $0.0030 per share, as described in 
the schedule; (ii) equal to or greater than 20,000,000 but less than 
30,000,001 shares will be charged $0.0029 per share; and (iii) equal to 
or greater than 30,000,001 shares will be charged $0.0028 per share.
    Furthermore, the Exchange proposes to adopt a new rebate. Members 
will receive a rebate of $0.0032 per share for all liquidity posted on 
EDGX if they add or route at least 10,000,000 shares of ADV to EDGX 
prior to 9:30 AM EST or after 4:00 PM EST (includes all flags except N 
and W) and add a minimum of 75,000,000 shares of ADV on EDGX in total, 
including during both market hours and pre- and post-trading hours. 
This rebate is designed to reward members who add or route significant 
order flow to EDGX both during market

[[Page 51904]]

hours and pre and post-trading hours. It is also designed to increase 
the liquidity of the pre and post markets.
    The Exchange proposes to amend the descriptions of the ``N'' and 
``W'' flags to display which Tape liquidity is removed from. For the 
``N'' flag, the Exchange proposes to amend the description to state 
that liquidity is removed from Tapes B & C. For the ``W'' flag, the 
Exchange proposes to amend the description to state that liquidity is 
removed from Tape A.
    Finally, the Exchange proposes to pass through to Exchange members 
the actual transaction fees assessed by away markets. Specifically, the 
Exchange is proposing to amend its fees schedule to reflect Nasdaq's 
reduction in rebate from 0.0006 to 0.0001 for removing liquidity from 
Nasdaq OMX BX.
    The fee changes discussed in this filing will become operative on 
October 1, 2009.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\5\ in general, and 
furthers the objectives of Section 6(b)(4),\6\ 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. In particular, adopting an additional rebate and 
providing tier-based rates if Members use the INET order type provide 
pricing incentives to market participants who route orders to DECN, 
allowing DECN to remain competitive. ISE notes that DECN operates in a 
highly competitive market in which market participants can readily 
direct order flow to competing venues if they deem fee levels at a 
particular venue to be excessive. The proposed rule change reflects a 
competitive pricing structure designed to incent market participants to 
direct their order flow to DECN. ISE believes the fees and credits 
remain competitive with those charged by other venues and therefore 
continue to be reasonable and equitably allocated to those members that 
opt to direct orders to DECN rather than competing venues. The rebates 
also provide incentives to members who add or route significant order 
flow to EDGX both during market hours and pre and post-trading hours 
and are designed to increase the liquidity of the pre and post markets. 
Finally, the Exchange believes that the proposed rates are equitable in 
that they apply uniformly to all Members and provide higher rebates for 
higher volume thresholds, resulting from lower administrative costs.
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    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78f(b)(4).
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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 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) of the Act \7\ and Rule 19b-4(f)(2) \8\ thereunder. At any 
time within 60 days of the filing of such proposed rule change, the 
Commission may summarily abrogate 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.
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 19b-4(f)(2).
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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 (https://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-ISE-2009-68 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-2009-68. This file 
number should be included on the subject line if e-mail 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 inspection and 
copying 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 the 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-2009-68 and 
should be submitted on or before October 29, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-24263 Filed 10-7-09; 8:45 am]
BILLING CODE 8011-01-P