Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Fees for Certain Regular Orders Executed on the Exchange, 37082-37086 [2012-15054]
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Federal Register / Vol. 77, No. 119 / Wednesday, June 20, 2012 / Notices
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Asset-based Distribution Fees
1. Section 17(d) of the Act and rule
17d–1 under the Act prohibit an
affiliated person of a registered
investment company or an affiliated
person of such person, acting as
principal, from participating in or
effecting any transaction in connection
with any joint enterprise or joint
arrangement in which the investment
company participates unless the
Commission issues an order permitting
the transaction. In reviewing
applications submitted under section
17(d) and rule 17d–1, the Commission
considers whether the participation of
the investment company in a joint
enterprise or joint arrangement is
consistent with the provisions, policies
and purposes of the Act, and the extent
to which the participation is on a basis
different from or less advantageous than
that of other participants.
2. Rule 17d–3 under the Act provides
an exemption from section 17(d) and
rule 17d–1 to permit open-end
investment companies to enter into
distribution arrangements pursuant to
rule 12b–1 under the Act. Applicants
request an order under section 17(d) and
rule 17d–1 under the Act to the extent
necessary to permit the Fund to impose
asset-based distribution fees. Applicants
have agreed to comply with rules
12b–1 and 17d–3 as if those rules
applied to closed-end investment
companies, which they believe will
resolve any concerns that might arise in
connection with a Fund financing the
distribution of its shares through assetbased distribution fees.
For the reasons stated above,
applicants submit that the exemptions
requested under section 6(c) are
necessary and appropriate in the public
interest and are consistent with the
protection of investors and the purposes
fairly intended by the policy and
provisions of the Act. Applicants further
submit that the relief requested
pursuant to section 23(c)(3) will be
consistent with the protection of
investors and will insure that applicants
do not unfairly discriminate against any
holders of the class of securities to be
purchased. Finally, applicants state that
the Funds’ institution of asset-based
distribution fees is consistent with the
provisions, policies and purposes of the
Act and does not involve participation
on a basis different from or less
advantageous than that of other
participants.
Applicants’ Condition
Applicants agree that any order
granting the requested relief will be
subject to the following condition:
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Each Fund relying on the order will
comply with the provisions of rules
6c–10, 12b–1, 17d–3, 18f–3, 22d–1, and,
where applicable, 11a–3 under the Act,
as amended from time to time, as if
those rules applied to closed-end
management investment companies,
and will comply with the NASD Sales
Charge Rule, as amended from time to
time, as if that rule applied to all closedend management investment
companies.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–15059 Filed 6–19–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–67201; File No. SR–ISE–
2012–49]
Self-Regulatory Organizations;
International Securities Exchange,
LLC; Notice of Filing and Immediate
Effectiveness of Proposed Rule
Change To Amend Fees for Certain
Regular Orders Executed on the
Exchange
June 14, 2012.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Exchange Act’’),1 and Rule 19b–4
thereunder,2 notice is hereby given that
on June 1, 2012, the International
Securities Exchange, LLC (the ‘‘ISE’’ or
the ‘‘Exchange’’) 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.
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 regular orders executed on
the Exchange. 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.
1 15
2 17
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of these statements may be examined at
the places specified in Item IV below.
The self-regulatory organization has
prepared summaries, set forth in
sections A, B and C below, of the most
significant aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of this proposed rule
change is to amend fees charged by the
Exchange for certain regular orders in 25
securities traded on the Exchange
(‘‘Special Non-Select Penny Pilot
Symbols’’).3 For trading in the Special
Non-Select Penny Pilot Symbols, the
Exchange currently charges $0.20 per
contract for Firm Proprietary orders and
Customer (Professional) 4 orders, and
$0.45 per contract for Non-ISE Market
Maker 5 orders. ISE Market Maker
orders 6 in these symbols are subject to
a sliding scale, ranging from $0.01 per
contract to $0.18 per contract,
depending on the amount of overall
volume traded by a Market Maker
during a month. Market Makers also
currently pay a payment for order flow
3 The Special Non-Select Penny Pilot Symbols are
Peabody Energy Corp. (‘‘BTU’’), Cliffs Natural
Resources Inc. (‘‘CLF’’), Salesforce.com Inc.
(‘‘CRM’’), ChevronTexaco Corporation (‘‘CVX’’),
Deere & Company (‘‘DE’’), eBay Inc. (‘‘EBAY’’),
FedEx Corp. (‘‘FDX’’), Corning Incorporated
(‘‘GLW’’), General Motors Co. (‘‘GM’’), Green
Mountain Coffee Roasters Inc. (‘‘GMCR’’), The
Goldman Sachs Group Inc. (‘‘GS’’), The Home
Depot Inc. (‘‘HD’’), Lululemon Athletica Inc.
(‘‘LULU’’), Molycorp Inc. (‘‘MCP’’), McMoRan
Exploration Co. (‘‘MMR’’), Mosaic Company
(‘‘MOS’’), Merck & Co. Inc. (‘‘MRK’’), Sears Holding
Corporation (‘‘SHLD’’), Sina Corp. (‘‘SINA’’), Silver
Wheaton Corp. (‘‘SLW’’), United Parcel Service Inc.
(‘‘UPS’’), U.S. Bancorp (‘‘USB’’), Wynn Resorts
Limited (‘‘WYNN’’), streetTracks Homebuilders
Fund (‘‘XHB’’) and Technology Select Sector SPDR
Fund (‘‘XLK’’). The Special Non-Select Penny Pilot
Symbols are identified by their ticker symbol on the
Exchange’s Schedule of Fees.
4 A Customer (Professional) is a person who is not
a broker/dealer and is not a Priority Customer.
5 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, as amended (‘‘Exchange Act’’), registered
in the same options class on another options
exchange.
6 The term ‘‘Market Makers’’ refers to
‘‘Competitive Market Makers’’ and ‘‘Primary Market
Makers’’ collectively. See ISE Rule 100(a)(25).
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(‘‘PFOF’’) fee of $0.25 per contract when
trading against Priority Customers.7
Priority Customer orders are not charged
for trading in the Special Non-Select
Penny Pilot Symbols. The Exchange also
currently charges the fees noted above
for responses to special orders in the
Special Non-Select Penny Pilot
Symbols. The Exchange also currently
charges the fees noted above for crossing
orders, i.e., orders executed in the
Exchange’s Facilitation Mechanism,8
Solicited Order Mechanism,9 Block
Order Mechanism and Price
Improvement Mechanism,10 and for
Qualified Contingent Cross orders, in
the Special Non-Select Penny Pilot
Symbols, except for Non-ISE Market
Maker orders, for which the Exchange
currently charges $0.20 per contract.
The Exchange currently assesses per
contract transaction fees and provides
rebates to market participants that add
or remove liquidity from the Exchange
(‘‘maker/taker fees and rebates’’) in a
number of options classes (the ‘‘Select
Symbols’’).11 The Exchange’s maker/
taker fees and rebates are applicable to
regular and complex orders executed in
the Select Symbols. The Exchange also
currently assesses maker/taker fees and
rebates for complex orders in symbols
that are in the Penny Pilot program but
are not a Select Symbol (‘‘Non-Select
Penny Pilot Symbols’’) 12 and for
complex orders in all symbols that are
not in the Penny Pilot Program (‘‘NonPenny Pilot Symbols’’).13 As noted
above, maker/taker fees and rebates
applicable on the above symbols are
assessed on the following order-type
categories: ISE Market Maker, Market
7 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).
8 See Exchange Act Release No. 61869 (April 7,
2010), 75 FR 19449 (April 14, 2010) (SR–ISE–2010–
25).
9 See Exchange Act Release No. 63283 (November
9, 2010), 75 FR 70059 (November 16, 2010) (SR–
ISE–2010–106).
10 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).
11 Options classes subject to maker/taker fees are
identified by their ticker symbol on the Exchange’s
Schedule of Fees.
12 See Exchange Act Release No. 65724
(November 10, 2011), 76 FR 71413 (November 17,
2011) (SR–ISE–2011–72).
13 See Exchange Act Release Nos. 66084 (January
3, 2012), 77 FR 1103 (January 9, 2012) (SR–ISE–
2011–84); 66392 (February 14, 2012), 77 FR 10016
(February 21, 2012) (SR–ISE–2012–06); and 66961
(May 10, 2012), 77 FR 28914 (May 16, 2012) (SR–
ISE–2012–38).
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Maker Plus,14 Firm Proprietary,
Customer (Professional), Non-ISE
Market Maker, and Priority Customer.
The Exchange now proposes to adopt
maker/taker fees and rebates to regular
orders in the Special Non-Select Penny
Pilot Symbols. Specifically, the
Exchange proposes to adopt the
following fees and rebates for orders
that trade against Non-Priority Customer
orders:
• For Market Maker orders, a maker
fee of $0.35 per contract and a taker fee
of $0.20 per contract;
• For Non-ISE Market Maker orders, a
maker fee of $0.40 per contract and a
taker fee of $0.35 per contract;
• For Firm Proprietary and Customer
(Professional) orders, a maker fee of
$0.35 per contract and a taker fee of
$0.25 per contract;
• For Priority Customer orders, a
maker rebate of $0.25 per contract and
a taker rebate of $0.32 per contract.
Additionally, the Exchange proposes
to adopt the following fees and rebates
for orders that trade against Priority
Customer orders:
• For Market Maker orders, a maker
fee of $0.35 per contract and a taker fee
of $0.30 per contract;
• For Non-ISE Market Maker orders, a
maker and taker fee of $0.40 per
contract;
• For Firm Proprietary and Customer
(Professional) orders, a maker fee of
$0.35 per contract and a taker fee of
$0.30 per contract;
• For Priority Customer orders, a
maker rebate of $0.25 per contract and
a taker fee of $0.00 per contract.
14 A Market Maker Plus is an ISE Market Maker
who is on the National Best Bid or National Best
Offer 80% of the time for series trading between
$0.03 and $5.00 (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
$5.00 (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 and 80% of the time for series
trading between $0.03 and $5.00 (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 $5.00 (for options whose underlying
stock’s previous trading day’s last sale price was
greater than $100) in premium across all expiration
months in order to receive the rebate. The Exchange
determines whether a Market Maker qualifies as a
Market Maker Plus at the end of each month by
looking back at each Market Maker’s quoting
statistics during that month. A Market Maker’s
single best and single worst overall quoting days
each month, on a per symbol basis, are excluded
in calculating whether a Market Maker qualifies for
this rebate, if doing so qualifies a Market Maker for
the rebate. If at the end of the month, a Market
Maker meets the Exchange’s stated criteria, the
Exchange rebates $0.10 per contract for transactions
executed by that Market Maker during that month.
The Exchange provides Market Makers a report on
a daily basis with quoting statistics so that Market
Makers can determine whether or not they are
meeting the Exchange’s stated criteria.
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For crossing regular orders in the
Special Non-Select Penny Pilot
Symbols, the Exchange proposes to
continue charging a fee of $0.20 per
contract. The Exchange currently does
not charge Priority Customers for
crossing orders executed in the Special
Non-Select Penny Pilot Symbols and
proposes to continue not charging
Priority Customers for crossing orders
executed in the Special Non-Select
Penny Pilot Symbols.
For responses to special orders in the
Special Non-Select Penny Pilot
Symbols,15 the Exchange proposes to
adopt a fee of $0.40 per contract for
Market Maker, Non-ISE Market Maker,
Firm Proprietary and Customer
(Professional) and Priority Customer
orders.
The Exchange currently provides ISE
Market Makers with a two cent discount
when trading against Priority Customer
orders that are preferenced to them in
the complex order book.16 The
Exchange proposes to extend this
discount for preferenced regular orders
in the Special Non-Select Penny Pilot
Symbols. Accordingly, ISE Market
Makers who take liquidity when trading
against Priority Customer orders that are
preferenced to them in the Special NonSelect Penny Pilot Symbols will be
charged $0.28 per contract and ISE
Market Makers who make liquidity
when trading against Priority Customer
orders that are preferenced to them in
the Special Non-Select Penny Pilot
Symbols will be charged $0.33 per
contract.
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 and Solicited
Order Mechanism, except when they
trade against pre-existing orders and
quotes, and to those contracts that do
not trade with the contra order in the
Price Improvement Mechanism. For the
Facilitation and Solicited Order
Mechanisms, the rebate is currently
$0.15 per contract. For the Price
Improvement Mechanism, the rebate is
currently $0.25 per contract. The
15 A response to a special order is any contra-side
interest submitted after the commencement of an
auction in the Exchange’s Facilitation Mechanism,
Solicited Order Mechanism, Block Order
Mechanism and Price Improvement Mechanism.
This fee applies to Market Maker, Non-ISE Market
Maker, Firm Proprietary and Customer
(Professional) interest.
16 Pursuant to SR–ISE–2011–81, the Exchange
provides this fee discount when ISE Market Makers
add or remove liquidity. See Exchange Act Release
No. 65958 (December 15, 2011) 76 FR 79236
(December 21, 2011) (SR–ISE–2011–81).
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Exchange proposes to extend this rebate
incentive for regular orders in the
Special Non-Select Penny Pilot Symbols
by adopting a per contract rebate at the
current levels to those contracts in the
Special Non-Select Penny Pilot Symbols
that do not trade with the contra order
in the Exchange’s Facilitation
Mechanism and Solicited Order
Mechanism except when they trade
against pre-existing orders and quotes
and in the Price Improvement
Mechanism.
Currently, Primary Market Makers
(PMMs) are required to provide away
market price protection for marketable
public customer orders when the ISE
market is not at the NBBO in accordance
with their obligations under ISE rules
and the Intermarket Linkage Plan.17
Accordingly, when PMMs are
performing this intermarket price
protection function, the Exchange
currently charges PMMs a fee ranging
from $0.01 per contract to $0.18 per
contract for PMM trade reports. Since
the PMM is performing its linkage
obligations when it executes (i.e., ‘‘trade
reports’’) such public customer orders, it
is neither a taker nor maker of liquidity
as those terms are used within the
framework of the ISE’s maker/taker
pricing model. Accordingly, the
Exchange proposes to not charge any
fees or provide any rebates for PMM
trade reports for executions in the
Special Non-Select Penny Pilot
Symbols. The Exchange currently does
not charge a trade report fee to PMMs
in symbols that are subject to maker/
taker fees and rebates.
With the proposed migration of
regular orders in the Special Non-Select
Penny Pilot Symbols to maker/taker and
rebate pricing, the Exchange proposes to
no longer charge a PFOF fee in the
Special Non-Select Penny Pilot
Symbols. The cancellation fee, however,
which only applies to Priority Customer
orders, will continue to apply.
As the Exchange is proposing to adopt
a new table for this proposed fee
change, the Exchange notes that:
• Fees for regular orders in the
Special Non-Select Penny Pilot Symbols
executed in the Exchange’s Facilitation,
Solicited Order, Price Improvement and
Block Order Mechanisms are for
contracts that are part of the originating
or contra order.
17 The Intermarket Linkage Plan prohibits an
exchange from allowing the automatic execution of
public customer orders at a price that is inferior to
the best prices being publically displayed by
another exchange. Under ISE Rule 803(c)(2), it is
the responsibility of the PMM to either execute an
order at a price that matches or betters the NBBO,
or obtain such better prices on behalf of the public
customer.
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• As noted above, PFOF fees will not
be collected in the Special Non-Select
Penny Pilot Symbols.
• As noted above, the cancellation
fee, which only applies to Priority
Customer orders, will continue to apply
to the Special Non-Select Penny Pilot
Symbols.
• The Exchange currently has a fee
cap, with certain exclusions, applicable
to crossing transactions executed in a
member’s proprietary account. The cap
also applies to transactions for the
account of entities affiliated with a
member. The Exchange also has a
service fee applicable to all QCC and
non-QCC transactions that are eligible
for the fee cap.18 This fee cap will
continue to apply to executions of
regular orders in the Special Non-Select
Penny Pilot Symbols.
• The Exchange currently has tiered
rebates to encourage members to submit
greater numbers of QCC orders and
Solicitation orders to the Exchange.
Once a member reaches a certain
volume threshold in QCC orders and/or
Solicitation orders during a month, the
Exchange provides a rebate to that
member for all of its QCC and
Solicitation traded contracts for that
month.19 These tiered rebates will
continue to apply to contracts traded in
the Special Non-Select Penny Pilot
Symbols.
• The Exchange currently has a $0.20
per contract fee for Market Maker orders
sent to the Exchange by EAMs in the
Special Non-Select Penny Pilot
Symbols.20 Market Maker orders in the
Special Non-Select Penny Pilot Symbols
sent to the Exchange by Electronic
Access Members will be assessed a fee
of $0.35 per contract for making
liquidity when trading against NonPriority Customer and Priority Customer
interest, $0.20 per contract for taking
liquidity when trading against NonPriority Customer interest, $0.30 per
contract for taking liquidity when
trading against Priority Customer orders,
$0.20 per contract for crossing orders
18 See Securities Exchange Act Release Nos.
64270 (April 8, 2011), 76 FR 20754 (April 13, 2011)
(SR–ISE–2011–13); and 66793 (April 12, 2012), 77
FR 23313 (April 18, 2012) (SR–ISE–2012–27).
19 See Securities Exchange Act Release Nos.
65087 (August 10, 2011), 76 FR 50783 (August 16,
2011) (SR–ISE–2011–47); 65583 (October 18, 2011),
76 FR 65555 (October 21, 2011) (SR–ISE–2011–68);
65705 (November 8, 2011), 76 FR 70789 (November
15, 2011) (SR–ISE–2011–70); 65898 (December 6,
2011), 76 FR 77279 (December 12, 2011) (SR–ISE–
2011–78); 66169 (January 17, 2012), 77 FR 3295
(January 23, 2012) (SR–ISE–2012–01); and 66790
(April 12, 2012), 77 FR 23312 (April 18, 2012) (SR–
ISE–2012–25).
20 See Securities Exchange Act Release No. 60817
(October 13, 2009), 74 FR 54111 (October 21, 2009).
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and $0.40 per contract for responses to
special orders.
• The Exchange currently provides a
$0.20 per contract fee credit for
executions in the Special Non-Select
Penny Pilot Symbols resulting from
responses to Customer (Professional)
orders that are ‘‘flashed’’ by the
Exchange to its Members. This fee credit
shall continue to apply.
• The Exchange currently provides a
$0.20 per contract fee credit to Primary
Market Makers (PMM) for execution of
Priority Customer orders—for classes in
which it serves as a PMM—that send an
Intermarket Sweep Order to other
exchanges. This fee credit shall
continue to apply.
• The Exchange currently has a $0.45
per contract fee for execution of
Customer (Professional) orders in the
Special Non-Select Penny Pilot Symbols
that are routed to one or more exchanges
in connection with the Options Order
Protection and Locked/Crossed Market
Plan. This fee shall continue to apply.
• The Exchange currently provides
PMMs a fee credit equal to the fee
charged by a destination market, but not
more than $0.45 per contract for
executing Professional (Customer)
orders in the Special Non-Select Penny
Pilot Symbols. This fee credit shall
continue to apply.
With this proposed rule change, all
non-customer orders will be assessed
similar fees, thus eliminating the gap
that currently exists, largely due to
PFOF fees, between Market Makers and
non-Market Makers when trading today.
The proposed fees are consistent with
the fees and rates of payment for order
flow commonly applied to symbols that
are part of the Penny Pilot program. The
Exchange’s maker/taker fees and rebates
for complex orders have proven to be an
effective method of attracting order flow
to the Exchange. The Exchange believes
that extending its maker/taker fees and
rebates to regular orders in the Special
Non-Select Penny Pilot Symbols will
strengthen its market share in these
products. The Exchange believes this
proposed rule change will also serve to
enhance its competitive position and
enable it to attract additional volume in
these symbols.
2. Statutory Basis
The Exchange believes that its
proposal to amend its Schedule of Fees
is consistent with Section 6(b) of the
Exchange Act 21 in general, and furthers
the objectives of Section 6(b)(4) of the
Exchange Act 22 in particular, in that it
is an equitable allocation of reasonable
21 15
22 15
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U.S.C. 78f(b).
U.S.C. 78f(b)(4).
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Federal Register / Vol. 77, No. 119 / Wednesday, June 20, 2012 / Notices
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
the Special Non-Select Penny Pilot
Symbols.
The Exchange believes it is reasonable
and equitable to charge a maker fee of
$0.35 per contract for regular Market
Maker, Firm Proprietary and Customer
(Professional) orders that trade against
Priority Customer and Non-Priority
Customer interest in the Special NonSelect Penny Pilot Symbols and $0.40
per contract for regular Non-ISE Market
Maker orders that trade against Priority
Customer and Non-Priority Customer
interest in the Special Non-Select Penny
Pilot Symbols. The Exchange notes the
proposed fees are comparable to fees
currently in place at other exchange for
Penny Pilot Symbols.23
The Exchange believes it is reasonable
and equitable to charge a taker fee of
$0.20 per contract for regular Market
Maker orders, $0.25 per contract for
regular Firm Proprietary and Customer
(Professional) orders, and $0.35 per
contract for regular Non-ISE Market
Maker orders in the Special Non-Select
Penny Pilot Symbols that trade against
Non-Priority Customer interest. The
Exchange also believes it is reasonable
and equitable to charge a taker fee of
$0.30 per contract for regular Market
Maker, Firm Proprietary and Customer
(Professional) orders and $0.40 per
contract for regular Non-ISE Market
Maker orders in the Special Non-Select
Penny Pilot Symbols that trade against
Priority Customer interest. Again, the
Exchange notes the proposed fees are
comparable to fees currently in place at
other exchanges.24
The Exchange further notes that the
proposed $0.35 per contract maker fee
for Market Maker, Firm Proprietary and
Customer (Professional) orders in the
Special Non-Select Penny Pilot Symbols
remains lower than that charged by the
Boston Options Exchange (‘‘BOX’’). For
a similar order, BOX charges both a
transaction fee, which ranges anywhere
from $0.20 per contract to $0.40 per
contract, and a fee of $0.22 per contract
for adding liquidity in these classes, for
an ‘all-in’ rate of as high as $0.62 per
contract.25
23 See NASDAQ OMX PHLX LLC Pricing
Schedule at https://nasdaqomxtrader.com/content/
marketregulation/membership/phlx/feesched.pdf.
24 Id.
25 See BOX Fee Schedule.
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The Exchange believes it is reasonable
and equitable to charge ISE Market
Maker, Non-ISE Market Maker, Firm
Proprietary and Customer (Professional)
orders a fee of $0.40 per contract when
such members are responding to special
orders in the Special Non-Select Penny
Pilot Symbols because these fees are
identical to the fees the Exchange
currently charges for responses to
special orders in the Select Symbols.26
In particular, the Exchange believes
the proposed fees are reasonable and
equitably allocated because they are
within the range of fees assessed by
other exchanges employing similar
pricing schemes. In addition, the
Exchange believes that charging NonISE Market Maker orders a higher rate
than the fee charged to ISE Market
Maker, Firm Proprietary and Customer
(Professional) orders is appropriate and
not unfairly discriminatory because
Non-ISE Market Makers are not subject
to many of the non-transaction based
fees that these other categories of
membership are subject to, e.g.,
membership fees, access fees, API/
Session fees, market data fees, etc.
Therefore, it is appropriate and not
unfairly discriminatory to assess a
higher transaction fee on Non-ISE
Market Makers because the Exchange
incurs costs associated with these types
of orders that are not recovered by nontransaction based fees paid by members.
The Exchange further believes it is
reasonable and equitable for the
Exchange to charge a fee of $0.20 per
contract for regular orders in the Special
Non-Select Penny Pilot Symbols
executed in the Exchange’s various
auctions and for Qualified Contingent
Cross orders because these fees are
identical to the fees the Exchange
currently charges for similar orders in
the symbols that are subject to the
Exchange’s maker/taker fees.
The Exchange believes that it is
reasonable and equitable to provide
rebates for regular Priority Customer
orders in the Special Non-Select Penny
Pilot Symbols because paying a rebate
would attract additional order flow to
the Exchange and create additional
liquidity in these symbols, which the
Exchange believes ultimately will
benefit all market participants who
trade on ISE. The Exchange already has
a number of similar rebate programs in
place. The Exchange believes that the
proposed rebates are competitive with
rebates provided by other exchanges
and are therefore reasonable and
26 See ISE Schedule of Fees, Rebates and Fees for
Adding and Removing Liquidity in Select Symbols
and Complex Order Maker/Taker fees for symbols
that are in the Penny Pilot Program, footnote 8.
PO 00000
Frm 00104
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37085
equitably allocated to those members
that direct orders to the Exchange rather
than to a competing exchange.
The Exchange believes it is reasonable
and equitable to provide a two cent
discount to ISE Market Makers on
preferenced orders as an incentive for
them to quote more aggressively in the
Special Non-Select Penny Pilot Symbols
and thereby create more trading
opportunities on the Exchange. ISE
currently provides Market Makers a
similar two cent discount for
preferenced complex orders in the
Select Symbols, Non-Select Penny Pilot
Symbols and Non-Penny Pilot Symbols
and is now proposing to extend the
same discount for preferenced regular
orders in the Special Non-Select Penny
Pilot Symbols. ISE notes that with this
proposed fee change, the Exchange will
maintain the two cent differential that is
currently in place for preferenced
complex orders in the group of symbols
noted above.
The Exchange believes that adopting
maker/taker fees and rebates for regular
orders in the Special Non-Select Penny
Pilot Symbols will attract additional
business in these symbols to the
Exchange. The Exchange further
believes that the proposed fees are not
unfairly discriminatory because the fee
structure is consistent with fee
structures that exist today at other
options exchanges. Additionally, the
Exchange believes that the proposed
fees are fair, equitable and not unfairly
discriminatory because they are
consistent with price differentiation that
exists today at other option exchanges.
The Exchange believes it remains an
attractive venue for market participants
to trade 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. With this proposed fee
change, the Exchange believes it
remains an attractive venue for market
participants to trade at favorable prices.
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.
E:\FR\FM\20JNN1.SGM
20JNN1
37086
Federal Register / Vol. 77, No. 119 / Wednesday, June 20, 2012 / Notices
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.27 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.
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 Exchange
Act. Comments may be submitted by
any of the following methods:
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 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–
2012–49 and should be submitted on or
before July 11, 2012.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.28
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–15054 Filed 6–19–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
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 rulecomments@sec.gov. Please include File
Number SR–ISE–2012–49 on the subject
line.
[Release No. 34–67203; File No. SR–
NASDAQ–2012–066]
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–2012–49. 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
June 14, 2012.
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing of Proposed Rule Change To
Adopt a New Market Maker Peg Order
Available to Exchange Market Makers
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b-4 thereunder,2
notice is hereby given that on June 6,
2012, the NASDAQ Stock Market LLC
(‘‘NASDAQ’’ or the ‘‘Exchange’’) 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 Exchange.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
28 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
27 15
U.S.C. 78s(b)(3)(A)(ii).
VerDate Mar<15>2010
16:14 Jun 19, 2012
Jkt 226001
PO 00000
Frm 00105
Fmt 4703
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I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to adopt a
new Market Maker Peg Order to provide
similar functionality as the automated
functionality provided to market makers
under Rules 4613(a)(2)(F) and (G).
The text of the proposed rule change
is below. Proposed new language is in
italics; proposed deletions are in
brackets.
*
*
*
*
*
4751. Definitions
The following definitions apply to the
Rule 4600 and 4750 Series for the
trading of securities listed on Nasdaq or
a national securities exchange other
than Nasdaq.
(a)–(e) No change.
(f) The term ‘‘Order Type’’ shall mean
the unique processing prescribed for
designated orders that are eligible for
entry into the System, and shall include:
(1)–(14) No change.
(15) ‘‘Market Maker Peg Order’’ is a
limit order that, upon entry, the bid or
offer is automatically priced by the
System at the Designated Percentage
away from the then current National
Best Bid and National Best Offer, or if
no National Best Bid or National Best
Offer, at the Designated Percentage
away from the last reported sale from
the responsible single plan processor in
order to comply with the quotation
requirements for Market Makers set
forth in Rule 4613(a)(2). Upon reaching
the Defined Limit, the price of a Market
Maker Peg Order bid or offer will be
adjusted by the System to the
Designated Percentage away from the
then current National Best Bid and
National Best Offer, or, if no National
Best Bid or National Best Offer, to the
Designated Percentage away from the
last reported sale from the responsible
single plan processor. If a Market Maker
Peg Order bid or offer moves a specified
number of percentage points away from
the Designated Percentage towards the
then current National Best Bid or
National Best Offer, as described in Rule
4613(a)(2)(F) (Quotation Creation and
Adjustment), the price of such bid or
offer will be adjusted to the Designated
Percentage away from the then current
National Best Bid and National Best
Offer, or if no National Best Bid or
National Best Offer, to the Designated
Percentage away from the last reported
sale from the responsible single plan
processor. In the absence of a National
Best Bid or National Best Offer and if no
last reported sale, the order will be
cancelled or rejected. Market Maker Peg
Orders are not eligible for routing
pursuant to Rule 4758 and are always
E:\FR\FM\20JNN1.SGM
20JNN1
]]>Agencies
[Federal Register Volume 77, Number 119 (Wednesday, June 20, 2012)]
[Notices]
[Pages 37082-37086]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-15054]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67201; File No. SR-ISE-2012-49]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change To Amend Fees for Certain Regular Orders Executed on the
Exchange
June 14, 2012.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is
hereby given that on June 1, 2012, the International Securities
Exchange, LLC (the ``ISE'' or the ``Exchange'') 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.
---------------------------------------------------------------------------
\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 is proposing to amend fees for certain regular orders
executed on the Exchange. 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.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of these statements may be examined at
the places specified in Item IV below. The self-regulatory organization
has prepared summaries, set forth in sections A, B and C below, of the
most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this proposed rule change is to amend fees charged
by the Exchange for certain regular orders in 25 securities traded on
the Exchange (``Special Non-Select Penny Pilot Symbols'').\3\ For
trading in the Special Non-Select Penny Pilot Symbols, the Exchange
currently charges $0.20 per contract for Firm Proprietary orders and
Customer (Professional) \4\ orders, and $0.45 per contract for Non-ISE
Market Maker \5\ orders. ISE Market Maker orders \6\ in these symbols
are subject to a sliding scale, ranging from $0.01 per contract to
$0.18 per contract, depending on the amount of overall volume traded by
a Market Maker during a month. Market Makers also currently pay a
payment for order flow
[[Page 37083]]
(``PFOF'') fee of $0.25 per contract when trading against Priority
Customers.\7\ Priority Customer orders are not charged for trading in
the Special Non-Select Penny Pilot Symbols. The Exchange also currently
charges the fees noted above for responses to special orders in the
Special Non-Select Penny Pilot Symbols. The Exchange also currently
charges the fees noted above for crossing orders, i.e., orders executed
in the Exchange's Facilitation Mechanism,\8\ Solicited Order
Mechanism,\9\ Block Order Mechanism and Price Improvement
Mechanism,\10\ and for Qualified Contingent Cross orders, in the
Special Non-Select Penny Pilot Symbols, except for Non-ISE Market Maker
orders, for which the Exchange currently charges $0.20 per contract.
---------------------------------------------------------------------------
\3\ The Special Non-Select Penny Pilot Symbols are Peabody
Energy Corp. (``BTU''), Cliffs Natural Resources Inc. (``CLF''),
Salesforce.com Inc. (``CRM''), ChevronTexaco Corporation (``CVX''),
Deere & Company (``DE''), eBay Inc. (``EBAY''), FedEx Corp.
(``FDX''), Corning Incorporated (``GLW''), General Motors Co.
(``GM''), Green Mountain Coffee Roasters Inc. (``GMCR''), The
Goldman Sachs Group Inc. (``GS''), The Home Depot Inc. (``HD''),
Lululemon Athletica Inc. (``LULU''), Molycorp Inc. (``MCP''),
McMoRan Exploration Co. (``MMR''), Mosaic Company (``MOS''), Merck &
Co. Inc. (``MRK''), Sears Holding Corporation (``SHLD''), Sina Corp.
(``SINA''), Silver Wheaton Corp. (``SLW''), United Parcel Service
Inc. (``UPS''), U.S. Bancorp (``USB''), Wynn Resorts Limited
(``WYNN''), streetTracks Homebuilders Fund (``XHB'') and Technology
Select Sector SPDR Fund (``XLK''). The Special Non-Select Penny
Pilot Symbols are identified by their ticker symbol on the
Exchange's Schedule of Fees.
\4\ A Customer (Professional) is a person who is not a broker/
dealer and is not a Priority Customer.
\5\ 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, as amended (``Exchange Act''),
registered in the same options class on another options exchange.
\6\ The term ``Market Makers'' refers to ``Competitive Market
Makers'' and ``Primary Market Makers'' collectively. See ISE Rule
100(a)(25).
\7\ 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).
\8\ See Exchange Act Release No. 61869 (April 7, 2010), 75 FR
19449 (April 14, 2010) (SR-ISE-2010-25).
\9\ See Exchange Act Release No. 63283 (November 9, 2010), 75 FR
70059 (November 16, 2010) (SR-ISE-2010-106).
\10\ 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).
---------------------------------------------------------------------------
The Exchange currently assesses per contract transaction fees and
provides rebates to market participants that add or remove liquidity
from the Exchange (``maker/taker fees and rebates'') in a number of
options classes (the ``Select Symbols'').\11\ The Exchange's maker/
taker fees and rebates are applicable to regular and complex orders
executed in the Select Symbols. The Exchange also currently assesses
maker/taker fees and rebates for complex orders in symbols that are in
the Penny Pilot program but are not a Select Symbol (``Non-Select Penny
Pilot Symbols'') \12\ and for complex orders in all symbols that are
not in the Penny Pilot Program (``Non-Penny Pilot Symbols'').\13\ As
noted above, maker/taker fees and rebates applicable on the above
symbols are assessed on the following order-type categories: ISE Market
Maker, Market Maker Plus,\14\ Firm Proprietary, Customer
(Professional), Non-ISE Market Maker, and Priority Customer.
---------------------------------------------------------------------------
\11\ Options classes subject to maker/taker fees are identified
by their ticker symbol on the Exchange's Schedule of Fees.
\12\ See Exchange Act Release No. 65724 (November 10, 2011), 76
FR 71413 (November 17, 2011) (SR-ISE-2011-72).
\13\ See Exchange Act Release Nos. 66084 (January 3, 2012), 77
FR 1103 (January 9, 2012) (SR-ISE-2011-84); 66392 (February 14,
2012), 77 FR 10016 (February 21, 2012) (SR-ISE-2012-06); and 66961
(May 10, 2012), 77 FR 28914 (May 16, 2012) (SR-ISE-2012-38).
\14\ A Market Maker Plus is an ISE Market Maker who is on the
National Best Bid or National Best Offer 80% of the time for series
trading between $0.03 and $5.00 (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 $5.00 (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 and 80% of the time for series trading between $0.03 and
$5.00 (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 $5.00 (for options whose underlying stock's previous trading
day's last sale price was greater than $100) in premium across all
expiration months in order to receive the rebate. The Exchange
determines whether a Market Maker qualifies as a Market Maker Plus
at the end of each month by looking back at each Market Maker's
quoting statistics during that month. A Market Maker's single best
and single worst overall quoting days each month, on a per symbol
basis, are excluded in calculating whether a Market Maker qualifies
for this rebate, if doing so qualifies a Market Maker for the
rebate. If at the end of the month, a Market Maker meets the
Exchange's stated criteria, the Exchange rebates $0.10 per contract
for transactions executed by that Market Maker during that month.
The Exchange provides Market Makers a report on a daily basis with
quoting statistics so that Market Makers can determine whether or
not they are meeting the Exchange's stated criteria.
---------------------------------------------------------------------------
The Exchange now proposes to adopt maker/taker fees and rebates to
regular orders in the Special Non-Select Penny Pilot Symbols.
Specifically, the Exchange proposes to adopt the following fees and
rebates for orders that trade against Non-Priority Customer orders:
For Market Maker orders, a maker fee of $0.35 per contract
and a taker fee of $0.20 per contract;
For Non-ISE Market Maker orders, a maker fee of $0.40 per
contract and a taker fee of $0.35 per contract;
For Firm Proprietary and Customer (Professional) orders, a
maker fee of $0.35 per contract and a taker fee of $0.25 per contract;
For Priority Customer orders, a maker rebate of $0.25 per
contract and a taker rebate of $0.32 per contract.
Additionally, the Exchange proposes to adopt the following fees and
rebates for orders that trade against Priority Customer orders:
For Market Maker orders, a maker fee of $0.35 per contract
and a taker fee of $0.30 per contract;
For Non-ISE Market Maker orders, a maker and taker fee of
$0.40 per contract;
For Firm Proprietary and Customer (Professional) orders, a
maker fee of $0.35 per contract and a taker fee of $0.30 per contract;
For Priority Customer orders, a maker rebate of $0.25 per
contract and a taker fee of $0.00 per contract.
For crossing regular orders in the Special Non-Select Penny Pilot
Symbols, the Exchange proposes to continue charging a fee of $0.20 per
contract. The Exchange currently does not charge Priority Customers for
crossing orders executed in the Special Non-Select Penny Pilot Symbols
and proposes to continue not charging Priority Customers for crossing
orders executed in the Special Non-Select Penny Pilot Symbols.
For responses to special orders in the Special Non-Select Penny
Pilot Symbols,\15\ the Exchange proposes to adopt a fee of $0.40 per
contract for Market Maker, Non-ISE Market Maker, Firm Proprietary and
Customer (Professional) and Priority Customer orders.
---------------------------------------------------------------------------
\15\ A response to a special order is any contra-side interest
submitted after the commencement of an auction in the Exchange's
Facilitation Mechanism, Solicited Order Mechanism, Block Order
Mechanism and Price Improvement Mechanism. This fee applies to
Market Maker, Non-ISE Market Maker, Firm Proprietary and Customer
(Professional) interest.
---------------------------------------------------------------------------
The Exchange currently provides ISE Market Makers with a two cent
discount when trading against Priority Customer orders that are
preferenced to them in the complex order book.\16\ The Exchange
proposes to extend this discount for preferenced regular orders in the
Special Non-Select Penny Pilot Symbols. Accordingly, ISE Market Makers
who take liquidity when trading against Priority Customer orders that
are preferenced to them in the Special Non-Select Penny Pilot Symbols
will be charged $0.28 per contract and ISE Market Makers who make
liquidity when trading against Priority Customer orders that are
preferenced to them in the Special Non-Select Penny Pilot Symbols will
be charged $0.33 per contract.
---------------------------------------------------------------------------
\16\ Pursuant to SR-ISE-2011-81, the Exchange provides this fee
discount when ISE Market Makers add or remove liquidity. See
Exchange Act Release No. 65958 (December 15, 2011) 76 FR 79236
(December 21, 2011) (SR-ISE-2011-81).
---------------------------------------------------------------------------
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 and Solicited Order
Mechanism, except when they trade against pre-existing orders and
quotes, and to those contracts that do not trade with the contra order
in the Price Improvement Mechanism. For the Facilitation and Solicited
Order Mechanisms, the rebate is currently $0.15 per contract. For the
Price Improvement Mechanism, the rebate is currently $0.25 per
contract. The
[[Page 37084]]
Exchange proposes to extend this rebate incentive for regular orders in
the Special Non-Select Penny Pilot Symbols by adopting a per contract
rebate at the current levels to those contracts in the Special Non-
Select Penny Pilot Symbols that do not trade with the contra order in
the Exchange's Facilitation Mechanism and Solicited Order Mechanism
except when they trade against pre-existing orders and quotes and in
the Price Improvement Mechanism.
Currently, Primary Market Makers (PMMs) are required to provide
away market price protection for marketable public customer orders when
the ISE market is not at the NBBO in accordance with their obligations
under ISE rules and the Intermarket Linkage Plan.\17\ Accordingly, when
PMMs are performing this intermarket price protection function, the
Exchange currently charges PMMs a fee ranging from $0.01 per contract
to $0.18 per contract for PMM trade reports. Since the PMM is
performing its linkage obligations when it executes (i.e., ``trade
reports'') such public customer orders, it is neither a taker nor maker
of liquidity as those terms are used within the framework of the ISE's
maker/taker pricing model. Accordingly, the Exchange proposes to not
charge any fees or provide any rebates for PMM trade reports for
executions in the Special Non-Select Penny Pilot Symbols. The Exchange
currently does not charge a trade report fee to PMMs in symbols that
are subject to maker/taker fees and rebates.
---------------------------------------------------------------------------
\17\ The Intermarket Linkage Plan prohibits an exchange from
allowing the automatic execution of public customer orders at a
price that is inferior to the best prices being publically displayed
by another exchange. Under ISE Rule 803(c)(2), it is the
responsibility of the PMM to either execute an order at a price that
matches or betters the NBBO, or obtain such better prices on behalf
of the public customer.
---------------------------------------------------------------------------
With the proposed migration of regular orders in the Special Non-
Select Penny Pilot Symbols to maker/taker and rebate pricing, the
Exchange proposes to no longer charge a PFOF fee in the Special Non-
Select Penny Pilot Symbols. The cancellation fee, however, which only
applies to Priority Customer orders, will continue to apply.
As the Exchange is proposing to adopt a new table for this proposed
fee change, the Exchange notes that:
Fees for regular orders in the Special Non-Select Penny
Pilot Symbols executed in the Exchange's Facilitation, Solicited Order,
Price Improvement and Block Order Mechanisms are for contracts that are
part of the originating or contra order.
As noted above, PFOF fees will not be collected in the
Special Non-Select Penny Pilot Symbols.
As noted above, the cancellation fee, which only applies
to Priority Customer orders, will continue to apply to the Special Non-
Select Penny Pilot Symbols.
The Exchange currently has a fee cap, with certain
exclusions, applicable to crossing transactions executed in a member's
proprietary account. The cap also applies to transactions for the
account of entities affiliated with a member. The Exchange also has a
service fee applicable to all QCC and non-QCC transactions that are
eligible for the fee cap.\18\ This fee cap will continue to apply to
executions of regular orders in the Special Non-Select Penny Pilot
Symbols.
---------------------------------------------------------------------------
\18\ See Securities Exchange Act Release Nos. 64270 (April 8,
2011), 76 FR 20754 (April 13, 2011) (SR-ISE-2011-13); and 66793
(April 12, 2012), 77 FR 23313 (April 18, 2012) (SR-ISE-2012-27).
---------------------------------------------------------------------------
The Exchange currently has tiered rebates to encourage
members to submit greater numbers of QCC orders and Solicitation orders
to the Exchange. Once a member reaches a certain volume threshold in
QCC orders and/or Solicitation orders during a month, the Exchange
provides a rebate to that member for all of its QCC and Solicitation
traded contracts for that month.\19\ These tiered rebates will continue
to apply to contracts traded in the Special Non-Select Penny Pilot
Symbols.
---------------------------------------------------------------------------
\19\ See Securities Exchange Act Release Nos. 65087 (August 10,
2011), 76 FR 50783 (August 16, 2011) (SR-ISE-2011-47); 65583
(October 18, 2011), 76 FR 65555 (October 21, 2011) (SR-ISE-2011-68);
65705 (November 8, 2011), 76 FR 70789 (November 15, 2011) (SR-ISE-
2011-70); 65898 (December 6, 2011), 76 FR 77279 (December 12, 2011)
(SR-ISE-2011-78); 66169 (January 17, 2012), 77 FR 3295 (January 23,
2012) (SR-ISE-2012-01); and 66790 (April 12, 2012), 77 FR 23312
(April 18, 2012) (SR-ISE-2012-25).
---------------------------------------------------------------------------
The Exchange currently has a $0.20 per contract fee for
Market Maker orders sent to the Exchange by EAMs in the Special Non-
Select Penny Pilot Symbols.\20\ Market Maker orders in the Special Non-
Select Penny Pilot Symbols sent to the Exchange by Electronic Access
Members will be assessed a fee of $0.35 per contract for making
liquidity when trading against Non-Priority Customer and Priority
Customer interest, $0.20 per contract for taking liquidity when trading
against Non-Priority Customer interest, $0.30 per contract for taking
liquidity when trading against Priority Customer orders, $0.20 per
contract for crossing orders and $0.40 per contract for responses to
special orders.
---------------------------------------------------------------------------
\20\ See Securities Exchange Act Release No. 60817 (October 13,
2009), 74 FR 54111 (October 21, 2009).
---------------------------------------------------------------------------
The Exchange currently provides a $0.20 per contract fee
credit for executions in the Special Non-Select Penny Pilot Symbols
resulting from responses to Customer (Professional) orders that are
``flashed'' by the Exchange to its Members. This fee credit shall
continue to apply.
The Exchange currently provides a $0.20 per contract fee
credit to Primary Market Makers (PMM) for execution of Priority
Customer orders--for classes in which it serves as a PMM--that send an
Intermarket Sweep Order to other exchanges. This fee credit shall
continue to apply.
The Exchange currently has a $0.45 per contract fee for
execution of Customer (Professional) orders in the Special Non-Select
Penny Pilot Symbols that are routed to one or more exchanges in
connection with the Options Order Protection and Locked/Crossed Market
Plan. This fee shall continue to apply.
The Exchange currently provides PMMs a fee credit equal to
the fee charged by a destination market, but not more than $0.45 per
contract for executing Professional (Customer) orders in the Special
Non-Select Penny Pilot Symbols. This fee credit shall continue to
apply.
With this proposed rule change, all non-customer orders will be
assessed similar fees, thus eliminating the gap that currently exists,
largely due to PFOF fees, between Market Makers and non-Market Makers
when trading today. The proposed fees are consistent with the fees and
rates of payment for order flow commonly applied to symbols that are
part of the Penny Pilot program. The Exchange's maker/taker fees and
rebates for complex orders have proven to be an effective method of
attracting order flow to the Exchange. The Exchange believes that
extending its maker/taker fees and rebates to regular orders in the
Special Non-Select Penny Pilot Symbols will strengthen its market share
in these products. The Exchange believes this proposed rule change will
also serve to enhance its competitive position and enable it to attract
additional volume in these symbols.
2. Statutory Basis
The Exchange believes that its proposal to amend its Schedule of
Fees is consistent with Section 6(b) of the Exchange Act \21\ in
general, and furthers the objectives of Section 6(b)(4) of the Exchange
Act \22\ in particular, in that it is an equitable allocation of
reasonable
[[Page 37085]]
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 the Special Non-Select Penny Pilot Symbols.
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\21\ 15 U.S.C. 78f(b).
\22\ 15 U.S.C. 78f(b)(4).
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The Exchange believes it is reasonable and equitable to charge a
maker fee of $0.35 per contract for regular Market Maker, Firm
Proprietary and Customer (Professional) orders that trade against
Priority Customer and Non-Priority Customer interest in the Special
Non-Select Penny Pilot Symbols and $0.40 per contract for regular Non-
ISE Market Maker orders that trade against Priority Customer and Non-
Priority Customer interest in the Special Non-Select Penny Pilot
Symbols. The Exchange notes the proposed fees are comparable to fees
currently in place at other exchange for Penny Pilot Symbols.\23\
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\23\ See NASDAQ OMX PHLX LLC Pricing Schedule at https://nasdaqomxtrader.com/content/marketregulation/membership/phlx/feesched.pdf.
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The Exchange believes it is reasonable and equitable to charge a
taker fee of $0.20 per contract for regular Market Maker orders, $0.25
per contract for regular Firm Proprietary and Customer (Professional)
orders, and $0.35 per contract for regular Non-ISE Market Maker orders
in the Special Non-Select Penny Pilot Symbols that trade against Non-
Priority Customer interest. The Exchange also believes it is reasonable
and equitable to charge a taker fee of $0.30 per contract for regular
Market Maker, Firm Proprietary and Customer (Professional) orders and
$0.40 per contract for regular Non-ISE Market Maker orders in the
Special Non-Select Penny Pilot Symbols that trade against Priority
Customer interest. Again, the Exchange notes the proposed fees are
comparable to fees currently in place at other exchanges.\24\
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\24\ Id.
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The Exchange further notes that the proposed $0.35 per contract
maker fee for Market Maker, Firm Proprietary and Customer
(Professional) orders in the Special Non-Select Penny Pilot Symbols
remains lower than that charged by the Boston Options Exchange
(``BOX''). For a similar order, BOX charges both a transaction fee,
which ranges anywhere from $0.20 per contract to $0.40 per contract,
and a fee of $0.22 per contract for adding liquidity in these classes,
for an `all-in' rate of as high as $0.62 per contract.\25\
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\25\ See BOX Fee Schedule.
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The Exchange believes it is reasonable and equitable to charge ISE
Market Maker, Non-ISE Market Maker, Firm Proprietary and Customer
(Professional) orders a fee of $0.40 per contract when such members are
responding to special orders in the Special Non-Select Penny Pilot
Symbols because these fees are identical to the fees the Exchange
currently charges for responses to special orders in the Select
Symbols.\26\
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\26\ See ISE Schedule of Fees, Rebates and Fees for Adding and
Removing Liquidity in Select Symbols and Complex Order Maker/Taker
fees for symbols that are in the Penny Pilot Program, footnote 8.
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In particular, the Exchange believes the proposed fees are
reasonable and equitably allocated because they are within the range of
fees assessed by other exchanges employing similar pricing schemes. In
addition, the Exchange believes that charging Non-ISE Market Maker
orders a higher rate than the fee charged to ISE Market Maker, Firm
Proprietary and Customer (Professional) orders is appropriate and not
unfairly discriminatory because Non-ISE Market Makers are not subject
to many of the non-transaction based fees that these other categories
of membership are subject to, e.g., membership fees, access fees, API/
Session fees, market data fees, etc. Therefore, it is appropriate and
not unfairly discriminatory to assess a higher transaction fee on Non-
ISE Market Makers because the Exchange incurs costs associated with
these types of orders that are not recovered by non-transaction based
fees paid by members.
The Exchange further believes it is reasonable and equitable for
the Exchange to charge a fee of $0.20 per contract for regular orders
in the Special Non-Select Penny Pilot Symbols executed in the
Exchange's various auctions and for Qualified Contingent Cross orders
because these fees are identical to the fees the Exchange currently
charges for similar orders in the symbols that are subject to the
Exchange's maker/taker fees.
The Exchange believes that it is reasonable and equitable to
provide rebates for regular Priority Customer orders in the Special
Non-Select Penny Pilot Symbols because paying a rebate would attract
additional order flow to the Exchange and create additional liquidity
in these symbols, which the Exchange believes ultimately will benefit
all market participants who trade on ISE. The Exchange already has a
number of similar rebate programs in place. The Exchange believes that
the proposed rebates are competitive with rebates provided by other
exchanges and are therefore reasonable and equitably allocated to those
members that direct orders to the Exchange rather than to a competing
exchange.
The Exchange believes it is reasonable and equitable to provide a
two cent discount to ISE Market Makers on preferenced orders as an
incentive for them to quote more aggressively in the Special Non-Select
Penny Pilot Symbols and thereby create more trading opportunities on
the Exchange. ISE currently provides Market Makers a similar two cent
discount for preferenced complex orders in the Select Symbols, Non-
Select Penny Pilot Symbols and Non-Penny Pilot Symbols and is now
proposing to extend the same discount for preferenced regular orders in
the Special Non-Select Penny Pilot Symbols. ISE notes that with this
proposed fee change, the Exchange will maintain the two cent
differential that is currently in place for preferenced complex orders
in the group of symbols noted above.
The Exchange believes that adopting maker/taker fees and rebates
for regular orders in the Special Non-Select Penny Pilot Symbols will
attract additional business in these symbols to the Exchange. The
Exchange further believes that the proposed fees are not unfairly
discriminatory because the fee structure is consistent with fee
structures that exist today at other options exchanges. Additionally,
the Exchange believes that the proposed fees are fair, equitable and
not unfairly discriminatory because they are consistent with price
differentiation that exists today at other option exchanges. The
Exchange believes it remains an attractive venue for market
participants to trade 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. With this proposed fee
change, the Exchange believes it remains an attractive venue for market
participants to trade at favorable prices.
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.
[[Page 37086]]
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.\27\ 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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\27\ 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 Exchange 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 Number SR-ISE-2012-49 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-2012-49. 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 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-2012-49 and should be
submitted on or before July 11, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\28\
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\28\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-15054 Filed 6-19-12; 8:45 am]
BILLING CODE 8011-01-P
