Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Fees for Certain Orders Executed on the Exchange, 42026-42029 [2012-17332]

Download as PDF 42026 Federal Register / Vol. 77, No. 137 / Tuesday, July 17, 2012 / Notices provide incentives to SLMMs that are reasonably related to an SLMM’s additional quoting and liquidity obligations in each security. The Exchange also believes that it is reasonable, equitable and not unfairly discriminatory to aggregate shares of an SLP-Prop and an SLMM of the same member organization for purposes of determining whether an SLP has added liquidity of an ADV of more than 10 million shares for all assigned SLP securities. Specifically, and as described in SR–NYSE–2012–10, if a member organization has more than one business unit, and the SLP-Prop business unit is walled off from the SLMM business unit, the member organization may engage in both an SLP-Prop and SLMM business from those different business units.15 Accordingly, because the 10 million share threshold applies to all of an SLP’s shares in the aggregate, the Exchange believes that the activity of an SLP-Prop and an SLMM of the same member organization should be aggregated.16 Furthermore, provided there is no coordinated trading between the SLP-Prop and SLMM business units, they may be assigned the same securities.17 In this regard, however, the Exchange believes that it is reasonable, equitable and not unfairly discriminatory to disaggregate shares of an SLP-Prop and an SLMM of the same member organization for purposes of determining whether an SLP has satisfied the 10% average or more quoting requirement pursuant to Rule 107B as well as the per-security percentage of added liquidity. The Exchange believes that this proposed disaggregation is consistent with the prohibition of an SLP-Prop coordinating its trading with an SLMM of the same member organization, and vice versa.18 The Exchange also believes that the removal of the text describing that there is no charge during CSII, CSIII and CSIV and putting the text describing CSI and 15 See supra note 4 at 35456. this would be consistent with the manner in which the Exchange aggregates the activity of an SLP-Prop and an SLMM of the same member organization for purposes of determining whether the 10 million share requirement of Rule 107B(a) has been satisfied. 17 See supra note 4 at 35456. See also Rule 107B(i)(2)(B), which provides that an SLP-Prop shall not also act as an SLMM in the same securities in which it is registered as an SLP-Prop and vice versa, provided, however, if a member organization maintains information barriers between an SLPProp unit and an SLMM unit, the SLP-Prop and SLMM units may be assigned the same securities. 18 Additionally, this would be consistent with the manner in which the Exchange disaggregates the activity of an SLP-Prop and an SLMM of the same member organization for purposes of determining whether the 10% requirement of Rule 107B(a) has been satisfied. tkelley on DSK3SPTVN1PROD with NOTICES 16 Additionally, VerDate Mar<15>2010 16:53 Jul 16, 2012 Jkt 226001 CSII under one heading is reasonable, equitable and not unfairly discriminatory because it would result in the removal of obsolete text from the Price List and add greater clarity regarding off-hours trading. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will 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 No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change is effective upon filing pursuant to Section 19(b)(3)(A) 19 of the Act and subparagraph (f)(2) of Rule 19b–4 20 thereunder, because it establishes a due, fee, or other charge imposed by the Exchange. 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. 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: All submissions should refer to File Number SR–NYSE–2012–22. 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 10:00 a.m. and 3:00 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–NYSE– 2012–22 and should be submitted on or before August 7, 2012. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.21 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2012–17333 Filed 7–16–12; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION 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–NYSE–2012–22 on the subject line. [Release No. 34–67404; File No. SR–ISE– 2012–62] Paper Comments • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. July 11, 2012. PO 00000 Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Fees for Certain Orders Executed on the Exchange 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 July 2, 21 17 19 15 U.S.C. 78s(b)(3)(A). 20 17 CFR 240.19b–4(f)(2). Frm 00060 Fmt 4703 Sfmt 4703 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 E:\FR\FM\17JYN1.SGM 17JYN1 Federal Register / Vol. 77, No. 137 / Tuesday, July 17, 2012 / Notices 2012, the International Securities Exchange, LLC (the ‘‘Exchange’’ or the ‘‘ISE’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, 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. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The ISE is proposing to amend transaction fees for certain 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 tkelley on DSK3SPTVN1PROD with NOTICES 1. Purpose The Exchange currently assesses a per contract transaction charge 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’’).3 For removing liquidity in the Select Symbols, the Exchange currently charges a ‘‘taker’’ fee of: (i) $0.28 per contract for Market Maker 4 and Market Maker Plus orders,5 and (ii) 3 Options classes subject to maker/taker fees and rebates are identified by their ticker symbol on the Exchange’s Schedule of Fees. 4 The term ‘‘Market Makers’’ refers to ‘‘Competitive Market Makers’’ and ‘‘Primary Market Makers’’ collectively. See ISE Rule 100(a)(25). 5 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 VerDate Mar<15>2010 16:53 Jul 16, 2012 Jkt 226001 $0.29 per contract for Firm Proprietary and Customer (Professional) 6 orders. The Exchange now proposes to increase the ‘‘taker’’ fee for Market Maker and Market Maker Plus orders in the Select Symbols from $0.28 per contract to $0.29 per contract, and for Firm Proprietary and Customer (Professional) orders in the Select Symbols from $0.29 per contract to $0.30 per contract. The Exchange is not proposing any change to the ‘‘taker’’ fee for Non-ISE Market Maker orders or Priority Customer 7 orders in the Select Symbols. Further, for complex orders in the Select Symbols (excluding SPY), the Exchange currently charges a ‘‘taker’’ fee of: (i) $0.34 per contract for Market Maker, Market Maker Plus, Firm Proprietary and Customer (Professional) orders. The Exchange now proposes to increase the complex order ‘‘taker’’ fee for Market Maker, Market Maker Plus, Firm Proprietary and Customer (Professional) orders in the Select Symbols (excluding SPY) from $0.34 per contract to $0.35 per contract. The Exchange is not proposing any change to the complex order ‘‘taker’’ fee for Non-ISE Market Maker orders or Priority Customer orders in the Select Symbols (excluding SPY). Additionally, the Exchange provides ISE Market Makers with a two cent discount when trading against Priority Customer orders that are preferenced to them. This discount is applicable when ISE Market Makers remove liquidity in the Select Symbols (excluding SPY) from the complex order book. ISE 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. 6 A Customer (Professional) is a person who is not a broker/dealer and is not a Priority Customer. 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). PO 00000 Frm 00061 Fmt 4703 Sfmt 4703 42027 Market Makers that remove liquidity in the Select Symbols (excluding SPY) from the complex order book by trading with Priority Customer orders that are preferenced to them will be charged $0.33 per contract. The Exchange currently provides volume-based tiered rebates for Priority Customer complex orders in the Select Symbols (excluding SPY) when these orders trade with non-Priority Customer orders in the complex order book. Specifically, the Exchange currently provides a rebate of $0.32 per contract, per leg, for Priority Customer complex orders when these orders trade with non-Priority Customer complex orders in the complex order book. Additionally, Members who achieve certain average daily volume (ADV) of Priority Customer complex order contracts across all symbols executed during a calendar month are provided a rebate of $0.33 per contract per leg in these symbols, if a Member achieves an ADV of 75,000 Priority Customer complex order contracts; $0.34 per contract per leg in these symbols, if a Member achieves an ADV of 125,000 Priority Customer complex order contracts; and $0.345 per contract per leg in these symbols, if a Member achieves an ADV of 250,000 Priority Customer complex order contracts. The highest rebate amount achieved by the Member for the current calendar month applies retroactively to all Priority Customer complex order contracts that trade with non-Priority Customer complex orders in the complex order book executed by the Member during such calendar month. The Exchange now proposes to increase the level of rebate for Members who achieve an ADV of 250,000 Priority Customer Complex contracts, from $0.345 per contract per leg to $0.35 per contract per leg. The Exchange also currently provides volume-based tiered rebates for Priority Customer complex orders in option symbol SPY when these orders trade with non-Priority Customer orders in the complex order book. Specifically, the Exchange currently provides a rebate of $0.33 per contract, per leg, for Priority Customer complex orders when these orders trade with non-Priority Customer complex orders in SPY in the complex order book. Additionally, Members who achieve certain ADV of Priority Customer complex order contracts in SPY during a calendar month are provided a rebate of $0.34 per contract per leg, if a Member achieves an ADV of 75,000 Priority Customer complex order contracts; $0.35 per contract per leg, if a Member achieves an ADV of 125,000 Priority Customer E:\FR\FM\17JYN1.SGM 17JYN1 tkelley on DSK3SPTVN1PROD with NOTICES 42028 Federal Register / Vol. 77, No. 137 / Tuesday, July 17, 2012 / Notices complex order contracts; and $0.355 per contract per leg, if a Member achieves an ADV of 250,000 Priority Customer complex order contracts. The highest rebate amount achieved by the Member for the current calendar month applies retroactively to all Priority Customer complex order contracts that trade with non-Priority Customer complex orders in the complex order book executed by the Member during such calendar month. The Exchange now proposes to increase the level of rebate for Members who achieve an ADV of 250,000 Priority Customer Complex contracts in SPY, from $0.355 per contract per leg to $0.36 per contract per leg. The Exchange has similar volumebased tiered rebates for Priority Customer complex orders in Non-Select Penny Pilot Symbols when these orders trade with non-Priority Customer orders in the complex order book. Specifically, the Exchange currently provides a rebate of $0.28 per contract, per leg, for Priority Customer complex orders when these orders trade with non-Priority Customer complex orders in the complex order book. Additionally, Members who achieve certain ADV of Priority Customer complex order contracts across all symbols executed during a calendar month are provided a rebate of $0.21 [sic] per contract per leg in these symbols, if a Member achieves an ADV of 75,000 Priority Customer complex order contracts; $0.32 per contract per leg in these symbols, if a Member achieves an ADV of 125,000 Priority Customer complex order contracts; and $0.325 per contract per leg in these symbols, if a Member achieves an ADV of 250,000 Priority Customer complex order contracts. Again, the highest rebate amount achieved by the Member for the current calendar month applies retroactively to all Priority Customer complex order contracts that trade with non-Priority Customer complex orders in the complex order book executed by the Member during such calendar month. In order to enhance the Exchange’s competitive position and to incentivize Members to increase the amount of Priority Customer complex orders in the Non-Select Penny Pilot Symbols that they send to the Exchange, the Exchange now proposes to increase the base amount of the rebate to $0.29 per contract. Additionally, the Exchange proposes to increase the amount of that rebate even further, on a month-bymonth and Member-by-Member basis, if such Member achieves an ADV of Priority Customer complex order contracts across all symbols executed during the calendar month, as follows: if the Member achieves an ADV of VerDate Mar<15>2010 16:53 Jul 16, 2012 Jkt 226001 75,000 Priority Customer complex order contracts, the rebate amount shall be $0.31 per contract per leg; if the Member achieves an ADV of 125,000 Priority Customer complex order contracts, the rebate amount shall be $0.33 per contract per leg; and if the Member achieves an ADV of 250,000 Priority Customer complex order contracts, the rebate amount shall be $0.34 per contract per leg. 2. Statutory Basis The Exchange believes that its proposal to amend its Schedule of Fees is consistent with Section 6(b) of the Securities and Exchange Act of 1934 (the ‘‘Act’’) 8 in general, and furthers the objectives of Section 6(b)(4) of the Act 9 in particular, in that it is an equitable allocation of reasonable dues, fees and other charges among Exchange members and other persons using its facilities. The impact of the proposal upon the net fees paid by a particular market participant will depend on a number of variables, most important of which will be its propensity to add or remove liquidity in options overlying the Select Symbols. The Exchange believes that its proposal to assess a $0.29 per contract ‘‘taker’’ fee for Market Maker and Market Maker Plus orders in the Select Symbols is reasonable and equitably allocated because the fee is within the range of fees assessed by other exchanges employing similar pricing schemes. For example, NASDAQ OMX PHLX, Inc. (‘‘PHLX’’) currently charges Specialists $0.33 per contract for removing liquidity in symbols that are subject to that exchange’s maker/taker fees.10 Further, the proposed increase will align this fee to the fee the Exchange currently charges to other market participants that employ a similar trading strategy. The Exchange also notes that with this proposed rule change, the fee charged to Market Maker and Market Maker Plus orders will remain lower than the fee currently charged by the Exchange to certain other market participants. The Exchange also believes that its proposal to assess a $0.30 per contract ‘‘taker’’ fee for Firm Proprietary and Customer (Professional) orders in the Select Symbols is reasonable and equitably allocated because the fee is also within the range of fees assessed by other exchanges employing similar pricing schemes. By comparison, the U.S.C. 78f(b). U.S.C. 78f(b)(4). 10 See PHLX Fee Schedule at https:// www.nasdaqtrader.com/content/marketregulation/ membership/phlx/feesched.pdf. PO 00000 8 15 9 15 Frm 00062 Fmt 4703 Sfmt 4703 proposed fees assessed to Firm Proprietary and Customer (Professional) orders are lower than the rates assessed by PHLX for similar orders. PHLX currently charges a ‘‘taker’’ fee of $0.45 for Firm and Broker-Dealer orders and $0.40 for Professional orders in its regular order book.11 The Exchange believes that the price differentiation between the various market participants is justified because Market Makers have obligations to the market that the other market participants do not. The Exchange believes that it is equitable to assess a higher fee to market participants that do not have the quoting requirements that Exchange Market Makers do. The Exchange believes that its proposal to assess a $0.35 per contract ‘‘taker’’ fee for Market Maker, Market Maker Plus, Firm Proprietary and Customer (Professional) orders in the Select Symbols (excluding SPY) is reasonable and equitably allocated because the fee is within the range of fees assessed by other exchanges employing similar pricing schemes and in some cases, is lower that the fees assessed by other exchanges. For example, PHLX currently charges $0.37 per contract for removing liquidity in complex orders for Specialist orders and $0.38 per contract for Firm and Professional orders.12 Therefore, while ISE is proposing a fee increase for Market Maker, Market Maker Plus, Firm Proprietary and Customer (Professional) orders, the resulting fee remains lower than the fee currently charged by PHLX for similar orders. The Exchange believes that it is reasonable and equitable to provide a two cent discount to Market Makers on preferenced orders as an incentive for them to quote in the complex order book. The Exchange notes that PHLX currently provides a similar discount. Accordingly, Market Makers who remove liquidity in the Select Symbols (excluding SPY) from the complex order book will be charged $0.33 per contract when trading with Priority Customer orders that are preferenced to them. ISE notes that with this proposed fee change, the Exchange will continue to maintain a two cent differential that was previously in place. The Exchange believes that it is reasonable and equitable to provide rebates for Priority Customer complex orders when these orders trade with Non-Priority Customer complex orders in the complex order book because paying a rebate would continue to attract additional order flow to the 11 Id. 12 Id. E:\FR\FM\17JYN1.SGM 17JYN1 Federal Register / Vol. 77, No. 137 / Tuesday, July 17, 2012 / Notices Exchange and create liquidity in the symbols that are subject to the rebate, which the Exchange believes ultimately will benefit all market participants who trade on ISE. The Exchange already provides these types of rebates, and is now merely proposing to increase those rebate amounts. 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 complex order pricing employed by the Exchange has proven to be an effective pricing mechanism and attractive to Exchange participants and their customers. The Exchange believes that this proposed rule change will continue to attract additional complex order business in the symbols that are subject of this proposed rule change. Moreover, the Exchange believes that the proposed fees are fair, equitable and not unfairly discriminatory because the proposed fees are consistent with price differentiation that exists today at other options exchanges. Additionally, the Exchange believes it remains an attractive venue for market participants to direct their order flow in the symbols that are subject to this proposed rule change as its fees are competitive with those charged by other exchanges for similar trading strategies. The Exchange operates in a highly competitive market in which market participants can readily direct order flow to another exchange if they deem fee levels at a particular exchange to be excessive. For the reasons noted above, the Exchange believes that the proposed fees are fair, equitable and not unfairly discriminatory. B. Self-Regulatory Organization’s Statement on Burden on Competition The proposed rule change does not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. tkelley on DSK3SPTVN1PROD with 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. VerDate Mar<15>2010 16:53 Jul 16, 2012 Jkt 226001 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.13 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 rulecomments@sec.gov. Please include File Number SR–ISE–2012–62 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–2012–62. 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 PO 00000 printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of 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– 2012–62 and should be submitted on or before August 7, 2012. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.14 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2012–17332 Filed 7–16–12; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–67403; File No. SR–ISE– 2012–64] Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Fees for Certain Complex Orders Executed on the Exchange July 11, 2012. 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 July 2, 2012, the International Securities Exchange, LLC (the ‘‘Exchange’’ or the ‘‘ISE’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, 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. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The ISE proposes to amend fees for certain complex orders executed on the Exchange. The text of the proposed rule change is available on the Exchange’s Web site (https://www.ise.com), at the principal office of the Exchange, and at 14 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 13 15 U.S.C. 78s(b)(3)(A)(ii). Frm 00063 Fmt 4703 Sfmt 4703 42029 E:\FR\FM\17JYN1.SGM 17JYN1

Agencies

[Federal Register Volume 77, Number 137 (Tuesday, July 17, 2012)]
[Notices]
[Pages 42026-42029]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-17332]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67404; File No. SR-ISE-2012-62]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change To Amend Fees for Certain Orders Executed on the Exchange

July 11, 2012.
    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 July 2,

[[Page 42027]]

2012, the International Securities Exchange, LLC (the ``Exchange'' or 
the ``ISE'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, 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.
---------------------------------------------------------------------------

    \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 transaction fees for certain 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 Exchange currently assesses a per contract transaction charge 
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'').\3\ For removing 
liquidity in the Select Symbols, the Exchange currently charges a 
``taker'' fee of: (i) $0.28 per contract for Market Maker \4\ and 
Market Maker Plus orders,\5\ and (ii) $0.29 per contract for Firm 
Proprietary and Customer (Professional) \6\ orders. The Exchange now 
proposes to increase the ``taker'' fee for Market Maker and Market 
Maker Plus orders in the Select Symbols from $0.28 per contract to 
$0.29 per contract, and for Firm Proprietary and Customer 
(Professional) orders in the Select Symbols from $0.29 per contract to 
$0.30 per contract. The Exchange is not proposing any change to the 
``taker'' fee for Non-ISE Market Maker orders or Priority Customer \7\ 
orders in the Select Symbols.
---------------------------------------------------------------------------

    \3\ Options classes subject to maker/taker fees and rebates are 
identified by their ticker symbol on the Exchange's Schedule of 
Fees.
    \4\ The term ``Market Makers'' refers to ``Competitive Market 
Makers'' and ``Primary Market Makers'' collectively. See ISE Rule 
100(a)(25).
    \5\ 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.
    \6\ A Customer (Professional) is a person who is not a broker/
dealer and is not a Priority Customer.
    \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).
---------------------------------------------------------------------------

    Further, for complex orders in the Select Symbols (excluding SPY), 
the Exchange currently charges a ``taker'' fee of: (i) $0.34 per 
contract for Market Maker, Market Maker Plus, Firm Proprietary and 
Customer (Professional) orders. The Exchange now proposes to increase 
the complex order ``taker'' fee for Market Maker, Market Maker Plus, 
Firm Proprietary and Customer (Professional) orders in the Select 
Symbols (excluding SPY) from $0.34 per contract to $0.35 per contract. 
The Exchange is not proposing any change to the complex order ``taker'' 
fee for Non-ISE Market Maker orders or Priority Customer orders in the 
Select Symbols (excluding SPY).
    Additionally, the Exchange provides ISE Market Makers with a two 
cent discount when trading against Priority Customer orders that are 
preferenced to them. This discount is applicable when ISE Market Makers 
remove liquidity in the Select Symbols (excluding SPY) from the complex 
order book. ISE Market Makers that remove liquidity in the Select 
Symbols (excluding SPY) from the complex order book by trading with 
Priority Customer orders that are preferenced to them will be charged 
$0.33 per contract.
    The Exchange currently provides volume-based tiered rebates for 
Priority Customer complex orders in the Select Symbols (excluding SPY) 
when these orders trade with non-Priority Customer orders in the 
complex order book. Specifically, the Exchange currently provides a 
rebate of $0.32 per contract, per leg, for Priority Customer complex 
orders when these orders trade with non-Priority Customer complex 
orders in the complex order book. Additionally, Members who achieve 
certain average daily volume (ADV) of Priority Customer complex order 
contracts across all symbols executed during a calendar month are 
provided a rebate of $0.33 per contract per leg in these symbols, if a 
Member achieves an ADV of 75,000 Priority Customer complex order 
contracts; $0.34 per contract per leg in these symbols, if a Member 
achieves an ADV of 125,000 Priority Customer complex order contracts; 
and $0.345 per contract per leg in these symbols, if a Member achieves 
an ADV of 250,000 Priority Customer complex order contracts. The 
highest rebate amount achieved by the Member for the current calendar 
month applies retroactively to all Priority Customer complex order 
contracts that trade with non-Priority Customer complex orders in the 
complex order book executed by the Member during such calendar month. 
The Exchange now proposes to increase the level of rebate for Members 
who achieve an ADV of 250,000 Priority Customer Complex contracts, from 
$0.345 per contract per leg to $0.35 per contract per leg.
    The Exchange also currently provides volume-based tiered rebates 
for Priority Customer complex orders in option symbol SPY when these 
orders trade with non-Priority Customer orders in the complex order 
book. Specifically, the Exchange currently provides a rebate of $0.33 
per contract, per leg, for Priority Customer complex orders when these 
orders trade with non-Priority Customer complex orders in SPY in the 
complex order book. Additionally, Members who achieve certain ADV of 
Priority Customer complex order contracts in SPY during a calendar 
month are provided a rebate of $0.34 per contract per leg, if a Member 
achieves an ADV of 75,000 Priority Customer complex order contracts; 
$0.35 per contract per leg, if a Member achieves an ADV of 125,000 
Priority Customer

[[Page 42028]]

complex order contracts; and $0.355 per contract per leg, if a Member 
achieves an ADV of 250,000 Priority Customer complex order contracts. 
The highest rebate amount achieved by the Member for the current 
calendar month applies retroactively to all Priority Customer complex 
order contracts that trade with non-Priority Customer complex orders in 
the complex order book executed by the Member during such calendar 
month. The Exchange now proposes to increase the level of rebate for 
Members who achieve an ADV of 250,000 Priority Customer Complex 
contracts in SPY, from $0.355 per contract per leg to $0.36 per 
contract per leg.
    The Exchange has similar volume-based tiered rebates for Priority 
Customer complex orders in Non-Select Penny Pilot Symbols when these 
orders trade with non-Priority Customer orders in the complex order 
book. Specifically, the Exchange currently provides a rebate of $0.28 
per contract, per leg, for Priority Customer complex orders when these 
orders trade with non-Priority Customer complex orders in the complex 
order book. Additionally, Members who achieve certain ADV of Priority 
Customer complex order contracts across all symbols executed during a 
calendar month are provided a rebate of $0.21 [sic] per contract per 
leg in these symbols, if a Member achieves an ADV of 75,000 Priority 
Customer complex order contracts; $0.32 per contract per leg in these 
symbols, if a Member achieves an ADV of 125,000 Priority Customer 
complex order contracts; and $0.325 per contract per leg in these 
symbols, if a Member achieves an ADV of 250,000 Priority Customer 
complex order contracts. Again, the highest rebate amount achieved by 
the Member for the current calendar month applies retroactively to all 
Priority Customer complex order contracts that trade with non-Priority 
Customer complex orders in the complex order book executed by the 
Member during such calendar month.
    In order to enhance the Exchange's competitive position and to 
incentivize Members to increase the amount of Priority Customer complex 
orders in the Non-Select Penny Pilot Symbols that they send to the 
Exchange, the Exchange now proposes to increase the base amount of the 
rebate to $0.29 per contract. Additionally, the Exchange proposes to 
increase the amount of that rebate even further, on a month-by-month 
and Member-by-Member basis, if such Member achieves an ADV of Priority 
Customer complex order contracts across all symbols executed during the 
calendar month, as follows: if the Member achieves an ADV of 75,000 
Priority Customer complex order contracts, the rebate amount shall be 
$0.31 per contract per leg; if the Member achieves an ADV of 125,000 
Priority Customer complex order contracts, the rebate amount shall be 
$0.33 per contract per leg; and if the Member achieves an ADV of 
250,000 Priority Customer complex order contracts, the rebate amount 
shall be $0.34 per contract per leg.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Schedule of 
Fees is consistent with Section 6(b) of the Securities and Exchange Act 
of 1934 (the ``Act'') \8\ in general, and furthers the objectives of 
Section 6(b)(4) of the Act \9\ in particular, in that it is an 
equitable allocation of reasonable dues, fees and other charges among 
Exchange members and other persons using its facilities. The impact of 
the proposal upon the net fees paid by a particular market participant 
will depend on a number of variables, most important of which will be 
its propensity to add or remove liquidity in options overlying the 
Select Symbols.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange believes that its proposal to assess a $0.29 per 
contract ``taker'' fee for Market Maker and Market Maker Plus orders in 
the Select Symbols is reasonable and equitably allocated because the 
fee is within the range of fees assessed by other exchanges employing 
similar pricing schemes. For example, NASDAQ OMX PHLX, Inc. (``PHLX'') 
currently charges Specialists $0.33 per contract for removing liquidity 
in symbols that are subject to that exchange's maker/taker fees.\10\ 
Further, the proposed increase will align this fee to the fee the 
Exchange currently charges to other market participants that employ a 
similar trading strategy. The Exchange also notes that with this 
proposed rule change, the fee charged to Market Maker and Market Maker 
Plus orders will remain lower than the fee currently charged by the 
Exchange to certain other market participants.
---------------------------------------------------------------------------

    \10\ See PHLX Fee Schedule at https://www.nasdaqtrader.com/content/marketregulation/membership/phlx/feesched.pdf.
---------------------------------------------------------------------------

    The Exchange also believes that its proposal to assess a $0.30 per 
contract ``taker'' fee for Firm Proprietary and Customer (Professional) 
orders in the Select Symbols is reasonable and equitably allocated 
because the fee is also within the range of fees assessed by other 
exchanges employing similar pricing schemes. By comparison, the 
proposed fees assessed to Firm Proprietary and Customer (Professional) 
orders are lower than the rates assessed by PHLX for similar orders. 
PHLX currently charges a ``taker'' fee of $0.45 for Firm and Broker-
Dealer orders and $0.40 for Professional orders in its regular order 
book.\11\
---------------------------------------------------------------------------

    \11\ Id.
---------------------------------------------------------------------------

    The Exchange believes that the price differentiation between the 
various market participants is justified because Market Makers have 
obligations to the market that the other market participants do not. 
The Exchange believes that it is equitable to assess a higher fee to 
market participants that do not have the quoting requirements that 
Exchange Market Makers do.
    The Exchange believes that its proposal to assess a $0.35 per 
contract ``taker'' fee for Market Maker, Market Maker Plus, Firm 
Proprietary and Customer (Professional) orders in the Select Symbols 
(excluding SPY) is reasonable and equitably allocated because the fee 
is within the range of fees assessed by other exchanges employing 
similar pricing schemes and in some cases, is lower that the fees 
assessed by other exchanges. For example, PHLX currently charges $0.37 
per contract for removing liquidity in complex orders for Specialist 
orders and $0.38 per contract for Firm and Professional orders.\12\ 
Therefore, while ISE is proposing a fee increase for Market Maker, 
Market Maker Plus, Firm Proprietary and Customer (Professional) orders, 
the resulting fee remains lower than the fee currently charged by PHLX 
for similar orders.
---------------------------------------------------------------------------

    \12\ Id.
---------------------------------------------------------------------------

    The Exchange believes that it is reasonable and equitable to 
provide a two cent discount to Market Makers on preferenced orders as 
an incentive for them to quote in the complex order book. The Exchange 
notes that PHLX currently provides a similar discount. Accordingly, 
Market Makers who remove liquidity in the Select Symbols (excluding 
SPY) from the complex order book will be charged $0.33 per contract 
when trading with Priority Customer orders that are preferenced to 
them. ISE notes that with this proposed fee change, the Exchange will 
continue to maintain a two cent differential that was previously in 
place.
    The Exchange believes that it is reasonable and equitable to 
provide rebates for Priority Customer complex orders when these orders 
trade with Non-Priority Customer complex orders in the complex order 
book because paying a rebate would continue to attract additional order 
flow to the

[[Page 42029]]

Exchange and create liquidity in the symbols that are subject to the 
rebate, which the Exchange believes ultimately will benefit all market 
participants who trade on ISE. The Exchange already provides these 
types of rebates, and is now merely proposing to increase those rebate 
amounts. 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 complex order pricing employed by the Exchange has proven to be 
an effective pricing mechanism and attractive to Exchange participants 
and their customers. The Exchange believes that this proposed rule 
change will continue to attract additional complex order business in 
the symbols that are subject of this proposed rule change.
    Moreover, the Exchange believes that the proposed fees are fair, 
equitable and not unfairly discriminatory because the proposed fees are 
consistent with price differentiation that exists today at other 
options exchanges. Additionally, the Exchange believes it remains an 
attractive venue for market participants to direct their order flow in 
the symbols that are subject to this proposed rule change as its fees 
are competitive with those charged by other exchanges for similar 
trading strategies. The Exchange operates in a highly competitive 
market in which market participants can readily direct order flow to 
another exchange if they deem fee levels at a particular exchange to be 
excessive. For the reasons noted above, the Exchange believes that the 
proposed fees are fair, equitable and not unfairly discriminatory.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The proposed rule change does not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any unsolicited written comments from members or other interested 
parties.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\13\ 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.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

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 Number SR-ISE-2012-62 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-2012-62. 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 
10:00 a.m. and 3:00 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-2012-62 and should be 
submitted on or before August 7, 2012.
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-17332 Filed 7-16-12; 8:45 am]
BILLING CODE 8011-01-P
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