Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Maker Fees for Certain Complex Orders Executed on the Exchange, 65034-65037 [2012-26146]

Download as PDF 65034 Federal Register / Vol. 77, No. 206 / Wednesday, October 24, 2012 / Notices Exchange to implement the proposed rule change as part of a planned implementation of similar rules on the Exchange’s affiliate exchanges. Accordingly, the Commission designates the proposal operative upon filing.22 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is 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. 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– NYSEMKT–2012–52 and should be submitted on or before November 14, 2012. IV. Solicitation of Comments For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.23 Kevin M. O’Neill, Deputy Secretary. Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: 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– NYSEMKT–2012–52 on the subject line. wreier-aviles on DSK5TPTVN1PROD with 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–NYSEMKT–2012–52. 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 22 For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule change’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). VerDate Mar<15>2010 14:21 Oct 23, 2012 Jkt 229001 [FR Doc. 2012–26144 Filed 10–23–12; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–68068; File No. SR–ISE– 2012–86] Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Maker Fees for Certain Complex Orders Executed on the Exchange October 18, 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 October 10, 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 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 maker fees for certain complex orders executed 23 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00085 Fmt 4703 Sfmt 4703 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 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 option classes (the ‘‘Select Symbols’’).3 The Exchange’s maker/ taker fees and rebates are applicable to regular and complex orders executed in the Select Symbols 4 and in the Special Non-Select Penny Pilot Symbols.5 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’’) 6 and for complex orders in all symbols that are not in the Penny Pilot Program (‘‘Non-Penny Pilot Symbols’’).7 The purpose of this 3 Options classes subject to maker/taker fees and rebates are identified by their ticker symbol on the Exchange’s Schedule of Fees. 4 These fees also apply to SPY. While the Exchange currently has a distinct taker fee for SPY, the maker fee for SPY is currently the same as the maker fee for all Select Symbols, as SPY is a Select Symbol. 5 See Exchange Act Release Nos. 67201 (June 14, 2012), 77 FR 37082 (June 20, 2012) (SR–ISE–2012– 49); and 67627 (August 9, 2012), 77 FR 49046 (August 15, 2012) (SR–ISE–2012–70). 6 See Exchange Act Release No. 65724 (November 10, 2011), 76 FR 71413 (November 17, 2011) (SR– ISE–2011–72). 7 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); 66961 (May 10, 2012), 77 FR 28914 (May 16, 2012) (SR–ISE– 2012–38); and 67400 (July 11, 2012), 77 FR 42036 (July 17, 2012) (SR–ISE–2012–63). E:\FR\FM\24OCN1.SGM 24OCN1 Federal Register / Vol. 77, No. 206 / Wednesday, October 24, 2012 / Notices wreier-aviles on DSK5TPTVN1PROD with proposed rule change is to amend the complex order maker fees charged by the Exchange for certain complex orders executed on the Exchange. Specifically, the Exchange proposes to adopt complex order maker fees for orders that trade against Priority Customer orders in the Select Symbols, SPY, Non-Select Penny Pilot Symbols and Non-Penny Pilot Symbols. Section II of the current Schedule of Fees provides the fees and rebates for complex orders traded on the Exchange, with the rebates provided in one table and the fees in another. With this proposed rule change, the Exchange is separating the fees table into two tables, one for maker fees and another for taker fees with the latter retaining the other fees applicable to complex orders, i.e., Fee for Crossing Orders and Fees for Responses to Crossing Orders. The Exchange is not proposing any change to the complex order taker fees or rebates applicable for executions in these symbols. For Select Symbols (including SPY) and Penny Pilot symbols, the Exchange currently charges a complex order maker fee of: (i) $0.10 per contract for Market Maker,8 Firm Proprietary/ Broker-Dealer and Professional Customer 9 orders; (ii) $0.20 per contract for Non-ISE Market Maker 10 orders; and (iii) $0.00 per contract for Priority Customer 11 orders. For Non-Penny Pilot Symbols, the Exchange currently charges a complex order maker fee of: (i) $0.10 per contract for Market Maker, Firm Proprietary/Broker-Dealer, Professional Customer and Non-ISE Market Maker orders; and (ii) $0.00 for Priority Customer orders. The Exchange now proposes to amend the maker fee for the group of symbols noted above when orders in these symbols trade against Priority Customer complex orders. Specifically, the Exchange proposes to adopt the following maker fees for complex orders that trade against Priority Customer orders in the Select Symbols (excluding SPY): • $0.37 per contract for Market Maker orders; 8 The term ‘‘Market Makers’’ refers to ‘‘Competitive Market Makers’’ and ‘‘Primary Market Makers’’ collectively. See ISE Rule 100(a)(25). 9 A Professional Customer is a person who is not a broker/dealer and is not a Priority Customer. 10 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. 11 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). VerDate Mar<15>2010 14:21 Oct 23, 2012 Jkt 229001 • $0.39 for Firm Proprietary/BrokerDealer, Professional Customer and NonISE Market Maker orders; • $0.00 for Priority Customer orders. For complex orders that trade against Priority Customer complex orders in SPY, the Exchange proposes to adopt the following maker fees: • $0.38 per contract for Market Maker orders; • $0.40 for Firm Proprietary/BrokerDealer, Professional Customer and NonISE Market Maker orders; • $0.00 for Priority Customer orders. For complex orders that trade against Priority Customer complex orders in Non-Select Penny Pilot Symbols, the Exchange proposes to adopt the following maker fees: • $0.37 per contract for Market Maker orders; • $0.39 for Firm Proprietary/BrokerDealer, Professional Customer and NonISE Market Maker orders; • $0.00 for Priority Customer orders. For orders that trade against Priority Customer complex orders in Non-Penny Pilot Symbols, the Exchange proposes to adopt the following complex order maker fees: • $0.80 per contract for Market Maker orders; • $0.83 for Firm Proprietary/BrokerDealer, Professional Customer and NonISE Market Maker orders; • $0.00 for Priority Customer orders. The Exchange also proposes to increase the maker fee for Non-ISE Market Maker orders in the Non-Penny Pilot Symbols from $0.10 per contract to $0.20 per contract when trading against a non-Priority Customer. With this change, the Exchange seeks to standardize the maker fee for complex orders in Non-Penny Pilot Symbols with the fee currently charged for complex orders in Select Symbols and Penny Pilot Symbols for Non-ISE Market Maker orders when trading against a non-Priority Customer order. Additionally, the Exchange provides Market Makers with a two cent discount when trading against Priority Customer orders that are preferenced to them. This discount is currently applicable when Market Makers remove liquidity in the Select Symbols, SPY, Non-Select Penny Pilot Symbols and Non-Penny Pilot Symbols from the complex order book. The Exchange also currently provides Market Makers with a two-cent discount when they make liquidity in a select group of option classes (‘‘Complex Quoting Symbols’’).12 The 12 See Exchange Act Release Nos. 65958 (December 15, 2011), 76 FR 79236 (December 21, 2012 [sic]) (SR–ISE–2011–81); 66406 (February 16, 2012), 77 FR 10579 (February 22, 2012) (SR–ISE– PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 65035 Exchange now proposes to provide Market Makers with a two-cent discount when they also add liquidity in the Select Symbols, SPY, Non-Select Penny Pilot Symbols and Non-Penny Pilot Symbols when trading against Priority Customer orders. Accordingly, Market Makers that add or remove liquidity from the complex order book by trading against Priority Customer orders that are preferenced to them will be charged: (i) $0.35 per contract in the Select Symbols; (ii) $0.36 per contract in SPY; (iii) $0.35 per contract in the Non-Select Penny Pilot Symbols; and iv) $0.78 per contract in the Non-Penny Pilot Symbols Select Symbols. The maker fees proposed herein are identical to the taker fees currently charged by the Exchange.13 With this proposed rule change, complex orders that trade against Priority Customer orders in the Select Symbols, SPY, NonSelect Penny Pilot Symbols, and NonPenny Pilot Symbols will now be charged the same fee for making and taking liquidity. With this proposed rule change, the Exchange will be better positioned to maintain its attractive rebate structure for Priority Customer complex orders. The number of non-Priority Customer maker participants has continued to grown, separately and in addition to the growth in symbols where the Exchange allows complex quoting and has already implemented a fee structure where makers trading against Priority Customer orders pay the taker fee equivalent. This has resulted in an increased number of non-Priority Customer complex maker orders trading with Priority Customer Complex orders. Charging non-Priority Customer orders the equivalent of the taker fee when interacting with Priority Customer complex orders will allow the Exchange to support this model and continue to attract additional orders and liquidity to its Complex Orderbook. Since the rate changes to the Schedule of Fees pursuant to this proposal will be effective upon filing, for the transactions occurring in October 2012 prior to the effective date of this filing members will be assessed the rates in effect immediately prior to those proposed by this filing. For transactions occurring in October 2012 on and after the effective date of this filing, members will be 2012–07); and 67316 (June 29, 2012), 77 FR 40136 (July 6, 2012) (SR–ISE–2012–59). 13 The Exchange has submitted a proposed rule change to increase the taker fees for complex orders in Select Symbols, SPY, Non-Select Penny Pilot Symbols and Non-Penny Pilot Symbols that mirror the proposed maker fees in this filing. See SR–ISE– 2012–85. E:\FR\FM\24OCN1.SGM 24OCN1 65036 Federal Register / Vol. 77, No. 206 / Wednesday, October 24, 2012 / Notices wreier-aviles on DSK5TPTVN1PROD with assessed the rates proposed by this filing. 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 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 14 in general, and furthers the objectives of Section 6(b)(4) of the Exchange Act 15 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 the symbols that are subject to the fees proposed herein. The Exchange believes it is reasonable and equitable to charge a maker fee of $0.37 per contract for Market Maker orders that trade against Priority Customer interest in the Select Symbols and Penny Pilot symbols and $0.39 per contract for Non-ISE Market Maker, Firm Proprietary/Broker-Dealer, and Professional Customer orders that trade against Priority Customer interest in the Select Symbols and Non-Select Penny Pilot Symbols. The Exchange believes it is reasonable and equitable to charge a maker fee of $0.38 per contract for Market Maker orders that trade against Priority Customer interest in SPY and $0.40 per contract for Non-ISE Market Maker, Firm Proprietary/Broker-Dealer, and Professional Customer orders that trade against Priority Customer interest in SPY. The Exchange believes it is reasonable and equitable to charge a maker fee of $0.80 per contract for Market Maker orders that trade against Priority Customer interest in the NonPenny Pilot Symbols and $0.83 per contract for Non-ISE Market Maker, Firm Proprietary/Broker-Dealer, and Professional Customer orders that trade against Priority Customer interest in the Non-Penny Pilot Symbols. The Exchange notes that it already charges an identical maker and taker fee for Complex Quoting Symbols and is now simply extending that pricing model to complex orders in the Select 14 15 15 15 14:21 Oct 23, 2012 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 U.S.C. 78f(b). U.S.C. 78f(b)(4). VerDate Mar<15>2010 Symbols, SPY, in the Non Select Penny Pilot Symbols and in the Non-Penny Pilot Symbols. The Exchange believes that it is reasonable and equitable to charge the fees proposed herein as they are already applicable to complex orders in the Complex Quoting Symbols; with this proposed rule change, the Exchange is simply extending its current pricing model to complex orders in a larger group of option classes. 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 adopting distinct maker fees for orders that trade against Priority Customer orders in the Select Symbols, SPY, Non Select Penny Pilot Symbols and Non-Penny Pilot Symbols will attract additional business to the Exchange. Moreover, the Exchange believes that the proposed fees are fair, equitable and not unfairly discriminatory because the proposed fees are consistent with price differentiation that exists today at other options exchanges. The Exchange believes it remains an attractive venue for market participants to trade complex orders despite its proposed fee change as its fees remain competitive with those charged by other exchanges. 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. Jkt 229001 PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 19(b)(3)(A)(ii) of the Act.16 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–2012–86 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–2012–86. 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 16 15 E:\FR\FM\24OCN1.SGM U.S.C. 78s(b)(3)(A)(ii). 24OCN1 Federal Register / Vol. 77, No. 206 / Wednesday, October 24, 2012 / Notices 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– 2012–86 and should be submitted on or before November 14, 2012. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2012–26146 Filed 10–23–12; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–68070; File No. SR–C2– 2012–024] Self-Regulatory Organizations; C2 Options Exchange, Incorporated; Order Approving a Proposed Rule Change To Adopt a Designated Primary Market-Maker Program October 18, 2012. I. Introduction On August 21, 2012, the C2 Options Exchange, Incorporated (the ‘‘Exchange’’ or ‘‘C2’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 a proposed rule change to adopt a Designated Primary MarketMaker (‘‘DPM’’) program. The proposed rule change was published in the Federal Register on September 7, 2012.3 The Commission received no comment letters on the proposal. This order approves the proposed rule change. II. Description of the Proposed Rule Change wreier-aviles on DSK5TPTVN1PROD with As set forth in the Notice, C2 has proposed to adopt a DPM program. The associated proposed rules are based on the rules governing the DPM program on the Chicago Board Options Exchange, Incorporated (‘‘CBOE’’), excluding certain provisions that are inapplicable to C2 (such as provisions related to floor trading and CBOE-specific provisions) 17 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release No. 67772 (August 31, 2012), 77 FR 55257 (September 7, 2012) (the ‘‘Notice’’). 1 15 VerDate Mar<15>2010 14:21 Oct 23, 2012 Jkt 229001 and other provisions that the Exchange believes are outdated.4 The proposed rule change defines a DPM as a Participant 5 organization that is approved by the Exchange to function in allocated securities as a MarketMaker and is subject to obligations under proposed Rule 8.17. Proposed Rule 8.14 sets forth the criteria that the Exchange will consider when reviewing a Participant organization’s application to become a DPM. Each approved DPM will retain its status to act as a DPM for one year. After each one-year term, a DPM may file an application with the Exchange to renew its approval to act as a DPM. In addition, the Exchange may take action to suspend or limit a DPM’s status, consistent with Rule 8.20 (concerning termination, conditioning, or limiting approval to act as a DPM).6 Proposed Rule 8.15 sets forth the manner in which the Exchange will allocate securities to DPMs. Specifically, the Exchange will determine for each security traded on the Exchange whether the security should be allocated to a DPM and, if so, to which DPM. The proposed rule also describes the criteria that the Exchange may consider in making allocation determinations. Proposed Rule 8.15 further provides that the Exchange may remove an allocation from a DPM and reallocate the security during a DPM’s term if the DPM fails to adhere to any market performance commitments made by the DPM in connection with receiving the allocation or the Exchange concludes 4 See CBOE Rules 6.45A(a)(ii)(2) and (iii), 6.45B(a)(i)(2) and (iii), 8.80, 8.83–8.91, 8.95, and 17.50(g)(14). 5 A ‘‘Participant’’ is an Exchange-recognized holder of a Trading Permit (‘‘Trading Permit Holder’’ or ‘‘TPH’’). A Trading Permit is an Exchange-issued permit that confers the ability to transact on the Exchange. See Rule 1.1. 6 CBOE’s DPM rules differ from proposed Rule 8.14 in several ways. CBOE Rule 8.83 provides that a DPM’s term is unlimited (until the Exchange relieves or terminates the DPM of its approval to act as a DPM), and accordingly, unlike the proposed rule, lacks a provision allowing DPMs to renew their appointments after each one year term (cf. CBOE Rule 8.83(e)). Further, CBOE Rule 8.83 contemplates the resignation of a DPM, while the proposed rule does not because the Exchange believes resignation would be unnecessary given the one-year DPM term. The DPM can simply choose not to renew its application at the end of the term or ask C2 to relieve it of its approval (cf. CBOE Rule 8.83(f)). CBOE Rule 8.89 also permits a DPM to sell, transfer, or assign its appointment, which is prohibited without the prior written approval of the Exchange by proposed Rule 8.14(g). Finally, CBOE requires an annual review of DPM operations and performance, but because C2 only permits DPMs to have a one-year term, the Exchange believes an annual review is unnecessary, though in proposed Rule 8.14(e), it may conduct an evaluation of the extent to which the DPM has satisfied its obligations under Rule 8.17 in determining whether to renew the DPM’s renewal application (cf. CBOE Rule 8.88(a)). PO 00000 Frm 00088 Fmt 4703 Sfmt 4703 65037 that doing so is in the best interests of the Exchange based on operational factors or efficiency. The proposed rule also describes the procedures the Exchange must follow prior to taking any action to remove an allocation. Proposed Rule 8.16 grants the Exchange the authority to establish: (1) Restrictions applicable to all DPMs on the concentration of securities allocable to a single DPM and to affiliated DPMs, and (2) minimum eligibility standards applicable to all DPMs, which must be satisfied in order for a DPM to receive allocations of securities, including but not limited to standards relating to adequacy of capital and operational capacity.7 Proposed Rule 8.17 describes the obligations of a DPM, including the general obligation that a DPM must fulfill all of the obligations of a MarketMaker under Exchange Rules. In addition, the rule sets forth additional requirements applicable to DPMs, such as heightened quoting obligations and a duty to make competitive markets on the Exchange. In particular, DPMs will be subject to a requirement to provide a continuous quote throughout each trading day in 99% of their nonadjusted series (or 100% minus one putcall pair of each assigned class). Proposed Rule 8.18 sets forth the specific financial requirements for DPMs. Proposed Rule 8.19 grants a trade participation right to DPMs, and gives the Exchange authority to establish a participation entitlement formula that is applicable to all DPMs.8 The proposed rule provides that: (1) A DPM will be entitled to a participation entitlement only if quoting at the best bid or offer disseminated on the Exchange (‘‘BBO’’); (2) a DPM may not be allocated a total quantity greater than the quantity that the DPM is quoting at the BBO; and (3) the participation entitlement is based on the number of contracts remaining after all public customer orders in the Book at the BBO have been satisfied. The proposed rule also provides that the collective DPM participation entitlement shall be: 50% when there is one Market-Maker also quoting at the BBO and 40% when there are two or more Market-Makers also quoting at the 7 The Commission notes that the exercise of the Exchange’s authority under this provision would be subject to the rule filing requirements of Section 19 of the Act and, if so required, would have to be filed with the Commission before such changes can become effective. See 15 U.S.C. 78s. 8 The Commission notes that any changes to the participation entitlement formula would be subject to the rule filing requirements of Section 19 of the Act and, if so required, would have to be filed with the Commission before such changes can become effective. See 15 U.S.C. 78s. E:\FR\FM\24OCN1.SGM 24OCN1

Agencies

[Federal Register Volume 77, Number 206 (Wednesday, October 24, 2012)]
[Notices]
[Pages 65034-65037]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-26146]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68068; File No. SR-ISE-2012-86]


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

October 18, 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 October 10, 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 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 maker 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 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 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 
option classes (the ``Select Symbols'').\3\ The Exchange's maker/taker 
fees and rebates are applicable to regular and complex orders executed 
in the Select Symbols \4\ and in the Special Non-Select Penny Pilot 
Symbols.\5\ 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'') \6\ and for complex orders in all symbols that are not in 
the Penny Pilot Program (``Non-Penny Pilot Symbols'').\7\ The purpose 
of this

[[Page 65035]]

proposed rule change is to amend the complex order maker fees charged 
by the Exchange for certain complex orders executed on the Exchange. 
Specifically, the Exchange proposes to adopt complex order maker fees 
for orders that trade against Priority Customer orders in the Select 
Symbols, SPY, Non-Select Penny Pilot Symbols and Non-Penny Pilot 
Symbols. Section II of the current Schedule of Fees provides the fees 
and rebates for complex orders traded on the Exchange, with the rebates 
provided in one table and the fees in another. With this proposed rule 
change, the Exchange is separating the fees table into two tables, one 
for maker fees and another for taker fees with the latter retaining the 
other fees applicable to complex orders, i.e., Fee for Crossing Orders 
and Fees for Responses to Crossing Orders. The Exchange is not 
proposing any change to the complex order taker fees or rebates 
applicable for executions in these 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\ These fees also apply to SPY. While the Exchange currently 
has a distinct taker fee for SPY, the maker fee for SPY is currently 
the same as the maker fee for all Select Symbols, as SPY is a Select 
Symbol.
    \5\ See Exchange Act Release Nos. 67201 (June 14, 2012), 77 FR 
37082 (June 20, 2012) (SR-ISE-2012-49); and 67627 (August 9, 2012), 
77 FR 49046 (August 15, 2012) (SR-ISE-2012-70).
    \6\ See Exchange Act Release No. 65724 (November 10, 2011), 76 
FR 71413 (November 17, 2011) (SR-ISE-2011-72).
    \7\ 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); 66961 (May 10, 
2012), 77 FR 28914 (May 16, 2012) (SR-ISE-2012-38); and 67400 (July 
11, 2012), 77 FR 42036 (July 17, 2012) (SR-ISE-2012-63).
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    For Select Symbols (including SPY) and Penny Pilot symbols, the 
Exchange currently charges a complex order maker fee of: (i) $0.10 per 
contract for Market Maker,\8\ Firm Proprietary/Broker-Dealer and 
Professional Customer \9\ orders; (ii) $0.20 per contract for Non-ISE 
Market Maker \10\ orders; and (iii) $0.00 per contract for Priority 
Customer \11\ orders. For Non-Penny Pilot Symbols, the Exchange 
currently charges a complex order maker fee of: (i) $0.10 per contract 
for Market Maker, Firm Proprietary/Broker-Dealer, Professional Customer 
and Non-ISE Market Maker orders; and (ii) $0.00 for Priority Customer 
orders.
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    \8\ The term ``Market Makers'' refers to ``Competitive Market 
Makers'' and ``Primary Market Makers'' collectively. See ISE Rule 
100(a)(25).
    \9\ A Professional Customer is a person who is not a broker/
dealer and is not a Priority Customer.
    \10\ 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.
    \11\ A Priority Customer is defined in ISE Rule 100(a)(37A) as a 
person or entity that is not a broker/dealer in securities, and does 
not place more than 390 orders in listed options per day on average 
during a calendar month for its own beneficial account(s).
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    The Exchange now proposes to amend the maker fee for the group of 
symbols noted above when orders in these symbols trade against Priority 
Customer complex orders. Specifically, the Exchange proposes to adopt 
the following maker fees for complex orders that trade against Priority 
Customer orders in the Select Symbols (excluding SPY):
     $0.37 per contract for Market Maker orders;
     $0.39 for Firm Proprietary/Broker-Dealer, Professional 
Customer and Non-ISE Market Maker orders;
     $0.00 for Priority Customer orders.
    For complex orders that trade against Priority Customer complex 
orders in SPY, the Exchange proposes to adopt the following maker fees:
     $0.38 per contract for Market Maker orders;
     $0.40 for Firm Proprietary/Broker-Dealer, Professional 
Customer and Non-ISE Market Maker orders;
     $0.00 for Priority Customer orders.
    For complex orders that trade against Priority Customer complex 
orders in Non-Select Penny Pilot Symbols, the Exchange proposes to 
adopt the following maker fees:
     $0.37 per contract for Market Maker orders;
     $0.39 for Firm Proprietary/Broker-Dealer, Professional 
Customer and Non-ISE Market Maker orders;
     $0.00 for Priority Customer orders.
    For orders that trade against Priority Customer complex orders in 
Non-Penny Pilot Symbols, the Exchange proposes to adopt the following 
complex order maker fees:
     $0.80 per contract for Market Maker orders;
     $0.83 for Firm Proprietary/Broker-Dealer, Professional 
Customer and Non-ISE Market Maker orders;
     $0.00 for Priority Customer orders.
    The Exchange also proposes to increase the maker fee for Non-ISE 
Market Maker orders in the Non-Penny Pilot Symbols from $0.10 per 
contract to $0.20 per contract when trading against a non-Priority 
Customer. With this change, the Exchange seeks to standardize the maker 
fee for complex orders in Non-Penny Pilot Symbols with the fee 
currently charged for complex orders in Select Symbols and Penny Pilot 
Symbols for Non-ISE Market Maker orders when trading against a non-
Priority Customer order.
    Additionally, the Exchange provides Market Makers with a two cent 
discount when trading against Priority Customer orders that are 
preferenced to them. This discount is currently applicable when Market 
Makers remove liquidity in the Select Symbols, SPY, Non-Select Penny 
Pilot Symbols and Non-Penny Pilot Symbols from the complex order book. 
The Exchange also currently provides Market Makers with a two-cent 
discount when they make liquidity in a select group of option classes 
(``Complex Quoting Symbols'').\12\ The Exchange now proposes to provide 
Market Makers with a two-cent discount when they also add liquidity in 
the Select Symbols, SPY, Non-Select Penny Pilot Symbols and Non-Penny 
Pilot Symbols when trading against Priority Customer orders. 
Accordingly, Market Makers that add or remove liquidity from the 
complex order book by trading against Priority Customer orders that are 
preferenced to them will be charged: (i) $0.35 per contract in the 
Select Symbols; (ii) $0.36 per contract in SPY; (iii) $0.35 per 
contract in the Non-Select Penny Pilot Symbols; and iv) $0.78 per 
contract in the Non-Penny Pilot Symbols Select Symbols.
---------------------------------------------------------------------------

    \12\ See Exchange Act Release Nos. 65958 (December 15, 2011), 76 
FR 79236 (December 21, 2012 [sic]) (SR-ISE-2011-81); 66406 (February 
16, 2012), 77 FR 10579 (February 22, 2012) (SR-ISE-2012-07); and 
67316 (June 29, 2012), 77 FR 40136 (July 6, 2012) (SR-ISE-2012-59).
---------------------------------------------------------------------------

    The maker fees proposed herein are identical to the taker fees 
currently charged by the Exchange.\13\ With this proposed rule change, 
complex orders that trade against Priority Customer orders in the 
Select Symbols, SPY, Non-Select Penny Pilot Symbols, and Non-Penny 
Pilot Symbols will now be charged the same fee for making and taking 
liquidity.
---------------------------------------------------------------------------

    \13\ The Exchange has submitted a proposed rule change to 
increase the taker fees for complex orders in Select Symbols, SPY, 
Non-Select Penny Pilot Symbols and Non-Penny Pilot Symbols that 
mirror the proposed maker fees in this filing. See SR-ISE-2012-85.
---------------------------------------------------------------------------

    With this proposed rule change, the Exchange will be better 
positioned to maintain its attractive rebate structure for Priority 
Customer complex orders. The number of non-Priority Customer maker 
participants has continued to grown, separately and in addition to the 
growth in symbols where the Exchange allows complex quoting and has 
already implemented a fee structure where makers trading against 
Priority Customer orders pay the taker fee equivalent. This has 
resulted in an increased number of non-Priority Customer complex maker 
orders trading with Priority Customer Complex orders. Charging non-
Priority Customer orders the equivalent of the taker fee when 
interacting with Priority Customer complex orders will allow the 
Exchange to support this model and continue to attract additional 
orders and liquidity to its Complex Orderbook.
    Since the rate changes to the Schedule of Fees pursuant to this 
proposal will be effective upon filing, for the transactions occurring 
in October 2012 prior to the effective date of this filing members will 
be assessed the rates in effect immediately prior to those proposed by 
this filing. For transactions occurring in October 2012 on and after 
the effective date of this filing, members will be

[[Page 65036]]

assessed the rates proposed by this filing.
    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 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 \14\ in 
general, and furthers the objectives of Section 6(b)(4) of the Exchange 
Act \15\ 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 the symbols that are subject to the fees 
proposed herein.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange believes it is reasonable and equitable to charge a 
maker fee of $0.37 per contract for Market Maker orders that trade 
against Priority Customer interest in the Select Symbols and Penny 
Pilot symbols and $0.39 per contract for Non-ISE Market Maker, Firm 
Proprietary/Broker-Dealer, and Professional Customer orders that trade 
against Priority Customer interest in the Select Symbols and Non-Select 
Penny Pilot Symbols. The Exchange believes it is reasonable and 
equitable to charge a maker fee of $0.38 per contract for Market Maker 
orders that trade against Priority Customer interest in SPY and $0.40 
per contract for Non-ISE Market Maker, Firm Proprietary/Broker-Dealer, 
and Professional Customer orders that trade against Priority Customer 
interest in SPY. The Exchange believes it is reasonable and equitable 
to charge a maker fee of $0.80 per contract for Market Maker orders 
that trade against Priority Customer interest in the Non-Penny Pilot 
Symbols and $0.83 per contract for Non-ISE Market Maker, Firm 
Proprietary/Broker-Dealer, and Professional Customer orders that trade 
against Priority Customer interest in the Non-Penny Pilot Symbols.
    The Exchange notes that it already charges an identical maker and 
taker fee for Complex Quoting Symbols and is now simply extending that 
pricing model to complex orders in the Select Symbols, SPY, in the Non 
Select Penny Pilot Symbols and in the Non-Penny Pilot Symbols. The 
Exchange believes that it is reasonable and equitable to charge the 
fees proposed herein as they are already applicable to complex orders 
in the Complex Quoting Symbols; with this proposed rule change, the 
Exchange is simply extending its current pricing model to complex 
orders in a larger group of option classes.
    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 adopting distinct maker 
fees for orders that trade against Priority Customer orders in the 
Select Symbols, SPY, Non Select Penny Pilot Symbols and Non-Penny Pilot 
Symbols will attract additional business to the Exchange. Moreover, the 
Exchange believes that the proposed fees are fair, equitable and not 
unfairly discriminatory because the proposed fees are consistent with 
price differentiation that exists today at other options exchanges. The 
Exchange believes it remains an attractive venue for market 
participants to trade complex orders despite its proposed fee change as 
its fees remain competitive with those charged by other exchanges. 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.\16\ 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.
---------------------------------------------------------------------------

    \16\ 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-2012-86 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-2012-86. 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

[[Page 65037]]

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-2012-86 and should be 
submitted on or before November 14, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
---------------------------------------------------------------------------

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

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-26146 Filed 10-23-12; 8:45 am]
BILLING CODE 8011-01-P
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