Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Establish Fees and Rebates for Mini Options, 20988-20997 [2013-08092]
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Federal Register / Vol. 78, No. 67 / Monday, April 8, 2013 / Notices
designates the proposed rule change to
be operative upon filing.20
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.
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–
NYSEARCA–2013–30 and should be
submitted on or before April 29, 2013.
IV. Solicitation of Comments
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
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:
[FR Doc. 2013–08096 Filed 4–5–13; 8:45 am]
BILLING CODE 8011–01–P
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–NYSEARCA–2013–30 on
the subject line.
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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–NYSEARCA–2013–30. 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
20 For the purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69270; File No. SR–ISE–
2013–28]
Self-Regulatory Organizations;
International Securities Exchange,
LLC; Notice of Filing and Immediate
Effectiveness of Proposed Rule
Change To Establish Fees and Rebates
for Mini Options
April 2, 2013.
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 March 21,
2013, the International Securities
Exchange, LLC (the ‘‘Exchange’’ or the
‘‘ISE’’) filed with the Securities and
Exchange Commission the proposed
rule change, as described in Items I, II,
and III below, which items have been
prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The ISE proposes to amend its
Schedule of Fees to establish fees for
Mini Options. 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.
21 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of these statements may be examined at
the places specified in Item IV below.
The self-regulatory organization has
prepared summaries, set forth in
sections A, B and C below, of the most
significant aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
ISE recently amended its rules to
allow for the listing of Mini Options on
SPDR S&P 500 (‘‘SPY’’), Apple, Inc.
(‘‘AAPL’’), SPDR Gold Trust (‘‘GLD’’),
Google Inc. (‘‘GOOG’’) and Amazon.com
Inc. (‘‘AMZN’’).3 In the Mini Options
Filing, the Exchange represented to the
Commission that ‘‘the current Schedule
of Fees is not applicable to Mini
Options and that the Exchange will not
begin to trade Mini Options without a
prior submission of a proposed rule
change to adopt transaction fees for
Mini Options.’’ 4 The Exchange is
therefore submitting this proposed rule
change to establish fees and rebates
applicable to Mini Options. This
proposal also seeks to adopt a definition
for Mini Options in the Preface of the
Schedule of Fees, as options overlying
ten (10) shares of AAPL, AMZN, GLD,
GOOG, and SPY. For purposes of the
Exchange’s fee schedule, Mini Options
in SPY, AAPL, GLD and AMZN are
classified as Select Symbols 5 while
Mini Options in GOOG is classified as
a Non-Select Symbol.6
Mini Options have a smaller exercise
and assignment value due to the
reduced number of shares they deliver
as compared to standard option
contracts. As such, the Exchange is
proposing to adopt per contract fees and
rebates that are 1/10th of the fees and
rebates for standard option contracts,
with some exceptions. Despite the
3 Mini Options were approved for trading on
September 28, 2012. See Securities Exchange Act
Release No. 67948 (September 28, 2012), 77 FR
60735 (October 4, 2012) (SR–ISE–2012–58) (‘‘Mini
Options Filing’’).
4 Id.
5 ‘‘Select Symbols’’ are options overlying all
symbols listed on the ISE that are in the Penny Pilot
Program.
6 ‘‘Non-Select Symbols’’ are options overlying all
symbols excluding Select Symbols.
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smaller exercise and assignment value
of Mini Options, the cost to the
Exchange to process quotes and orders
in Mini Options, perform regulatory
surveillance and retain quotes and
orders for archival purposes is the same
as for a standard contract. The Exchange
believes that adopting fees and rebates
for Mini Options that are in some cases
lower than fees and rebates for standard
option contracts, and in other cases the
same as for standard option contracts, is
appropriate, not unreasonable, not
unfairly discriminatory and not
burdensome to competition between
participants, or between the Exchange
and other exchanges that list and trade
Mini Options.
A. Regular Order Fees and Rebates for
Mini Options
The Exchange proposes to adopt
separate tables for fees and rebates
applicable to regular orders in Mini
Options. The fees and rebates listed in
the table below are 1/10th of the fees
and rebates currently applicable to
regular orders for standard options in
classes that overlie SPY, AAPL, GLD,
AMZN, and GOOG:
SELECT SYMBOLS
Maker
rebate/fee
Market participant
Market Maker Plus .........................................................
Market Maker .................................................................
Non-ISE Market Maker (FarMM) ...................................
Firm Proprietary/Broker-Dealer ......................................
Professional Customer ...................................................
Priority Customer ...........................................................
($0.010)
0.010
0.010
0.010
0.010
0.000
Taker fee
Fee for
responses
to crossing
orders
$0.032
0.032
0.036
0.033
0.033
0.025
PIM breakup rebate
Facilitation
and solicitation breakup rebate
$0.040
0.040
0.040
0.040
0.040
0.040
Fee for
crossing
orders
N/A
N/A
($0.025)
(0.025)
(0.025)
(0.025)
N/A
N/A
($0.015)
(0.015)
(0.015)
(0.015)
$0.020
0.020
0.020
0.020
0.020
0.000
NON-SELECT SYMBOLS
Market participant
Market Maker ...............................................................................................................................
Market Maker (for orders sent by Electronic Access Members) .................................................
Non-ISE Market Maker (FarMM) .................................................................................................
Firm Proprietary/Broker-Dealer ....................................................................................................
Professional Customer ................................................................................................................
Priority Customer .........................................................................................................................
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For Mini Options in the Select
Symbols, the following maker fees and
rebates shall apply: (i) For Market
Maker,7 Non-ISE Market Maker,8 Firm
Proprietary/Broker-Dealer and
Professional Customer 9 orders, $0.010
per contract; (ii) for Priority Customer 10
orders, $0.000 per contract; and (iii) for
Market Maker Plus 11 orders, a rebate of
7 The term ‘‘Market Makers’’ refers to
‘‘Competitive Market Makers’’ and ‘‘Primary Market
Makers’’ collectively. See ISE Rule 100(a)(25).
8 A Non-ISE Market Maker, or Far Away Market
Maker (‘‘FarMM’’), is a market maker as defined in
Section 3(a)(38) of the Securities Exchange Act of
1934 registered in the same options class on another
options exchange.
9 A Professional Customer is a person who is not
a broker/dealer and is not a Priority Customer.
10 A Priority Customer is defined in ISE Rule
100(a)(37A) as a person or entity that is not a
broker/dealer in securities, and does not place more
than 390 orders in listed options per day on average
during a calendar month for its own beneficial
account(s).
11 In order to promote and encourage liquidity in
Mini Options in the Select Symbols, the Exchange
proposes to adopt a $0.010 per contract rebate to
Market Makers if the quotes they sent to the
Exchange qualify the Market Maker to become a
Market Maker Plus. A Market Maker Plus is a
Market Maker who is on the National Best Bid or
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$0.010 per contract. For Mini Options in
the Select Symbols, the following taker
fees shall apply: (i) For Market Maker
and Market Maker Plus orders, $0.032
per contract; (ii) for Non-ISE Market
Maker orders, $0.036 per contract; (iii)
for Firm Proprietary/Broker-Dealer and
Professional Customer orders, $0.033
per contract; and (iv) for Priority
Customer orders, $0.025 per contract.
Additionally, the Exchange proposes
to charge Market Maker, Market Maker
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 for all
expiration months in that symbol during the current
trading month. A Market Maker’s single best and
single worst overall quoting days each month, on
a per symbol basis, is excluded in calculating
whether a Market Maker qualifies for this rebate, if
doing so will qualify a Market Maker for the rebate.
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Fee for
crossing
orders
Fee
Fmt 4703
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$0.018
0.020
0.045
0.020
0.020
0.000
$0.018
0.020
0.020
0.020
0.020
0.000
Fee for
responses to
crossing
orders
$0.018
0.020
0.045
0.020
0.020
0.020
Plus, Non-ISE Market Maker, Firm
Proprietary/Broker-Dealer and
Professional Customers a fee of $0.020
per contract ($0.000 per contract for
Priority Customers) for regular Crossing
Orders for Mini Options in the Select
Symbols, and a fee of $0.040 per
contract to all market participants for
regular Responses to Crossing Orders for
Mini Options in the Select Symbols.
The Exchange also proposes to adopt
a rebate of $0.025 per contract for
contracts that are submitted to the Price
Improvement Mechanism that do not
trade with their contra order for Mini
Options in the Select Symbols, and a
rebate of $0.015 per contract for
contracts that are submitted to the
Facilitation and Solicited Order
Mechanisms that do not trade with their
contra order for Mini Options in the
Select Symbols except when those
contracts trade against pre-existing
orders and quotes on the Exchange’s
orderbook.
For Mini Options in Non-Select
Symbols, the following fees shall apply:
(i) For Market Maker orders, a fee of
$0.018 per contract; (ii) for Market
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Maker (for orders sent by Electronic
Access Members), Firm Proprietary/
Broker-Dealer and Professional
Customer orders, a fee of $0.020 per
contract; (iii) for Non-ISE Market Maker
orders, a fee of $0.045 per contract; and
(iv) for Priority Customer orders, a fee
of $0.000 per contract.
Additionally, for regular Crossing
Orders for Mini Options in Non-Select
Symbols, the following fees shall apply:
(i) Ct Market Makers, a fee of $0.018 per
contract; (ii) for Market Maker (for
orders sent by Electronic Access
Members), Non-ISE Market Maker, Firm
Proprietary/Broker-Dealer and
Professional Customers, a fee of $0.020
per contract; and (iii) for Priority
Customers, a fee of $0.000 per contract.
For regular Responses to Crossing
Orders for Mini Options in Non-Select
Symbols, the following fees shall apply:
(i) For Market Makers, $0.018 per
contract; (ii) for Non-ISE Market Maker,
$0.045 per contract; and (iii) for Market
Maker (for orders sent by Electronic
Access Members), Firm Proprietary/
Broker-Dealer, Professional Customer
and Priority Customers, a fee of $0.020
per contract.
Further, the Exchange currently
charges Primary Market Makers (PMMs)
a transaction fee for standard options in
Non-Select Symbols when they trade
report a Priority Customer or
Professional Customer order in
accordance with their obligation to
provide away market price protection.
This fee shall also apply to Mini
Options in Non-Select Symbols. On the
other hand, for standard options in the
Select Symbols, PMMs do not receive a
maker rebate nor pay a taker fee when
trade reporting. With this proposed rule
change, PMMs in Mini Options in the
Select Symbols will also not receive a
maker rebate nor pay a taker fee when
trade reporting.
trading Mini Options in the Select
Symbols.
PMM Linkage Credit
Route-Out Fees
The Exchange also proposes to adopt
a $0.020 per contract fee credit to PMMs
for execution of Priority Customer
orders in Mini Options in Non-Select
Symbols 12—for classes in which it
serves as a PMM—that send an
Intermarket Sweep Order to other
exchanges. This credit will be applied
regardless of the transaction fee charged
by a destination market. For PMMs
executing Priority Customer orders in
Mini Options in the Select Symbols, this
credit will be equal to the fee charged
by the destination market, and for
executing Professional Customer orders,
the fee credit will be equal to the fee
charged by a destination market, but not
more than $0.045 per contract.
Consistent with Distributive Linkage
and pursuant to ISE rules, PMMs have
an obligation to address customer 14
orders when there is a better market
displayed on another exchange. ISE’s
PMMs meet this obligation via the use
of Intermarket Sweep Orders (‘‘ISOs’’).
With the costs associated with servicing
customer orders that must be executed
at another exchange, the Exchange
currently charges a fee, at a rate of $0.45
per contract for Professional Customers
and $0.35 per contract for Priority
Customers, for executions that result
from the PMM routing ISOs to another
exchange. This fee applies to standard
options in all symbols traded on the
Exchange. At this time, the Exchange
proposes to charge 1/10th of the fee for
routing out Mini Options than the fee
charged by the Exchange for routing out
standard options. Specifically, the
Exchange proposes to adopt a route-out
fee of $0.045 per contract for
Professional Customer orders in Mini
Options that are routed out for
execution and a fee of $0.035 per
contract for Priority Customer orders in
Mini Options that are routed out for
execution.
Credit for Responses to Flash Orders
The Exchange proposes to adopt a
$0.020 per contract credit for responses
to Flash Orders for Mini Option in NonSelect Symbols when trading against
Professional Customers. For Mini
Options in the Select Symbols, the per
contract fee credit for responses to Flash
Orders will be (i) $0.010 per contract
when trading against Priority
Customers; and (ii) $0.010 per contract
when trading against Professional
Customers.
Payment for Order Flow
The Exchange proposes to adopt a
payment for order flow (PFOF) fee of
$0.07 per contract, applicable to Market
Makers when trading against Priority
Customer orders in Mini Options in
Non-Penny Pilot Symbols.13 The
Exchange will not charge a PFOF fee for
B. Complex Order Fees and Rebates for
Mini Options
The Exchange proposes to adopt
separate tables for fees and rebates
applicable to complex orders in Mini
Options. The fees and rebates listed in
the table below are 1/10th of the fees
and rebates currently applicable to
complex orders for standard options in
classes that overlie SPY, AAPL, GLD,
AMZN, and GOOG:
REBATES
Rebate for
Select
Symbols
(excluding
SPY)
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Market participant
Market Maker ...................................
Non-ISE Market Maker (FarMM) .....
Firm Proprietary/Broker-Dealer ........
Professional Customer .....................
N/A
N/A
N/A
N/A
12 This fee credit applies to only GOOG as GOOG
is the only Non-Select Symbol approved as a Mini
Option.
13 For the purposes of the PFOF fee noted in the
Schedule of Fees, GOOG is a Non-Penny Pilot
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Rebate for
SPY
Rebate for
Non-select
Symbols
N/A
N/A
N/A
N/A
Rebate for
Priority
Customer
orders that
trade with
quotes and
orders on
the regular
orderbook
(excluding
SPY)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Symbol because all Non-Select Symbols are NonPenny Pilot Symbols. Therefore, the PFOF fee
proposed in this filing will apply only to Mini
Options in GOOG.
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Rebate for
Priority
Customer
orders that
trade with
quotes and
orders on
the regular
orderbook In
SPY
N/A
N/A
N/A
N/A
PIM
Break-up
Rebate
for Select
Symbols
N/A
($0.025)
(0.025)
(0.025)
Facilitation
and
solicitation
Break-up
Rebate for
Select
Symbols
N/A
($0.015)
(0.015)
(0.015)
14 Pursuant to ISE Rule 1900(f) of the Distributive
Linkage rules, a customer is an individual or
organization that is not a broker-dealer.
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REBATES—Continued
Rebate for
Select
Symbols
(excluding
SPY)
Market participant
Priority Customer Complex ADV 0–
39,999 ...........................................
Priority Customer Complex ADV
40,000–74,999 ..............................
Priority Customer Complex ADV
75,000–124,999 ............................
Priority Customer Complex ADV
125,000–224,999 ..........................
Priority Customer Complex ADV
225,000+ ......................................
Incremental Priority Customer Complex ADV above 225,000 .............
Rebate for
SPY
Rebate for
Priority
Customer
orders that
trade with
quotes and
orders on
the regular
orderbook
(excluding
SPY)
Rebate for
Non-select
Symbols
Rebate for
Priority
Customer
orders that
trade with
quotes and
orders on
the regular
orderbook In
SPY
Facilitation
and
solicitation
Break-up
Rebate for
Select
Symbols
PIM
Break-up
Rebate
for Select
Symbols
($0.033)
($0.036)
($0.066)
($0.006)
($0.007)
(0.025)
(0.015)
(0.035)
(0.038)
(0.072)
(0.008)
(0.009)
(0.025)
(0.015)
(0.037)
(0.039)
(0.075)
(0.009)
(0.010)
(0.025)
(0.015)
(0.039)
(0.040)
(0.077)
(0.010)
(0.011)
(0.025)
(0.015)
(0.040)
(0.041)
(0.078)
(0.011)
(0.012)
(0.025)
(0.015)
(0.001)
(0.001)
(0.001)
(0.000)
(0.000)
(0.000)
(0.000)
MAKER FEES
Maker Fee
for Select
Symbols
Market Participant
Market Maker ...............................................................................
Non-ISE Market Maker (FarMM) .................................................
Firm Proprietary/Broker-Dealer ....................................................
Professional Customer .................................................................
Priority Customer .........................................................................
Maker Fee for
Select
Symbols when
trading against
Priority Customer
(excluding
SPY)
$0.010
0.020
0.010
0.010
0.000
Maker Fee for
SPY when
trading against
Priority
Customer
Maker Fee for
Non-Select
symbols when
trading against
Priority
Customer
$0.039
0.040
0.040
0.040
0.000
Maker Fee
for
Non-select
Symbols
$0.039
0.041
0.041
0.041
0.000
$0.082
0.084
0.084
0.084
0.000
$0.010
0.020
0.010
0.010
0.000
TAKER AND OTHER FEES
Taker Fee
for Select
Symbols
(excluding
SPY)
Market participant
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Market Maker ...................................................................
Non-ISE Market Maker (FarMM) .....................................
Firm Proprietary/Broker-Dealer ........................................
Professional Customer .....................................................
Priority Customer .............................................................
For complex orders in Mini Options
in the Select Symbols and Non-Select
Symbols, the following maker fees shall
apply: (i) $0.010 per contract for Market
Maker, Firm Proprietary/Broker-Dealer
and Professional Customer orders; (ii)
$0.020 per contract for Non-ISE Market
Maker orders; and (iii) $0.000 per
contract for Priority Customer orders.
For complex orders in Mini Options in
the Select Symbols when trading against
Priority Customers (excluding SPY), the
following maker fees shall apply: (i)
$0.039 per contract for Market Maker
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$0.039
0.040
0.040
0.040
0.000
Taker Fee
for SPY
$0.039
0.041
0.041
0.041
0.000
Taker Fee
for
Non-Select
Symbols
Fee for
Crossing
Orders
(largest leg
only)
Fee for
Responses
to Crossing
Orders for
Select
Symbols
Fee for
Responses
to Crossing
Orders for
non-Select
Symbols
$0.082
0.084
0.084
0.084
0.000
$0.020
0.020
0.020
0.020
0.000
$0.040
0.040
0.040
0.040
0.040
$0.082
0.084
0.084
0.084
$0.000
orders; (ii) $0.040 for Non-ISE Market
Maker, Firm Proprietary/Broker-Dealer
and Professional Customer orders; and
(iii) $0.000 per contract for Priority
Customer orders. For complex orders in
Mini Options in SPY when trading
against Priority Customers, the
following maker fees shall apply: (i)
$0.039 per contract for Market Maker
orders; (ii) $0.041 for Non-ISE Market
Maker, Firm Proprietary/Broker-Dealer
and Professional Customer orders; and
(iii) $0.000 per contract for Priority
Customer orders. For complex orders in
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Mini Options in non-Select Symbols
when trading against Priority
Customers, the following maker fees
shall apply: (i) $0.082 per contract for
Market Maker orders; (ii) $0.084 for
Non-ISE Market Maker, Firm
Proprietary/Broker-Dealer and
Professional Customer orders; and (iii)
$0.000 per contract for Priority
Customer orders.
For complex orders in Mini Options
in the Select Symbols (excluding SPY),
the following taker fees shall apply: (i)
$0.039 per contract for Market Maker
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orders; (ii) $0.040 for Non-ISE Market
Maker, Firm Proprietary/Broker-Dealer
and Professional Customer orders; and
(iii) $0.000 per contract for Priority
Customer orders. For complex orders in
Mini Options in SPY, the following
taker fees shall apply: (i) $0.039 per
contract for Market Maker orders; (ii)
$0.041 for Non-ISE Market Maker, Firm
Proprietary/Broker-Dealer and
Professional Customer orders; and (iii)
$0.000 per contract for Priority
Customer orders. For complex orders in
Mini Options in non-Select Symbols,
the following taker fees shall apply: (i)
$0.082 per contract for Market Maker
orders; (ii) $0.084 for Non-ISE Market
Maker, Firm Proprietary/Broker-Dealer
and Professional Customer orders; and
(iii) $0.000 per contract for Priority
Customer orders.
Additionally, the Exchange proposes
to charge Market Maker, Non-ISE
Market Maker, Firm Proprietary/BrokerDealer and Professional Customers a fee
of: (i) $0.020 per contract ($0.000 per
contract for Priority Customers) for
Crossing Orders for complex orders in
Mini Options; (ii) $0.040 per contract to
all market participants for Responses to
Crossing Orders for complex orders in
Mini Options in the Select Symbols; and
(iii) $0.082 per contract for Market
Makers ($0.084 per contract for Non-ISE
Market Maker, Firm Proprietary/BrokerDealer and Professional Customers and
$0.000 per contract for Priority
Customers) for Responses to Crossing
Orders for complex orders in Mini
Options in non-Select Symbols).
The Exchange currently provides
volume-based tiered rebates for Priority
Customer complex orders in the Select
Symbols (excluding SPY), in SPY, and
in the Non-Select Symbols for standard
options when these orders trade with
non-Priority Customer orders in the
complex order book. The Exchange
proposes to extend this rebate program
to Mini Options also, as follows:
For Mini Options in Select Symbols
(excluding SPY), the Exchange proposes
to adopt a base rebate of $0.033 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 a
certain level of average daily volume
(ADV) of executed Priority Customer
complex order contracts across all
symbols during a calendar month will
be provided a rebate of $0.035 per
contract, per leg, in these symbols, if a
Member achieves an ADV of 40,000
Priority Customer complex order
contracts; $0.037 per contract, per leg,
in these symbols, if a Member achieves
an ADV of 75,000 Priority Customer
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20:02 Apr 05, 2013
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complex order contracts; $0.039 per
contract, per leg, in these symbols, if a
Member achieves an ADV of 125,000
Priority Customer complex order
contracts; and $0.040 per contract, per
leg, in these symbols, if a Member
achieves an ADV of 225,000 Priority
Customer complex order contracts.
Additionally, the Exchange also
proposes to adopt a rebate of $0.001 per
contract payable for incremental Priority
Customer complex order volume when
trading against non-Priority Customer
complex orders in the complex order
book above the highest tier for Mini
Options in the Select Symbols
(excluding SPY).
For Mini Options in SPY, the
Exchange proposes to adopt a base
rebate of $0.036 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 a certain level of
ADV of executed Priority Customer
complex order contracts across all
symbols during a calendar month will
be provided a rebate of $0.038 per
contract, per leg, in these symbols, if a
Member achieves an ADV of 40,000
Priority Customer complex order
contracts; $0.039 per contract, per leg,
in these symbols, if a Member achieves
an ADV of 75,000 Priority Customer
complex order contracts; $0.040 per
contract, per leg, in these symbols, if a
Member achieves an ADV of 125,000
Priority Customer complex order
contracts; and $0.041 per contract, per
leg, in these symbols, if a Member
achieves an ADV of 225,000 Priority
Customer complex order contracts.
Additionally, the Exchange also
proposes to adopt a rebate of $0.001 per
contract payable for incremental Priority
Customer complex order volume when
trading against non-Priority Customer
complex orders in the complex order
book above the highest tier for Mini
Options in SPY.
For Mini Options in non-Select
Symbols, the Exchange proposes to
adopt a base rebate of $0.066 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 a
certain level of average daily volume
(ADV) of executed Priority Customer
complex order contracts across all
symbols during a calendar month will
be provided a rebate of $0.072 per
contract, per leg, in these symbols, if a
Member achieves an ADV of 40,000
Priority Customer complex order
contracts; $0.075 per contract, per leg,
in these symbols, if a Member achieves
PO 00000
Frm 00110
Fmt 4703
Sfmt 4703
an ADV of 75,000 Priority Customer
complex order contracts; $0.077 per
contract, per leg, in these symbols, if a
Member achieves an ADV of 125,000
Priority Customer complex order
contracts; and $0.078 per contract, per
leg, in these symbols, if a Member
achieves an ADV of 225,000 Priority
Customer complex order contracts.
Additionally, the Exchange also
proposes to adopt a rebate of $0.001 per
contract payable for incremental Priority
Customer complex order volume when
trading against non-Priority Customer
complex orders in the complex order
book above the highest tier for Mini
Options in the non-Select Symbols.
Further, the Exchange currently
provides volume-based tiered rebates for
Priority Customer complex orders in all
symbols for standard options when
these orders trade against quotes or
orders in the regular orderbook. The
Exchange proposes to extend this rebate
to Mini Options also, as follows:
For Mini Options (excluding SPY),
the Exchange proposes to adopt a base
rebate of $0.006 per contract, per leg, for
Priority Customer complex orders when
these orders trade against quotes or
orders in the regular orderbook.
Additionally, members who achieve a
certain level of ADV of executed Priority
Customer complex order contracts
across all symbols during a calendar
month will be provided a rebate of
$0.008 per contract, per leg, in these
symbols, if a Member achieves an ADV
of 40,000 Priority Customer complex
order contracts; $0.009 per contract, per
leg, in these symbols, if a Member
achieves an ADV of 75,000 Priority
Customer complex order contracts;
$0.010 per contract, per leg, in these
symbols, if a Member achieves an ADV
of 125,000 Priority Customer complex
order contracts; and $0.011 per contract,
per leg, in these symbols, if a Member
achieves an ADV of 225,000 Priority
Customer complex order contracts.
For Mini Options in SPY, the
Exchange proposes to adopt a base
rebate of $0.007 per contract, per leg, for
Priority Customer complex orders when
these orders trade against quotes or
orders in the regular orderbook.
Additionally, members who achieve a
certain level of ADV of executed Priority
Customer complex order contracts
across all symbols during a calendar
month will be provided a rebate of
$0.009 per contract, per leg, in these
symbols, if a Member achieves an ADV
of 40,000 Priority Customer complex
order contracts; $0.010 per contract, per
leg, in these symbols, if a Member
achieves an ADV of 75,000 Priority
Customer complex order contracts;
$0.011 per contract, per leg, in these
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symbols, if a Member achieves an ADV
of 125,000 Priority Customer complex
order contracts; and $0.012 per contract,
per leg, in these symbols, if a Member
achieves an ADV of 225,000 Priority
Customer complex order contracts.
For each of the volume-based tiered
rebates noted above, the highest rebate
amount achieved by the Member for the
current calendar month will apply
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, with the exception of the
incremental rebate, as noted above. For
purposes of these volume-based tiered
rebates, volume in standard options and
Mini Options will be combined to
calculate the tier a Member has reached.
Based on the tier achieved, the Member
will be rebated for that tier for all the
standard options traded at the standard
option rebate amount and for all the
Mini Options traded at the Mini Option
rebate amount.
The Exchange also proposes to adopt
a rebate of $0.025 per contract for
contracts that are submitted to the Price
Improvement Mechanism that do not
trade with their contra order for Mini
Options in the Select Symbols, and a
rebate of $0.015 per contract for
contracts that are submitted to the
Facilitation and Solicited Order
Mechanisms that do not trade with their
contra order for Mini Options in the
Select Symbols except when those
contracts trade against pre-existing
orders and quotes on the Exchange’s
orderbook.
Firm Fee Cap
The Exchange currently has a fee cap
program that, subject to certain
exclusions noted in the Schedule of
Fees, is applicable across all products
traded on ISE. Under the fee cap
program, the Exchange caps proprietary
transaction fees in all products traded
on ISE, in the aggregate, at $75,000 per
month per Member. All proprietary
transactions, including non-ISE market
maker transactions, that are part of a
crossing transaction are eligible towards
the fee cap. Crossing volume from
regular and complex orders in Mini
Options, such as orders executed in the
Facilitation Mechanism, Price
Improvement Mechanism, Solicited
Order Mechanism, Block Order
Mechanism and Qualified Contingent
Cross orders in Mini Options, counts
towards the fee cap. The Exchange
proposes to extend the fee cap to also
include proprietary transactions in Mini
Options that are part of a crossing
transaction.
ISE also currently has a service fee of
$0.01 per side on all transactions that
are eligible for the fee cap. The service
fee applies once a member reaches the
fee cap level and applies to every
contract side included in and above the
fee cap. A member who does not reach
the monthly fee cap is not charged the
service fee. The service fee is not
calculated in reaching the fee cap. Once
the fee cap is reached, the service fee
applies to both proprietary and other
account designations 15 in all ISE
products in addition to those
transactions that were included in
reaching the fee cap. For Mini Options,
the Exchange proposes to adopt a
service fee of $0.001 per side on all
transactions that are eligible for the fee
cap.
QCC and Solicitation Rebate
The Exchange currently provides a
rebate for Qualified Contingent Cross
(‘‘QCC’’) orders and Solicitation orders
for standard options to further
encourage members to submit greater
numbers of QCC orders and Solicitation
orders to the Exchange. The Exchange
proposes to extend that rebate incentive
to Mini Options. With this proposed
rule change, the Exchange will provide
a rebate to members who reach a certain
volume threshold in QCC orders and/or
Solicitation orders in standard options
and Mini Options during a month. Once
a Member reaches a volume threshold,
the Exchange will provide a rebate to
that Member for all of its QCC and
Solicitation contracts traded for that
month. For purposes of this rebate,
volume in standard options and Mini
Options will be combined to calculate
the tier a Member has reached. Based on
the tier achieved, the Member will be
rebated for that tier for all the standard
options traded at the standard option
rebate amount and for all the Mini
Options traded at the Mini Option
rebate amount, as provided in the
following table:
Rebate for
sandard
options
Originating contract sides
mstockstill on DSK4VPTVN1PROD with NOTICES
0 to 199,999 .........................................................................................................................................................
200,000 to 499,999 ..............................................................................................................................................
500,000 to 699,999 ..............................................................................................................................................
700,000 to 999,999 ..............................................................................................................................................
1,000,000+ ...........................................................................................................................................................
The rebate will be paid to the Member
entering a qualifying order, i.e., a QCC
order and/or a Solicitation order. The
rebate applies to QCC orders and
Solicitation orders in all symbols traded
on the Exchange. Additionally, the
threshold levels are based on the
originating side so if an order is broken
up and executed with multiple counter
parties, all contracts of the originating
side will be counted to reach the
established threshold levels.
Complex Quoting in GLD
15 Other account designations include Prop-firm
(Member trading for its own account and clearing
in the F range at OCC), Prop-cust (Member trading
for its own account and clearing in the C range at
OCC), BD-firm (Member trading on behalf of
another registered broker/dealer clearing in the F
range at OCC), BD-cust (Member trading on behalf
of another registered broker/dealer clearing in the
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The Exchange currently allows
Market Makers to enter quotations for
complex order strategies in the complex
order book in a limited group of
symbols (‘‘Complex Quoting Symbols’’),
one of which is GLD, a Mini Option
class. Given this enhancement to the
complex order functionality, and in
order to maintain a competitive fee and
rebate structure for Priority Customer
orders, the Exchange has adopted maker
PO 00000
Frm 00111
Fmt 4703
Sfmt 4703
$0.00
(0.07)
(0.08)
(0.09)
(0.11)
Rebate for Mini
Options
$0.000
(0.007)
(0.008)
(0.009)
(0.011)
fees that apply to transactions in the
complex order book when they interact
with Priority Customer orders in options
overlying the Complex Quoting
Symbols, including GLD. Specifically,
the Exchange currently charges a maker
fee of $0.39 per contract for standard
options in the Complex Quoting
Symbols, including GLD. Of all the
Complex Quoting Symbols, only GLD is
approved for Mini Options trading and
therefore, the Exchange proposes to
C range at OCC), FarMM (Member trading on behalf
of another registered broker/dealer clearing in the
M range at OCC).
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charge a maker fee of $0.039 per
contract for Mini Options in GLD for
Market Maker, Non-ISE Market Maker,
Firm Proprietary/Broker-Dealer and
Professional Customer orders when
these orders interact with Priority
Customer orders. Priority Customer
orders in GLD that trade in the complex
order book are not charged a fee and do
not receive a rebate when interacting
with other Priority Customer orders.
Options Regulatory Fee
The Exchange currently charges an
Options Regulatory Fee (‘‘ORF’’) of
$0.0042 per contract. The ORF is
assessed to each member for all options
transactions executed or cleared by the
member that are cleared by The Options
Clearing Corporation (‘‘OCC’’) in the
customer range, regardless of the
exchange on which the transaction
occurs. The Exchange is proposing to
charge the same rate for transactions in
Mini options, $0.0042 per contract,
since, as noted above, the costs to the
Exchange to perform the necessary
regulatory surveillance programs and
procedures for Mini Options are the
same as for standard option contracts.
As such, the Exchange feels that it is
appropriate to charge the ORF at the
same rate as the standard option
contract.
The Exchange has designated this
proposal to be operative on March 18,
2013.
mstockstill on DSK4VPTVN1PROD with NOTICES
2. Statutory Basis
The Exchange believes that its
proposal to amend its Schedule of Fees
is consistent with Section 6(b) of the
Act 16 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act 17 in particular, in that it is
an equitable allocation of reasonable
fees and other charges among Exchange
members and other persons using its
facilities and does not unfairly
discriminate between issuers, brokers or
dealers.
Regular Order Fees and Rebates for Mini
Options
The Exchange has determined to
charge fees and provide rebates for
regular orders in Mini Options at a rate
that is 1/10th the rate of fees and rebates
the Exchange currently provides for
trading in standard options. The
Exchange believes it is reasonable and
equitable and not unfairly
discriminatory to assess lower fees and
rebates to provide market participants
an incentive to trade Mini Options on
the Exchange. The Exchange believes
16 15
17 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4) and (5).
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20:02 Apr 05, 2013
Jkt 229001
the proposed fees and rebates are
reasonable and equitable in light of the
fact that Mini Options do have a smaller
exercise and assignment value,
specifically 1/10th that of a standard
option contract, and, as such, levying
fees that are 1/10th of what market
participants pay today. As for Priority
Customers, for the most part, the
Exchange does not charge Priority
Customers a fee (Priority Customers
have traditionally traded options on the
Exchange without a fee) and to the
extent they pay a transaction fee for
trading in standard options, they will
continue to pay a transaction fee in Mini
Options but at 1/10th the rate they pay
for standard options. The Exchange
believes charging lower fees, or no fees,
to Priority Customer orders attracts that
order flow to the Exchange and thereby
creates liquidity to the benefit of all
market participants who trade on the
Exchange. With respect to fees to NonISE Market Maker orders, the Exchange
believes that charging Non-ISE Market
Maker orders a higher rate than the fee
charged to Market Maker, Firm
Proprietary/Broker-Dealer and
Professional Customer regular orders is
appropriate and not unfairly
discriminatory because Non-ISE Market
Makers are not subject to many of the
non-transaction based fees that these
other categories of membership are
subject to, e.g., membership fees, access
fees, API/Session fees, market data fees,
etc. Therefore, the Exchange believes it
is appropriate and not unfairly
discriminatory to assess a higher
transaction fee to Non-ISE Market
Makers because the Exchange incurs
costs associated with these types of
orders that are not recovered by nontransaction based fees paid by members.
With respect to fees for Market Maker
orders, the Exchange believes that the
price differentiation between the
various market participants is
appropriate and not unfairly
discriminatory because Market Makers
have different requirements and
obligations to the Exchange that the
other market participants do not (such
as quoting requirements and paying
membership-related non-transaction
fees). The Exchange believes that it is
equitable and not unfairly
discriminatory to assess a higher fee to
market participants that do not have
such requirements and obligations that
Exchange Market Makers do. The
Exchange believes the proposed fees
and rebates for regular orders in Mini
Options will encourage use of Mini
Options, which are designed to allow
investors to reduce risk in high-priced
underlying securities.
PO 00000
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Sfmt 4703
PMM Linkage Credit
The Exchange believes it is
reasonable, equitable and not unfairly
discriminatory to provide a fee credit to
PMMs for execution of Priority
Customer orders in Mini Options in
Non-Select Symbols and to Priority
Customer and Professional Customer
orders in Mini Options in Select
Symbols to offset the costs incurred by
PMMs as these fees will be uniformly
applied to all PMMs that route out these
orders at a rate that is 1/10th of the rate
the Exchange currently provides for
such orders in standard options.
Credit for Responses to Flash Orders
The Exchange believes it is
reasonable, equitable and not unfairly
discriminatory to provide a fee credit for
responses to Flash Orders when trading
against Professional Customers orders in
Mini Options in Non-Select Symbols
and for responses to Flash Orders when
trading against Priority Customers and
Professional Customers in the Select
Symbols at a rate that is 1/10th of the
rate the Exchange currently provides for
such orders in standard options. The
Exchange believes the credit provides
an incentive for members to trade these
orders on the Exchange. The Exchange
further believes that adopting a fee
credit for executions resulting from
responses to Priority Customer orders is
reasonable and equitable because doing
so will incentivize Exchange members
to execute Priority Customer orders on
the Exchange by trading against these
orders at the National Best Bid or Offer.
Further, the Exchange believes that the
proposed fee credit is not unfairly
discriminatory because the credit would
be applied uniformly to responses to
Priority Customer orders that are flashed
and executed on the Exchange.
Payment for Order Flow
The Exchange believes it is
reasonable, equitable and not unfairly
discriminatory to charge a PFOF fee to
Market Makers when trading against
Priority Customers in GOOG because
the Exchange already charges this fee for
standard options in GOOG and is
simply proposing to charge this fee at a
level that is 1/10th the rate for standard
options in GOOG. The Exchange
believes the proposed fee is equitable
and not unfairly discriminatory because
it will apply to all Exchange Market
Makers. The Exchange does not
currently charge a PFOF fee for standard
options in AAPL, AMZN, GLD and SPY
and therefore does not propose a PFOF
fee for Mini Options in these symbols.
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mstockstill on DSK4VPTVN1PROD with NOTICES
Route-Out Fee
Despite the Exchange’s costs in
routing orders to other exchanges,
which are fixed regardless of whether
the routed order is a standard option or
a Mini Option, the Exchange has
determined to charge a fee for routing
out orders in Mini Options that is
1/10th of the fee the Exchange charges
for routing out orders in standard
options. The Exchange believes it is
reasonable, equitable and not unfairly
discriminatory as these fees will be
uniformly applied to all market
participants that choose to trade Mini
Options on the Exchange.
Complex Order Fees and Rebates for
Mini Options
The Exchange has determined to
charge fees and provide rebates for
complex orders in Mini Options at a rate
that is 1/10th the rate of fees and rebates
the Exchange currently provides for
trading in standard options. The
Exchange believes it is reasonable and
equitable and not unfairly
discriminatory to assess lower fees and
rebates to provide market participants
an incentive to trade Mini Options on
the Exchange. The Exchange believes
the proposed fees and rebates are
reasonable and equitable in light of the
fact that Mini Options do have a smaller
exercise and assignment value,
specifically 1/10th that of a standard
option contract, and, as such, levying
fees that are 1/10th of what market
participants pay today. As for Priority
Customers, for the most part, the
Exchange does not charge Priority
Customers a fee (Priority Customers
have traditionally traded options on the
Exchange without a fee) and to the
extent they pay a transaction fee for
trading in standard options, they will
continue to pay a transaction fee in Mini
Options but at 1/10th the rate they pay
for standard options. With respect to
fees to Non-ISE Market Maker orders,
the Exchange believes that charging
Non-ISE Market Maker orders a higher
rate than the fee charged to Market
Maker, Firm Proprietary/Broker-Dealer
and Professional Customer complex
orders is appropriate and not unfairly
discriminatory because Non-ISE Market
Makers are not subject to many of the
non-transaction based fees that these
other categories of membership are
subject to, e.g., membership fees, access
fees, API/Session fees, market data fees,
etc. Therefore, the Exchange believes it
is appropriate and not unfairly
discriminatory to assess a higher
transaction fee to Non-ISE Market
Makers because the Exchange incurs
costs associated with these types of
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20:02 Apr 05, 2013
Jkt 229001
orders that are not recovered by nontransaction based fees paid by members.
With respect to fees for Market Maker
orders, the Exchange believes that the
price differentiation between the
various market participants is
appropriate and not unfairly
discriminatory because Market Makers
have different requirements and
obligations to the Exchange that the
other market participants do not (such
as quoting requirements and paying
membership-related non-transaction
fees). The Exchange believes that it is
equitable and not unfairly
discriminatory to assess a higher fee to
market participants that do not have
such requirements and obligations that
Exchange Market Makers do. The
Exchange believes the proposed fees
and rebates for complex orders in Mini
Options will encourage use of Mini
Options, which are designed to allow
investors to reduce risk in high-priced
underlying securities.
The Exchange believes that it is
reasonable and equitable to provide
rebates for Priority Customer complex
orders in Mini Options when these
orders trade with Non-Priority Customer
complex orders in the complex order
book because paying a rebate will attract
additional order flow to the Exchange
and create liquidity in Mini Options,
which the Exchange believes ultimately
will benefit all market participants who
trade on ISE. The Exchange already
provides these rebates for standard
options that overlie the five securities
on which Mini Options are approved for
trading. The Exchange believes that the
proposed rebates are competitive and
are therefore reasonable and equitably
allocated to those members that direct
orders to the Exchange rather than to a
competing exchange. The Exchange also
believes it is reasonable, equitable and
not unfairly discriminatory to combine
volume in standard options and Mini
Options to calculate the tier a Member
has reached because doing so will
provided members with an opportunity
to qualify for increased rebates and
therefore, incentivize members to trade
more of such order flow on the
Exchange.
Firm Fee Cap
The Exchange believes it is reasonable
and equitable and not unfairly
discriminatory to include Mini Options
in the Exchange’s fee cap program
because it will potentially lower
transaction fees for members providing
liquidity in Mini Options on the
Exchange. Members who reach the fee
cap during a month will not have to pay
incremental transaction fees and thus
will be able to lower their monthly fees.
PO 00000
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20995
The Exchange believes that the fee cap
is not unfairly discriminatory because
all members, including non-ISE market
makers, are eligible to reach the cap.
The Exchange believes that the
proposed service fee, which is 1/10th of
the service fee charged for standard
options, is reasonable because members
who reach the fee cap during a month
will pay the service fee instead of the
regular transaction fees and thus will be
able to lower their monthly fees.
QCC and Solicitation Rebate
The Exchange believes it is
reasonable, equitable and not unfairly
discriminatory to provided rebates for
QCC and Solicitation orders in Mini
Options. The Exchange believes that the
proposed fee change will generally
allow the Exchange and its members to
better compete for order flow and thus
enhance competition. Specifically, the
Exchange believes that its proposal is
reasonable as it will encourage members
to direct their QCC and Solicitation
orders in Mini Options to the Exchange
instead of sending this order flow to a
competing exchange. The Exchange
believes that with the various tiers,
which provides for additional volume
thresholds, members will have the
ability to qualify for higher rebates for
sending their QCC and Solicitation
orders in Mini Options to the Exchange.
While the Exchange proposes to adopt
the rebate levels for QCC and
Solicitation orders in Mini Options that
are 1/10th of the rebate for standard
options, the Exchange is also proposing
to combine volume in Mini Options and
standard options to allow members to
reach a higher tier and therefore, qualify
for higher rebates. The Exchange also
believes that its rebate program for QCC
and Solicitation orders is equitable
because it would uniformly apply to all
members engaged in QCC and
Solicitation trading in Mini Options
traded on the Exchange.
Complex Quoting in GLD
The Exchange believes it is
reasonable, equitable and not unfairly
discriminatory to charge the proposed
maker fee for complex quoting in Mini
Options in GLD. The Exchange believes
it is reasonable and equitable to charge
fees for orders in standard options
executed in the complex order book
when trading against Priority Customers
in GLD given this unique functionality
that allows Market Makers to quote in
the complex order book. The Exchange
believes that the proposed maker fee for
complex orders in Mini Options in GLD
is not unfairly discriminatory because
the fees proposed herein are already
applicable to complex orders in
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standard options in GLD; with this
proposed rule change, the Exchange is
simply extending fees that are already
established on the Exchange to Mini
Options in GLD at a rate that is 1/10th
of the fee charged for standard options
in GLD.
mstockstill on DSK4VPTVN1PROD with NOTICES
Options Regulatory Fee
The Exchange is not proposing any
change to the ORF with the introduction
of Mini Options. The Exchange believes
it is reasonable, equitable and not
unfairly discriminatory to charge the
ORF at the same rate for Mini Options
as the Exchange charges for standard
options. The Exchange believes that the
cost to perform surveillance to ensure
compliance with various Exchange and
industry-wide rules is no different for
Mini Options that it is for standard
options. Reducing the ORF for Mini
Options could result in a higher ORF for
standard options. Such an outcome
would arguably be discriminatory
towards investors in standard options
for the benefit of investors in Mini
Options. Therefore, the Exchange
believes it is appropriate to treat both
Mini Options and standard options the
same with respect to the amount of ORF
that is being charged.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
ISE 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. This rule change is
designed to provide greater specificity
within the Schedule of Fees with
respect to fees and rebates applicable to
Mini Options.
The Exchange believes that the
proposed fees and rebates for Mini
Options which, with the exception to
the ORF, are 1/10th of the fees and
rebates the Exchange currently charges
for standard options will not impose a
burden on competition among various
market participants on the Exchange, or
between the Exchange and other
exchanges that list and trade Mini
Options, that is not necessary or
appropriate in furtherance of the
purposes of the Act. The Exchange
believes that charging different rates to
different market participants does not
impose a burden on competition for a
number of reasons. For one, charging
lower fees, or no fees, to Priority
Customer orders attracts that order flow
to the Exchange and thereby creates
liquidity to the benefit of all market
participants who trade on the Exchange.
Further, Market Makers have certain
obligations and commitments to the
Exchange that non-Market Makers (i.e.,
VerDate Mar<15>2010
20:02 Apr 05, 2013
Jkt 229001
Non-ISE Market Makers, Firm
Proprietary/Broker-Dealer and
Professional Customer participants) do
not and therefore it is appropriate for
the Exchange to charge Market Makers
fees that are different from those
charged to other market participants.
Further, the Exchange notes that for
standard options a greater difference in
fees for various market participants
already exists than that which is
proposed for Mini Options. For
example, Priority Customers already
trade for lower taker fees than do Market
Makers when trading complex orders on
the Exchange. For complex orders in
standard options, ISE Market Makers
currently pays a taker fee as high as
$0.82 per contract for Non-Select
Symbols (which are essentially nonPenny Pilot symbols) while the taker fee
for Non-ISE Market Maker, Firm
Proprietary/Broker-Dealer and
Professional Customer orders in these
symbols is $0.84 per contract. For
complex orders in standard options in
these symbols, Priority Customers do
not pay a taker fee. For Mini Options in
these symbols, the taker fee proposed by
the Exchange for ISE Market Makers is
$0.082 per contract, 1/10th of the fee
charged for standard options in these
symbols, while the taker fee proposed
by the Exchange for Non-ISE Market
Maker, Firm Proprietary/Broker-Dealer
and Professional Customer orders in
these symbols is $0.084 per contract,
again 1/10th of the fee charged for
standard options. The differential for
Mini Options is de minimus compared
to the differential for standard options.
The Exchange notes that the
difference in fees for various
participants in standard options has not
proven to be a burden on competition.
Therefore, the fee differential for Mini
Options, being quite a bit smaller,
should not prove to be a burden on
competition. Mini Options are a new
product being introduced to the listed
options market and while the Exchange
at this time believes that the proposed
fees and rebates are appropriate, the
impact of this proposed rule change will
only be known for certain once Mini
Options have begun trading.
The Exchange notes that it operates in
a highly competitive environment in
which market participants can readily
direct their order flow to competing
exchanges. In such an environment, the
Exchange must continually review, and
consider adjusting, its fees and rebates
to remain competitive with other
exchanges. For the reasons noted above,
the Exchange believes that the proposed
rule change reflects this competitive
environment.
PO 00000
Frm 00114
Fmt 4703
Sfmt 4703
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 18 and
subparagraph (f)(2) of Rule 19b–4
thereunder,19 because it establishes a
due, fee, or other charge imposed by
ISE.
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
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–2013–28 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–2013–28. 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
18 15
19 17
E:\FR\FM\08APN1.SGM
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
08APN1
Federal Register / Vol. 78, No. 67 / Monday, April 8, 2013 / Notices
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–
2013–28 and should be submitted on or
before April 29, 2013.
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I and II 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.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Kevin M. O’Neill,
Deputy Secretary.
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 those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
[FR Doc. 2013–08092 Filed 4–5–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69267; File No. SR–
NYSEArca–2013–27]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Amending Its Option
Trading Rules to Extend the Operation
of Its Pilot Program Regarding
Minimum Value Sizes for Flexible
Exchange Options, Currently
Scheduled to Expire on March 29,
2013, Until March 31, 2014
mstockstill on DSK4VPTVN1PROD with NOTICES
April 2, 2013.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on March
28, 2013, NYSE Arca, Inc. (the
‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend its
option trading rules to extend the
operation of its pilot program (‘‘Pilot
Program’’) regarding minimum value
sizes for flexible exchange options
(‘‘FLEX Options’’), currently scheduled
to expire on March 29, 2013, until
March 31, 2014. The text of the
proposed rule change is available on the
Exchange’s Web site at www.nyse.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
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange hereby proposes to
amend its option trading rules to extend
the operation of its Pilot Program
regarding minimum value sizes for
FLEX Options, currently scheduled to
expire on March 29, 2013,4 until March
31, 2014. This filing does not propose
any substantive changes to the Pilot
Program and contemplates that all other
terms of FLEX Options will remain the
same. Overall, the Exchange believes
that extending the Pilot Program will
benefit public customers and other
market participants who will be able to
20 17
1 15
VerDate Mar<15>2010
20:02 Apr 05, 2013
4 See Securities Exchange Act Release No. 66650
(March 23, 2012), 77 FR 19048 (March 29, 2012)
(SR–NYSEArca–2012–20).
Jkt 229001
PO 00000
Frm 00115
Fmt 4703
Sfmt 4703
20997
use FLEX Options to manage risk for
smaller portfolios.
In support of the proposed extension
of the Pilot Program, and as required by
the terms of the Pilot Program’s
implementation,5 the Exchange has
submitted to the Securities and
Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) a Pilot Program Report
that provides an analysis of the Pilot
Program covering the period during
which the Pilot Program has been in
effect. This Pilot Program Report
includes (i) data and analysis on the
open interest and trading volume in (a)
FLEX Equity Options that have opening
transactions with a minimum size of 0
to 249 contracts and less than $1 million
in underlying value; (b) FLEX Index
Options that have opening transactions
with a minimum opening size of less
than $10 million in underlying
equivalent value; and (ii) analysis on the
types of investors that initiated opening
FLEX Equity and Index Options
transactions (i.e., institutional, high net
worth, or retail). The report has been
submitted to the Commission.
The Exchange believes that there is
sufficient investor interest and demand
in the Pilot Program to warrant
extension for another three months [sic].
The Exchange believes that the Pilot
Program has provided investors with
additional means of managing their risk
exposures and carrying out their
investment objectives. The Exchange
has not experienced any adverse market
effects with respect to the Pilot Program.
If, in the future, the Exchange
proposes an additional extension of the
Pilot Program, or should the Exchange
propose to make the Pilot Program
permanent, the Exchange will submit,
along with any filing proposing such
amendments to the Pilot Program, an
additional Pilot Program Report
covering the period during which the
Pilot Program was in effect and
including the details referenced above,
along with the nominal dollar value of
the underlying security of each trade.
The Pilot Program Report would be
submitted to the Commission at least
two months prior to the expiration date
of the Pilot Program.
The Exchange notes that any positions
established under this Pilot Program
would not be impacted by the
expiration of the Pilot Program. For
example, a 10-contract FLEX Equity
Option opening position that overlies
less than $1 million in the underlying
security and expires in January 2016
could be established during the Pilot
Program. If the Pilot Program were not
extended, the position would continue
5 See
E:\FR\FM\08APN1.SGM
infra note 6.
08APN1
]]>Agencies
[Federal Register Volume 78, Number 67 (Monday, April 8, 2013)]
[Notices]
[Pages 20988-20997]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-08092]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69270; File No. SR-ISE-2013-28]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change To Establish Fees and Rebates for Mini Options
April 2, 2013.
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 March 21, 2013, the International Securities Exchange, LLC (the
``Exchange'' or the ``ISE'') filed with the Securities and Exchange
Commission the proposed rule change, as described in Items I, II, and
III below, which items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The ISE proposes to amend its Schedule of Fees to establish fees
for Mini Options. 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
ISE recently amended its rules to allow for the listing of Mini
Options on SPDR S&P 500 (``SPY''), Apple, Inc. (``AAPL''), SPDR Gold
Trust (``GLD''), Google Inc. (``GOOG'') and Amazon.com Inc.
(``AMZN'').\3\ In the Mini Options Filing, the Exchange represented to
the Commission that ``the current Schedule of Fees is not applicable to
Mini Options and that the Exchange will not begin to trade Mini Options
without a prior submission of a proposed rule change to adopt
transaction fees for Mini Options.'' \4\ The Exchange is therefore
submitting this proposed rule change to establish fees and rebates
applicable to Mini Options. This proposal also seeks to adopt a
definition for Mini Options in the Preface of the Schedule of Fees, as
options overlying ten (10) shares of AAPL, AMZN, GLD, GOOG, and SPY.
For purposes of the Exchange's fee schedule, Mini Options in SPY, AAPL,
GLD and AMZN are classified as Select Symbols \5\ while Mini Options in
GOOG is classified as a Non-Select Symbol.\6\
---------------------------------------------------------------------------
\3\ Mini Options were approved for trading on September 28,
2012. See Securities Exchange Act Release No. 67948 (September 28,
2012), 77 FR 60735 (October 4, 2012) (SR-ISE-2012-58) (``Mini
Options Filing'').
\4\ Id.
\5\ ``Select Symbols'' are options overlying all symbols listed
on the ISE that are in the Penny Pilot Program.
\6\ ``Non-Select Symbols'' are options overlying all symbols
excluding Select Symbols.
---------------------------------------------------------------------------
Mini Options have a smaller exercise and assignment value due to
the reduced number of shares they deliver as compared to standard
option contracts. As such, the Exchange is proposing to adopt per
contract fees and rebates that are 1/10th of the fees and rebates for
standard option contracts, with some exceptions. Despite the
[[Page 20989]]
smaller exercise and assignment value of Mini Options, the cost to the
Exchange to process quotes and orders in Mini Options, perform
regulatory surveillance and retain quotes and orders for archival
purposes is the same as for a standard contract. The Exchange believes
that adopting fees and rebates for Mini Options that are in some cases
lower than fees and rebates for standard option contracts, and in other
cases the same as for standard option contracts, is appropriate, not
unreasonable, not unfairly discriminatory and not burdensome to
competition between participants, or between the Exchange and other
exchanges that list and trade Mini Options.
A. Regular Order Fees and Rebates for Mini Options
The Exchange proposes to adopt separate tables for fees and rebates
applicable to regular orders in Mini Options. The fees and rebates
listed in the table below are 1/10th of the fees and rebates currently
applicable to regular orders for standard options in classes that
overlie SPY, AAPL, GLD, AMZN, and GOOG:
Select Symbols
----------------------------------------------------------------------------------------------------------------
Facilitation
Fee for Fee for and
Market participant Maker Taker fee crossing responses PIM break- solicitation
rebate/fee orders to crossing up rebate break-up
orders rebate
----------------------------------------------------------------------------------------------------------------
Market Maker Plus............... ($0.010) $0.032 $0.020 $0.040 N/A N/A
Market Maker.................... 0.010 0.032 0.020 0.040 N/A N/A
Non-ISE Market Maker (FarMM).... 0.010 0.036 0.020 0.040 ($0.025) ($0.015)
Firm Proprietary/Broker-Dealer.. 0.010 0.033 0.020 0.040 (0.025) (0.015)
Professional Customer........... 0.010 0.033 0.020 0.040 (0.025) (0.015)
Priority Customer............... 0.000 0.025 0.000 0.040 (0.025) (0.015)
----------------------------------------------------------------------------------------------------------------
Non-Select Symbols
----------------------------------------------------------------------------------------------------------------
Fee for
Fee for responses to
Market participant Fee crossing crossing
orders orders
----------------------------------------------------------------------------------------------------------------
Market Maker.................................................... $0.018 $0.018 $0.018
Market Maker (for orders sent by Electronic Access Members)..... 0.020 0.020 0.020
Non-ISE Market Maker (FarMM).................................... 0.045 0.020 0.045
Firm Proprietary/Broker-Dealer.................................. 0.020 0.020 0.020
Professional Customer........................................... 0.020 0.020 0.020
Priority Customer............................................... 0.000 0.000 0.020
----------------------------------------------------------------------------------------------------------------
For Mini Options in the Select Symbols, the following maker fees
and rebates shall apply: (i) For Market Maker,\7\ Non-ISE Market
Maker,\8\ Firm Proprietary/Broker-Dealer and Professional Customer \9\
orders, $0.010 per contract; (ii) for Priority Customer \10\ orders,
$0.000 per contract; and (iii) for Market Maker Plus \11\ orders, a
rebate of $0.010 per contract. For Mini Options in the Select Symbols,
the following taker fees shall apply: (i) For Market Maker and Market
Maker Plus orders, $0.032 per contract; (ii) for Non-ISE Market Maker
orders, $0.036 per contract; (iii) for Firm Proprietary/Broker-Dealer
and Professional Customer orders, $0.033 per contract; and (iv) for
Priority Customer orders, $0.025 per contract.
---------------------------------------------------------------------------
\7\ The term ``Market Makers'' refers to ``Competitive Market
Makers'' and ``Primary Market Makers'' collectively. See ISE Rule
100(a)(25).
\8\ A Non-ISE Market Maker, or Far Away Market Maker
(``FarMM''), is a market maker as defined in Section 3(a)(38) of the
Securities Exchange Act of 1934 registered in the same options class
on another options exchange.
\9\ A Professional Customer is a person who is not a broker/
dealer and is not a Priority Customer.
\10\ A Priority Customer is defined in ISE Rule 100(a)(37A) as a
person or entity that is not a broker/dealer in securities, and does
not place more than 390 orders in listed options per day on average
during a calendar month for its own beneficial account(s).
\11\ In order to promote and encourage liquidity in Mini Options
in the Select Symbols, the Exchange proposes to adopt a $0.010 per
contract rebate to Market Makers if the quotes they sent to the
Exchange qualify the Market Maker to become a Market Maker Plus. A
Market Maker Plus is a 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 for all expiration months in that
symbol during the current trading month. A Market Maker's single
best and single worst overall quoting days each month, on a per
symbol basis, is excluded in calculating whether a Market Maker
qualifies for this rebate, if doing so will qualify a Market Maker
for the rebate.
---------------------------------------------------------------------------
Additionally, the Exchange proposes to charge Market Maker, Market
Maker Plus, Non-ISE Market Maker, Firm Proprietary/Broker-Dealer and
Professional Customers a fee of $0.020 per contract ($0.000 per
contract for Priority Customers) for regular Crossing Orders for Mini
Options in the Select Symbols, and a fee of $0.040 per contract to all
market participants for regular Responses to Crossing Orders for Mini
Options in the Select Symbols.
The Exchange also proposes to adopt a rebate of $0.025 per contract
for contracts that are submitted to the Price Improvement Mechanism
that do not trade with their contra order for Mini Options in the
Select Symbols, and a rebate of $0.015 per contract for contracts that
are submitted to the Facilitation and Solicited Order Mechanisms that
do not trade with their contra order for Mini Options in the Select
Symbols except when those contracts trade against pre-existing orders
and quotes on the Exchange's orderbook.
For Mini Options in Non-Select Symbols, the following fees shall
apply: (i) For Market Maker orders, a fee of $0.018 per contract; (ii)
for Market
[[Page 20990]]
Maker (for orders sent by Electronic Access Members), Firm Proprietary/
Broker-Dealer and Professional Customer orders, a fee of $0.020 per
contract; (iii) for Non-ISE Market Maker orders, a fee of $0.045 per
contract; and (iv) for Priority Customer orders, a fee of $0.000 per
contract.
Additionally, for regular Crossing Orders for Mini Options in Non-
Select Symbols, the following fees shall apply: (i) Ct Market Makers, a
fee of $0.018 per contract; (ii) for Market Maker (for orders sent by
Electronic Access Members), Non-ISE Market Maker, Firm Proprietary/
Broker-Dealer and Professional Customers, a fee of $0.020 per contract;
and (iii) for Priority Customers, a fee of $0.000 per contract. For
regular Responses to Crossing Orders for Mini Options in Non-Select
Symbols, the following fees shall apply: (i) For Market Makers, $0.018
per contract; (ii) for Non-ISE Market Maker, $0.045 per contract; and
(iii) for Market Maker (for orders sent by Electronic Access Members),
Firm Proprietary/Broker-Dealer, Professional Customer and Priority
Customers, a fee of $0.020 per contract.
Further, the Exchange currently charges Primary Market Makers
(PMMs) a transaction fee for standard options in Non-Select Symbols
when they trade report a Priority Customer or Professional Customer
order in accordance with their obligation to provide away market price
protection. This fee shall also apply to Mini Options in Non-Select
Symbols. On the other hand, for standard options in the Select Symbols,
PMMs do not receive a maker rebate nor pay a taker fee when trade
reporting. With this proposed rule change, PMMs in Mini Options in the
Select Symbols will also not receive a maker rebate nor pay a taker fee
when trade reporting.
PMM Linkage Credit
The Exchange also proposes to adopt a $0.020 per contract fee
credit to PMMs for execution of Priority Customer orders in Mini
Options in Non-Select Symbols \12\--for classes in which it serves as a
PMM--that send an Intermarket Sweep Order to other exchanges. This
credit will be applied regardless of the transaction fee charged by a
destination market. For PMMs executing Priority Customer orders in Mini
Options in the Select Symbols, this credit will be equal to the fee
charged by the destination market, and for executing Professional
Customer orders, the fee credit will be equal to the fee charged by a
destination market, but not more than $0.045 per contract.
---------------------------------------------------------------------------
\12\ This fee credit applies to only GOOG as GOOG is the only
Non-Select Symbol approved as a Mini Option.
---------------------------------------------------------------------------
Credit for Responses to Flash Orders
The Exchange proposes to adopt a $0.020 per contract credit for
responses to Flash Orders for Mini Option in Non-Select Symbols when
trading against Professional Customers. For Mini Options in the Select
Symbols, the per contract fee credit for responses to Flash Orders will
be (i) $0.010 per contract when trading against Priority Customers; and
(ii) $0.010 per contract when trading against Professional Customers.
Payment for Order Flow
The Exchange proposes to adopt a payment for order flow (PFOF) fee
of $0.07 per contract, applicable to Market Makers when trading against
Priority Customer orders in Mini Options in Non-Penny Pilot
Symbols.\13\ The Exchange will not charge a PFOF fee for trading Mini
Options in the Select Symbols.
---------------------------------------------------------------------------
\13\ For the purposes of the PFOF fee noted in the Schedule of
Fees, GOOG is a Non-Penny Pilot Symbol because all Non-Select
Symbols are Non-Penny Pilot Symbols. Therefore, the PFOF fee
proposed in this filing will apply only to Mini Options in GOOG.
---------------------------------------------------------------------------
Route-Out Fees
Consistent with Distributive Linkage and pursuant to ISE rules,
PMMs have an obligation to address customer \14\ orders when there is a
better market displayed on another exchange. ISE's PMMs meet this
obligation via the use of Intermarket Sweep Orders (``ISOs''). With the
costs associated with servicing customer orders that must be executed
at another exchange, the Exchange currently charges a fee, at a rate of
$0.45 per contract for Professional Customers and $0.35 per contract
for Priority Customers, for executions that result from the PMM routing
ISOs to another exchange. This fee applies to standard options in all
symbols traded on the Exchange. At this time, the Exchange proposes to
charge 1/10th of the fee for routing out Mini Options than the fee
charged by the Exchange for routing out standard options. Specifically,
the Exchange proposes to adopt a route-out fee of $0.045 per contract
for Professional Customer orders in Mini Options that are routed out
for execution and a fee of $0.035 per contract for Priority Customer
orders in Mini Options that are routed out for execution.
---------------------------------------------------------------------------
\14\ Pursuant to ISE Rule 1900(f) of the Distributive Linkage
rules, a customer is an individual or organization that is not a
broker-dealer.
---------------------------------------------------------------------------
B. Complex Order Fees and Rebates for Mini Options
The Exchange proposes to adopt separate tables for fees and rebates
applicable to complex orders in Mini Options. The fees and rebates
listed in the table below are 1/10th of the fees and rebates currently
applicable to complex orders for standard options in classes that
overlie SPY, AAPL, GLD, AMZN, and GOOG:
Rebates
--------------------------------------------------------------------------------------------------------------------------------------------------------
Rebate for
Priority Rebate for
Customer Priority Facilitation
Rebate for orders that Customer and
Select Rebate for trade with orders that PIM Break- solicitation
Market participant Symbols Rebate for Non-select quotes and trade with up Rebate Break-up
(excluding SPY Symbols orders on the quotes and for Select Rebate for
SPY) regular orders on the Symbols Select
orderbook regular Symbols
(excluding orderbook In
SPY) SPY
--------------------------------------------------------------------------------------------------------------------------------------------------------
Market Maker.......................................... N/A N/A N/A N/A N/A N/A N/A
Non-ISE Market Maker (FarMM).......................... N/A N/A N/A N/A N/A ($0.025) ($0.015)
Firm Proprietary/Broker-Dealer........................ N/A N/A N/A N/A N/A (0.025) (0.015)
Professional Customer................................. N/A N/A N/A N/A N/A (0.025) (0.015)
[[Page 20991]]
Priority Customer Complex ADV 0-39,999................ ($0.033) ($0.036) ($0.066) ($0.006) ($0.007) (0.025) (0.015)
Priority Customer Complex ADV 40,000-74,999........... (0.035) (0.038) (0.072) (0.008) (0.009) (0.025) (0.015)
Priority Customer Complex ADV 75,000-124,999.......... (0.037) (0.039) (0.075) (0.009) (0.010) (0.025) (0.015)
Priority Customer Complex ADV 125,000-224,999......... (0.039) (0.040) (0.077) (0.010) (0.011) (0.025) (0.015)
Priority Customer Complex ADV 225,000+................ (0.040) (0.041) (0.078) (0.011) (0.012) (0.025) (0.015)
Incremental Priority Customer Complex ADV above (0.001) (0.001) (0.001) (0.000) (0.000) (0.000) (0.000)
225,000..............................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
Maker Fees
----------------------------------------------------------------------------------------------------------------
Maker Fee for
Select Maker Fee for
Symbols when Maker Fee for Non-Select
Maker Fee Maker Fee trading SPY when symbols when
Market Participant for Select for Non- against trading trading
Symbols select Priority against against
Symbols Customer Priority Priority
(excluding Customer Customer
SPY)
----------------------------------------------------------------------------------------------------------------
Market Maker.......................... $0.010 $0.010 $0.039 $0.039 $0.082
Non-ISE Market Maker (FarMM).......... 0.020 0.020 0.040 0.041 0.084
Firm Proprietary/Broker-Dealer........ 0.010 0.010 0.040 0.041 0.084
Professional Customer................. 0.010 0.010 0.040 0.041 0.084
Priority Customer..................... 0.000 0.000 0.000 0.000 0.000
----------------------------------------------------------------------------------------------------------------
Taker and Other Fees
----------------------------------------------------------------------------------------------------------------
Fee for Fee for
Taker Fee Taker Fee Fee for Responses Responses
for Select Taker Fee for Non- Crossing to Crossing to Crossing
Market participant Symbols for SPY Select Orders Orders for Orders for
(excluding Symbols (largest Select non-Select
SPY) leg only) Symbols Symbols
----------------------------------------------------------------------------------------------------------------
Market Maker...................... $0.039 $0.039 $0.082 $0.020 $0.040 $0.082
Non-ISE Market Maker (FarMM)...... 0.040 0.041 0.084 0.020 0.040 0.084
Firm Proprietary/Broker-Dealer.... 0.040 0.041 0.084 0.020 0.040 0.084
Professional Customer............. 0.040 0.041 0.084 0.020 0.040 0.084
Priority Customer................. 0.000 0.000 0.000 0.000 0.040 $0.000
----------------------------------------------------------------------------------------------------------------
For complex orders in Mini Options in the Select Symbols and Non-
Select Symbols, the following maker fees shall apply: (i) $0.010 per
contract for Market Maker, Firm Proprietary/Broker-Dealer and
Professional Customer orders; (ii) $0.020 per contract for Non-ISE
Market Maker orders; and (iii) $0.000 per contract for Priority
Customer orders. For complex orders in Mini Options in the Select
Symbols when trading against Priority Customers (excluding SPY), the
following maker fees shall apply: (i) $0.039 per contract for Market
Maker orders; (ii) $0.040 for Non-ISE Market Maker, Firm Proprietary/
Broker-Dealer and Professional Customer orders; and (iii) $0.000 per
contract for Priority Customer orders. For complex orders in Mini
Options in SPY when trading against Priority Customers, the following
maker fees shall apply: (i) $0.039 per contract for Market Maker
orders; (ii) $0.041 for Non-ISE Market Maker, Firm Proprietary/Broker-
Dealer and Professional Customer orders; and (iii) $0.000 per contract
for Priority Customer orders. For complex orders in Mini Options in
non-Select Symbols when trading against Priority Customers, the
following maker fees shall apply: (i) $0.082 per contract for Market
Maker orders; (ii) $0.084 for Non-ISE Market Maker, Firm Proprietary/
Broker-Dealer and Professional Customer orders; and (iii) $0.000 per
contract for Priority Customer orders.
For complex orders in Mini Options in the Select Symbols (excluding
SPY), the following taker fees shall apply: (i) $0.039 per contract for
Market Maker
[[Page 20992]]
orders; (ii) $0.040 for Non-ISE Market Maker, Firm Proprietary/Broker-
Dealer and Professional Customer orders; and (iii) $0.000 per contract
for Priority Customer orders. For complex orders in Mini Options in
SPY, the following taker fees shall apply: (i) $0.039 per contract for
Market Maker orders; (ii) $0.041 for Non-ISE Market Maker, Firm
Proprietary/Broker-Dealer and Professional Customer orders; and (iii)
$0.000 per contract for Priority Customer orders. For complex orders in
Mini Options in non-Select Symbols, the following taker fees shall
apply: (i) $0.082 per contract for Market Maker orders; (ii) $0.084 for
Non-ISE Market Maker, Firm Proprietary/Broker-Dealer and Professional
Customer orders; and (iii) $0.000 per contract for Priority Customer
orders.
Additionally, the Exchange proposes to charge Market Maker, Non-ISE
Market Maker, Firm Proprietary/Broker-Dealer and Professional Customers
a fee of: (i) $0.020 per contract ($0.000 per contract for Priority
Customers) for Crossing Orders for complex orders in Mini Options; (ii)
$0.040 per contract to all market participants for Responses to
Crossing Orders for complex orders in Mini Options in the Select
Symbols; and (iii) $0.082 per contract for Market Makers ($0.084 per
contract for Non-ISE Market Maker, Firm Proprietary/Broker-Dealer and
Professional Customers and $0.000 per contract for Priority Customers)
for Responses to Crossing Orders for complex orders in Mini Options in
non-Select Symbols).
The Exchange currently provides volume-based tiered rebates for
Priority Customer complex orders in the Select Symbols (excluding SPY),
in SPY, and in the Non-Select Symbols for standard options when these
orders trade with non-Priority Customer orders in the complex order
book. The Exchange proposes to extend this rebate program to Mini
Options also, as follows:
For Mini Options in Select Symbols (excluding SPY), the Exchange
proposes to adopt a base rebate of $0.033 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 a certain level of average daily
volume (ADV) of executed Priority Customer complex order contracts
across all symbols during a calendar month will be provided a rebate of
$0.035 per contract, per leg, in these symbols, if a Member achieves an
ADV of 40,000 Priority Customer complex order contracts; $0.037 per
contract, per leg, in these symbols, if a Member achieves an ADV of
75,000 Priority Customer complex order contracts; $0.039 per contract,
per leg, in these symbols, if a Member achieves an ADV of 125,000
Priority Customer complex order contracts; and $0.040 per contract, per
leg, in these symbols, if a Member achieves an ADV of 225,000 Priority
Customer complex order contracts. Additionally, the Exchange also
proposes to adopt a rebate of $0.001 per contract payable for
incremental Priority Customer complex order volume when trading against
non-Priority Customer complex orders in the complex order book above
the highest tier for Mini Options in the Select Symbols (excluding
SPY).
For Mini Options in SPY, the Exchange proposes to adopt a base
rebate of $0.036 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 a
certain level of ADV of executed Priority Customer complex order
contracts across all symbols during a calendar month will be provided a
rebate of $0.038 per contract, per leg, in these symbols, if a Member
achieves an ADV of 40,000 Priority Customer complex order contracts;
$0.039 per contract, per leg, in these symbols, if a Member achieves an
ADV of 75,000 Priority Customer complex order contracts; $0.040 per
contract, per leg, in these symbols, if a Member achieves an ADV of
125,000 Priority Customer complex order contracts; and $0.041 per
contract, per leg, in these symbols, if a Member achieves an ADV of
225,000 Priority Customer complex order contracts. Additionally, the
Exchange also proposes to adopt a rebate of $0.001 per contract payable
for incremental Priority Customer complex order volume when trading
against non-Priority Customer complex orders in the complex order book
above the highest tier for Mini Options in SPY.
For Mini Options in non-Select Symbols, the Exchange proposes to
adopt a base rebate of $0.066 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 a certain level of average daily volume (ADV) of
executed Priority Customer complex order contracts across all symbols
during a calendar month will be provided a rebate of $0.072 per
contract, per leg, in these symbols, if a Member achieves an ADV of
40,000 Priority Customer complex order contracts; $0.075 per contract,
per leg, in these symbols, if a Member achieves an ADV of 75,000
Priority Customer complex order contracts; $0.077 per contract, per
leg, in these symbols, if a Member achieves an ADV of 125,000 Priority
Customer complex order contracts; and $0.078 per contract, per leg, in
these symbols, if a Member achieves an ADV of 225,000 Priority Customer
complex order contracts. Additionally, the Exchange also proposes to
adopt a rebate of $0.001 per contract payable for incremental Priority
Customer complex order volume when trading against non-Priority
Customer complex orders in the complex order book above the highest
tier for Mini Options in the non-Select Symbols.
Further, the Exchange currently provides volume-based tiered
rebates for Priority Customer complex orders in all symbols for
standard options when these orders trade against quotes or orders in
the regular orderbook. The Exchange proposes to extend this rebate to
Mini Options also, as follows:
For Mini Options (excluding SPY), the Exchange proposes to adopt a
base rebate of $0.006 per contract, per leg, for Priority Customer
complex orders when these orders trade against quotes or orders in the
regular orderbook. Additionally, members who achieve a certain level of
ADV of executed Priority Customer complex order contracts across all
symbols during a calendar month will be provided a rebate of $0.008 per
contract, per leg, in these symbols, if a Member achieves an ADV of
40,000 Priority Customer complex order contracts; $0.009 per contract,
per leg, in these symbols, if a Member achieves an ADV of 75,000
Priority Customer complex order contracts; $0.010 per contract, per
leg, in these symbols, if a Member achieves an ADV of 125,000 Priority
Customer complex order contracts; and $0.011 per contract, per leg, in
these symbols, if a Member achieves an ADV of 225,000 Priority Customer
complex order contracts.
For Mini Options in SPY, the Exchange proposes to adopt a base
rebate of $0.007 per contract, per leg, for Priority Customer complex
orders when these orders trade against quotes or orders in the regular
orderbook. Additionally, members who achieve a certain level of ADV of
executed Priority Customer complex order contracts across all symbols
during a calendar month will be provided a rebate of $0.009 per
contract, per leg, in these symbols, if a Member achieves an ADV of
40,000 Priority Customer complex order contracts; $0.010 per contract,
per leg, in these symbols, if a Member achieves an ADV of 75,000
Priority Customer complex order contracts; $0.011 per contract, per
leg, in these
[[Page 20993]]
symbols, if a Member achieves an ADV of 125,000 Priority Customer
complex order contracts; and $0.012 per contract, per leg, in these
symbols, if a Member achieves an ADV of 225,000 Priority Customer
complex order contracts.
For each of the volume-based tiered rebates noted above, the
highest rebate amount achieved by the Member for the current calendar
month will apply 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,
with the exception of the incremental rebate, as noted above. For
purposes of these volume-based tiered rebates, volume in standard
options and Mini Options will be combined to calculate the tier a
Member has reached. Based on the tier achieved, the Member will be
rebated for that tier for all the standard options traded at the
standard option rebate amount and for all the Mini Options traded at
the Mini Option rebate amount.
The Exchange also proposes to adopt a rebate of $0.025 per contract
for contracts that are submitted to the Price Improvement Mechanism
that do not trade with their contra order for Mini Options in the
Select Symbols, and a rebate of $0.015 per contract for contracts that
are submitted to the Facilitation and Solicited Order Mechanisms that
do not trade with their contra order for Mini Options in the Select
Symbols except when those contracts trade against pre-existing orders
and quotes on the Exchange's orderbook.
Firm Fee Cap
The Exchange currently has a fee cap program that, subject to
certain exclusions noted in the Schedule of Fees, is applicable across
all products traded on ISE. Under the fee cap program, the Exchange
caps proprietary transaction fees in all products traded on ISE, in the
aggregate, at $75,000 per month per Member. All proprietary
transactions, including non-ISE market maker transactions, that are
part of a crossing transaction are eligible towards the fee cap.
Crossing volume from regular and complex orders in Mini Options, such
as orders executed in the Facilitation Mechanism, Price Improvement
Mechanism, Solicited Order Mechanism, Block Order Mechanism and
Qualified Contingent Cross orders in Mini Options, counts towards the
fee cap. The Exchange proposes to extend the fee cap to also include
proprietary transactions in Mini Options that are part of a crossing
transaction.
ISE also currently has a service fee of $0.01 per side on all
transactions that are eligible for the fee cap. The service fee applies
once a member reaches the fee cap level and applies to every contract
side included in and above the fee cap. A member who does not reach the
monthly fee cap is not charged the service fee. The service fee is not
calculated in reaching the fee cap. Once the fee cap is reached, the
service fee applies to both proprietary and other account designations
\15\ in all ISE products in addition to those transactions that were
included in reaching the fee cap. For Mini Options, the Exchange
proposes to adopt a service fee of $0.001 per side on all transactions
that are eligible for the fee cap.
---------------------------------------------------------------------------
\15\ Other account designations include Prop-firm (Member
trading for its own account and clearing in the F range at OCC),
Prop-cust (Member trading for its own account and clearing in the C
range at OCC), BD-firm (Member trading on behalf of another
registered broker/dealer clearing in the F range at OCC), BD-cust
(Member trading on behalf of another registered broker/dealer
clearing in the C range at OCC), FarMM (Member trading on behalf of
another registered broker/dealer clearing in the M range at OCC).
---------------------------------------------------------------------------
QCC and Solicitation Rebate
The Exchange currently provides a rebate for Qualified Contingent
Cross (``QCC'') orders and Solicitation orders for standard options to
further encourage members to submit greater numbers of QCC orders and
Solicitation orders to the Exchange. The Exchange proposes to extend
that rebate incentive to Mini Options. With this proposed rule change,
the Exchange will provide a rebate to members who reach a certain
volume threshold in QCC orders and/or Solicitation orders in standard
options and Mini Options during a month. Once a Member reaches a volume
threshold, the Exchange will provide a rebate to that Member for all of
its QCC and Solicitation contracts traded for that month. For purposes
of this rebate, volume in standard options and Mini Options will be
combined to calculate the tier a Member has reached. Based on the tier
achieved, the Member will be rebated for that tier for all the standard
options traded at the standard option rebate amount and for all the
Mini Options traded at the Mini Option rebate amount, as provided in
the following table:
------------------------------------------------------------------------
Rebate for
Originating contract sides sandard Rebate for Mini
options Options
------------------------------------------------------------------------
0 to 199,999.......................... $0.00 $0.000
200,000 to 499,999.................... (0.07) (0.007)
500,000 to 699,999.................... (0.08) (0.008)
700,000 to 999,999.................... (0.09) (0.009)
1,000,000+............................ (0.11) (0.011)
------------------------------------------------------------------------
The rebate will be paid to the Member entering a qualifying order,
i.e., a QCC order and/or a Solicitation order. The rebate applies to
QCC orders and Solicitation orders in all symbols traded on the
Exchange. Additionally, the threshold levels are based on the
originating side so if an order is broken up and executed with multiple
counter parties, all contracts of the originating side will be counted
to reach the established threshold levels.
Complex Quoting in GLD
The Exchange currently allows Market Makers to enter quotations for
complex order strategies in the complex order book in a limited group
of symbols (``Complex Quoting Symbols''), one of which is GLD, a Mini
Option class. Given this enhancement to the complex order
functionality, and in order to maintain a competitive fee and rebate
structure for Priority Customer orders, the Exchange has adopted maker
fees that apply to transactions in the complex order book when they
interact with Priority Customer orders in options overlying the Complex
Quoting Symbols, including GLD. Specifically, the Exchange currently
charges a maker fee of $0.39 per contract for standard options in the
Complex Quoting Symbols, including GLD. Of all the Complex Quoting
Symbols, only GLD is approved for Mini Options trading and therefore,
the Exchange proposes to
[[Page 20994]]
charge a maker fee of $0.039 per contract for Mini Options in GLD for
Market Maker, Non-ISE Market Maker, Firm Proprietary/Broker-Dealer and
Professional Customer orders when these orders interact with Priority
Customer orders. Priority Customer orders in GLD that trade in the
complex order book are not charged a fee and do not receive a rebate
when interacting with other Priority Customer orders.
Options Regulatory Fee
The Exchange currently charges an Options Regulatory Fee (``ORF'')
of $0.0042 per contract. The ORF is assessed to each member for all
options transactions executed or cleared by the member that are cleared
by The Options Clearing Corporation (``OCC'') in the customer range,
regardless of the exchange on which the transaction occurs. The
Exchange is proposing to charge the same rate for transactions in Mini
options, $0.0042 per contract, since, as noted above, the costs to the
Exchange to perform the necessary regulatory surveillance programs and
procedures for Mini Options are the same as for standard option
contracts. As such, the Exchange feels that it is appropriate to charge
the ORF at the same rate as the standard option contract.
The Exchange has designated this proposal to be operative on March
18, 2013.
2. Statutory Basis
The Exchange believes that its proposal to amend its Schedule of
Fees is consistent with Section 6(b) of the Act \16\ in general, and
furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act \17\
in particular, in that it is an equitable allocation of reasonable fees
and other charges among Exchange members and other persons using its
facilities and does not unfairly discriminate between issuers, brokers
or dealers.
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
Regular Order Fees and Rebates for Mini Options
The Exchange has determined to charge fees and provide rebates for
regular orders in Mini Options at a rate that is 1/10th the rate of
fees and rebates the Exchange currently provides for trading in
standard options. The Exchange believes it is reasonable and equitable
and not unfairly discriminatory to assess lower fees and rebates to
provide market participants an incentive to trade Mini Options on the
Exchange. The Exchange believes the proposed fees and rebates are
reasonable and equitable in light of the fact that Mini Options do have
a smaller exercise and assignment value, specifically 1/10th that of a
standard option contract, and, as such, levying fees that are 1/10th of
what market participants pay today. As for Priority Customers, for the
most part, the Exchange does not charge Priority Customers a fee
(Priority Customers have traditionally traded options on the Exchange
without a fee) and to the extent they pay a transaction fee for trading
in standard options, they will continue to pay a transaction fee in
Mini Options but at 1/10th the rate they pay for standard options. The
Exchange believes charging lower fees, or no fees, to Priority Customer
orders attracts that order flow to the Exchange and thereby creates
liquidity to the benefit of all market participants who trade on the
Exchange. With respect to fees to Non-ISE Market Maker orders, the
Exchange believes that charging Non-ISE Market Maker orders a higher
rate than the fee charged to Market Maker, Firm Proprietary/Broker-
Dealer and Professional Customer regular orders is appropriate and not
unfairly discriminatory because Non-ISE Market Makers are not subject
to many of the non-transaction based fees that these other categories
of membership are subject to, e.g., membership fees, access fees, API/
Session fees, market data fees, etc. Therefore, the Exchange believes
it is appropriate and not unfairly discriminatory to assess a higher
transaction fee to Non-ISE Market Makers because the Exchange incurs
costs associated with these types of orders that are not recovered by
non-transaction based fees paid by members. With respect to fees for
Market Maker orders, the Exchange believes that the price
differentiation between the various market participants is appropriate
and not unfairly discriminatory because Market Makers have different
requirements and obligations to the Exchange that the other market
participants do not (such as quoting requirements and paying
membership-related non-transaction fees). The Exchange believes that it
is equitable and not unfairly discriminatory to assess a higher fee to
market participants that do not have such requirements and obligations
that Exchange Market Makers do. The Exchange believes the proposed fees
and rebates for regular orders in Mini Options will encourage use of
Mini Options, which are designed to allow investors to reduce risk in
high-priced underlying securities.
PMM Linkage Credit
The Exchange believes it is reasonable, equitable and not unfairly
discriminatory to provide a fee credit to PMMs for execution of
Priority Customer orders in Mini Options in Non-Select Symbols and to
Priority Customer and Professional Customer orders in Mini Options in
Select Symbols to offset the costs incurred by PMMs as these fees will
be uniformly applied to all PMMs that route out these orders at a rate
that is 1/10th of the rate the Exchange currently provides for such
orders in standard options.
Credit for Responses to Flash Orders
The Exchange believes it is reasonable, equitable and not unfairly
discriminatory to provide a fee credit for responses to Flash Orders
when trading against Professional Customers orders in Mini Options in
Non-Select Symbols and for responses to Flash Orders when trading
against Priority Customers and Professional Customers in the Select
Symbols at a rate that is 1/10th of the rate the Exchange currently
provides for such orders in standard options. The Exchange believes the
credit provides an incentive for members to trade these orders on the
Exchange. The Exchange further believes that adopting a fee credit for
executions resulting from responses to Priority Customer orders is
reasonable and equitable because doing so will incentivize Exchange
members to execute Priority Customer orders on the Exchange by trading
against these orders at the National Best Bid or Offer. Further, the
Exchange believes that the proposed fee credit is not unfairly
discriminatory because the credit would be applied uniformly to
responses to Priority Customer orders that are flashed and executed on
the Exchange.
Payment for Order Flow
The Exchange believes it is reasonable, equitable and not unfairly
discriminatory to charge a PFOF fee to Market Makers when trading
against Priority Customers in GOOG because the Exchange already charges
this fee for standard options in GOOG and is simply proposing to charge
this fee at a level that is 1/10th the rate for standard options in
GOOG. The Exchange believes the proposed fee is equitable and not
unfairly discriminatory because it will apply to all Exchange Market
Makers. The Exchange does not currently charge a PFOF fee for standard
options in AAPL, AMZN, GLD and SPY and therefore does not propose a
PFOF fee for Mini Options in these symbols.
[[Page 20995]]
Route-Out Fee
Despite the Exchange's costs in routing orders to other exchanges,
which are fixed regardless of whether the routed order is a standard
option or a Mini Option, the Exchange has determined to charge a fee
for routing out orders in Mini Options that is 1/10th of the fee the
Exchange charges for routing out orders in standard options. The
Exchange believes it is reasonable, equitable and not unfairly
discriminatory as these fees will be uniformly applied to all market
participants that choose to trade Mini Options on the Exchange.
Complex Order Fees and Rebates for Mini Options
The Exchange has determined to charge fees and provide rebates for
complex orders in Mini Options at a rate that is 1/10th the rate of
fees and rebates the Exchange currently provides for trading in
standard options. The Exchange believes it is reasonable and equitable
and not unfairly discriminatory to assess lower fees and rebates to
provide market participants an incentive to trade Mini Options on the
Exchange. The Exchange believes the proposed fees and rebates are
reasonable and equitable in light of the fact that Mini Options do have
a smaller exercise and assignment value, specifically 1/10th that of a
standard option contract, and, as such, levying fees that are 1/10th of
what market participants pay today. As for Priority Customers, for the
most part, the Exchange does not charge Priority Customers a fee
(Priority Customers have traditionally traded options on the Exchange
without a fee) and to the extent they pay a transaction fee for trading
in standard options, they will continue to pay a transaction fee in
Mini Options but at 1/10th the rate they pay for standard options. With
respect to fees to Non-ISE Market Maker orders, the Exchange believes
that charging Non-ISE Market Maker orders a higher rate than the fee
charged to Market Maker, Firm Proprietary/Broker-Dealer and
Professional Customer complex orders is appropriate and not unfairly
discriminatory because Non-ISE Market Makers are not subject to many of
the non-transaction based fees that these other categories of
membership are subject to, e.g., membership fees, access fees, API/
Session fees, market data fees, etc. Therefore, the Exchange believes
it is appropriate and not unfairly discriminatory to assess a higher
transaction fee to Non-ISE Market Makers because the Exchange incurs
costs associated with these types of orders that are not recovered by
non-transaction based fees paid by members. With respect to fees for
Market Maker orders, the Exchange believes that the price
differentiation between the various market participants is appropriate
and not unfairly discriminatory because Market Makers have different
requirements and obligations to the Exchange that the other market
participants do not (such as quoting requirements and paying
membership-related non-transaction fees). The Exchange believes that it
is equitable and not unfairly discriminatory to assess a higher fee to
market participants that do not have such requirements and obligations
that Exchange Market Makers do. The Exchange believes the proposed fees
and rebates for complex orders in Mini Options will encourage use of
Mini Options, which are designed to allow investors to reduce risk in
high-priced underlying securities.
The Exchange believes that it is reasonable and equitable to
provide rebates for Priority Customer complex orders in Mini Options
when these orders trade with Non-Priority Customer complex orders in
the complex order book because paying a rebate will attract additional
order flow to the Exchange and create liquidity in Mini Options, which
the Exchange believes ultimately will benefit all market participants
who trade on ISE. The Exchange already provides these rebates for
standard options that overlie the five securities on which Mini Options
are approved for trading. The Exchange believes that the proposed
rebates are competitive and are therefore reasonable and equitably
allocated to those members that direct orders to the Exchange rather
than to a competing exchange. The Exchange also believes it is
reasonable, equitable and not unfairly discriminatory to combine volume
in standard options and Mini Options to calculate the tier a Member has
reached because doing so will provided members with an opportunity to
qualify for increased rebates and therefore, incentivize members to
trade more of such order flow on the Exchange.
Firm Fee Cap
The Exchange believes it is reasonable and equitable and not
unfairly discriminatory to include Mini Options in the Exchange's fee
cap program because it will potentially lower transaction fees for
members providing liquidity in Mini Options on the Exchange. Members
who reach the fee cap during a month will not have to pay incremental
transaction fees and thus will be able to lower their monthly fees. The
Exchange believes that the fee cap is not unfairly discriminatory
because all members, including non-ISE market makers, are eligible to
reach the cap. The Exchange believes that the proposed service fee,
which is 1/10th of the service fee charged for standard options, is
reasonable because members who reach the fee cap during a month will
pay the service fee instead of the regular transaction fees and thus
will be able to lower their monthly fees.
QCC and Solicitation Rebate
The Exchange believes it is reasonable, equitable and not unfairly
discriminatory to provided rebates for QCC and Solicitation orders in
Mini Options. The Exchange believes that the proposed fee change will
generally allow the Exchange and its members to better compete for
order flow and thus enhance competition. Specifically, the Exchange
believes that its proposal is reasonable as it will encourage members
to direct their QCC and Solicitation orders in Mini Options to the
Exchange instead of sending this order flow to a competing exchange.
The Exchange believes that with the various tiers, which provides for
additional volume thresholds, members will have the ability to qualify
for higher rebates for sending their QCC and Solicitation orders in
Mini Options to the Exchange. While the Exchange proposes to adopt the
rebate levels for QCC and Solicitation orders in Mini Options that are
1/10th of the rebate for standard options, the Exchange is also
proposing to combine volume in Mini Options and standard options to
allow members to reach a higher tier and therefore, qualify for higher
rebates. The Exchange also believes that its rebate program for QCC and
Solicitation orders is equitable because it would uniformly apply to
all members engaged in QCC and Solicitation trading in Mini Options
traded on the Exchange.
Complex Quoting in GLD
The Exchange believes it is reasonable, equitable and not unfairly
discriminatory to charge the proposed maker fee for complex quoting in
Mini Options in GLD. The Exchange believes it is reasonable and
equitable to charge fees for orders in standard options executed in the
complex order book when trading against Priority Customers in GLD given
this unique functionality that allows Market Makers to quote in the
complex order book. The Exchange believes that the proposed maker fee
for complex orders in Mini Options in GLD is not unfairly
discriminatory because the fees proposed herein are already applicable
to complex orders in
[[Page 20996]]
standard options in GLD; with this proposed rule change, the Exchange
is simply extending fees that are already established on the Exchange
to Mini Options in GLD at a rate that is 1/10th of the fee charged for
standard options in GLD.
Options Regulatory Fee
The Exchange is not proposing any change to the ORF with the
introduction of Mini Options. The Exchange believes it is reasonable,
equitable and not unfairly discriminatory to charge the ORF at the same
rate for Mini Options as the Exchange charges for standard options. The
Exchange believes that the cost to perform surveillance to ensure
compliance with various Exchange and industry-wide rules is no
different for Mini Options that it is for standard options. Reducing
the ORF for Mini Options could result in a higher ORF for standard
options. Such an outcome would arguably be discriminatory towards
investors in standard options for the benefit of investors in Mini
Options. Therefore, the Exchange believes it is appropriate to treat
both Mini Options and standard options the same with respect to the
amount of ORF that is being charged.
B. Self-Regulatory Organization's Statement on Burden on Competition
ISE 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. This rule change is designed to
provide greater specificity within the Schedule of Fees with respect to
fees and rebates applicable to Mini Options.
The Exchange believes that the proposed fees and rebates for Mini
Options which, with the exception to the ORF, are 1/10th of the fees
and rebates the Exchange currently charges for standard options will
not impose a burden on competition among various market participants on
the Exchange, or between the Exchange and other exchanges that list and
trade Mini Options, that is not necessary or appropriate in furtherance
of the purposes of the Act. The Exchange believes that charging
different rates to different market participants does not impose a
burden on competition for a number of reasons. For one, charging lower
fees, or no fees, to Priority Customer orders attracts that order flow
to the Exchange and thereby creates liquidity to the benefit of all
market participants who trade on the Exchange. Further, Market Makers
have certain obligations and commitments to the Exchange that non-
Market Makers (i.e., Non-ISE Market Makers, Firm Proprietary/Broker-
Dealer and Professional Customer participants) do not and therefore it
is appropriate for the Exchange to charge Market Makers fees that are
different from those charged to other market participants. Further, the
Exchange notes that for standard options a greater difference in fees
for various market participants already exists than that which is
proposed for Mini Options. For example, Priority Customers already
trade for lower taker fees than do Market Makers when trading complex
orders on the Exchange. For complex orders in standard options, ISE
Market Makers currently pays a taker fee as high as $0.82 per contract
for Non-Select Symbols (which are essentially non-Penny Pilot symbols)
while the taker fee for Non-ISE Market Maker, Firm Proprietary/Broker-
Dealer and Professional Customer orders in these symbols is $0.84 per
contract. For complex orders in standard options in these symbols,
Priority Customers do not pay a taker fee. For Mini Options in these
symbols, the taker fee proposed by the Exchange for ISE Market Makers
is $0.082 per contract, 1/10th of the fee charged for standard options
in these symbols, while the taker fee proposed by the Exchange for Non-
ISE Market Maker, Firm Proprietary/Broker-Dealer and Professional
Customer orders in these symbols is $0.084 per contract, again 1/10th
of the fee charged for standard options. The differential for Mini
Options is de minimus compared to the differential for standard
options.
The Exchange notes that the difference in fees for various
participants in standard options has not proven to be a burden on
competition. Therefore, the fee differential for Mini Options, being
quite a bit smaller, should not prove to be a burden on competition.
Mini Options are a new product being introduced to the listed options
market and while the Exchange at this time believes that the proposed
fees and rebates are appropriate, the impact of this proposed rule
change will only be known for certain once Mini Options have begun
trading.
The Exchange notes that it operates in a highly competitive
environment in which market participants can readily direct their order
flow to competing exchanges. In such an environment, the Exchange must
continually review, and consider adjusting, its fees and rebates to
remain competitive with other exchanges. For the reasons noted above,
the Exchange believes that the proposed rule change reflects this
competitive environment.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange has not solicited, and does not intend to solicit,
comments on this proposed rule change. The Exchange has not received
any unsolicited written comments from members or other interested
parties.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act \18\ and subparagraph (f)(2) of Rule 19b-4
thereunder,\19\ because it establishes a due, fee, or other charge
imposed by ISE.
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\18\ 15 U.S.C. 78s(b)(3)(A)(ii).
\19\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-ISE-2013-28 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-2013-28. 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
[[Page 20997]]
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-2013-28 and should be submitted on or before April
29, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-08092 Filed 4-5-13; 8:45 am]
BILLING CODE 8011-01-P
