Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Schedule of Fees, 69714-69718 [2013-27753]

Download as PDF 69714 Federal Register / Vol. 78, No. 224 / Wednesday, November 20, 2013 / Notices information collected pursuant to the ‘‘short exempt’’ marking requirement may be publicly available because it may be published, in a form that would not identify individual broker-dealers, by SROs that publish on their Internet Web sites aggregate short selling volume data in each individual equity security for that day and, on a one-month delayed basis, information regarding individual short sale transactions in all exchange-listed equity securities. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number. The public may view background documentation for this information collection at the following Web site, www.reginfo.gov. Comments should be directed to: (i) Desk Officer for the Securities and Exchange Commission, Office of Information and Regulatory Affairs, Office of Management and Budget, Room 10102, New Executive Office Building, Washington, DC 20503, or by sending an email to: Shagufta_ Ahmed@omb.eop.gov; and (ii) Thomas Bayer, Director/Chief Information Officer, Securities and Exchange Commission, c/o Remi Pavlik-Simon, 100 F Street NE., Washington, DC 20549 or send an email to: PRA_Mailbox@ sec.gov. Comments must be submitted to OMB within 30 days of this notice. Dated: November 14, 2013. Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–27762 Filed 11–19–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Submission for OMB Review; Comment Request Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of Investor Education and Advocacy, 100 F Street NE., Washington, DC 20549–0213. tkelley on DSK3SPTVN1PROD with NOTICES Extension: Regulation S–AM, SEC File No. 270–548, OMB Control No. 3235–0609. Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (‘‘PRA’’) (44 U.S.C. 3501 et seq.), the Securities and Exchange Commission (‘‘Commission’’) has submitted to the Office of Management and Budget (‘‘OMB’’) a request for approval of extension of the previously approved collection of information provided for in Regulation S–AM (17 CFR Part 248, Subpart B), under the Fair Credit VerDate Mar<15>2010 16:04 Nov 19, 2013 Jkt 232001 Reporting Act (15 U.S.C. 1681 et seq.) (‘‘FCRA’’), the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.), the Investment Company Act of 1940 (15 U.S.C. 80a–1 et seq.), and the Investment Advisers Act of 1940 (15 U.S.C. 80b–1 et seq.). Regulation S–AM implements the requirements of Section 624 of the FCRA (15 U.S.C. 1681s–3) as applied to brokers, dealers, and investment companies, as well as investment advisers and transfer agents that are registered with the Commission (collectively, ‘‘Covered Persons’’). Under Section 624 and the regulation, before a receiving affiliate may make marketing solicitations based on the communication of certain consumer financial information from a Covered Person, the Covered Person must provide a notice to each affected individual informing the individual of his or her right to prohibit such marketing. The regulation potentially applies to all of the approximately 19,856 Covered Persons registered with the Commission, although only approximately 11,119 of them have one or more corporate affiliates, and the regulation requires only approximately 1,986 to provide consumers with an affiliate marketing notice and an opt-out opportunity. The Commission staff estimates that there are approximately 11,119 Covered Persons having one or more affiliates, and that they each spend an average of 0.20 hours per year to review affiliate marketing practices, for, collectively, an estimated annual time burden of 2,224 hours at an annual internal staff cost of approximately $980,784. The staff also estimates that approximately 1,986 Covered Persons provide notice and optout opportunities to consumers, and that they each spend an average of 7.6 hours per year creating notices, providing notices and opt-out opportunities, monitoring the opt-out notice process, making and updating records of opt-out elections, and addressing consumer questions and concerns about opt-out notices, for, collectively, an estimated annual time burden of 15,094 hours at an annual internal staff cost of approximately $2,705,054. Thus, the staff estimates that the collection of information requires a total of approximately 11,119 respondents to incur an estimated annual time burden of a total of 17,318 hours at a total annual internal cost of compliance of approximately $3,339,438. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information PO 00000 Frm 00075 Fmt 4703 Sfmt 4703 under the PRA unless it displays a currently valid OMB control number. The public may view background documentation for this information collection at the following Web site: www.reginfo.gov. Comments should be directed to: (i) Desk Officer for the Securities and Exchange Commission, Office of Information and Regulatory Affairs, Office of Management and Budget, Room 10102, New Executive Office Building, Washington, DC 20503, or by sending an email to: Shagufta_ Ahmed@omb.eop.gov; and (ii) Thomas Bayer, Director/Chief Information Officer, Securities and Exchange Commission, c/o Remi Pavlik-Simon, 100 F Street NE., Washington, DC 20549, or send an email to: PRA_ Mailbox@sec.gov. Comments must be submitted to OMB within 30 days of this notice. Dated: November 14, 2013. Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–27763 Filed 11–19–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–70873; File No. SR–ISE– 2013–56] Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Schedule of Fees November 14, 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 November 1, 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 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. 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. The text of the proposed rule change is available on the Exchange’s Web site (http:// 1 15 2 17 E:\FR\FM\20NON1.SGM U.S.C. 78s(b)(1). CFR 240.19b–4. 20NON1 Federal Register / Vol. 78, No. 224 / Wednesday, November 20, 2013 / Notices www.ise.com), at the principal office of the Exchange, and at the Commission’s Public Reference Room. Mini Options, which are not discussed below, are and shall continue to be 1/10th of the fees for Standard Options.7 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. 1. Affiliate Definition for Firm Fee Cap A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change tkelley on DSK3SPTVN1PROD with NOTICES 1. Purpose The purpose of this proposed rule change is to amend the Exchange’s Schedule of Fees (1) to adopt a definition of ‘‘affiliate’’ for the purpose of aggregating affiliated Member fees for the Firm Fee Cap, (2) to increase the taker fee for Priority Customers 3 in symbols that are in the Penny Pilot program (‘‘Select Symbols’’), (3) to increase the fee charged to Firm Proprietary 4/Broker-Dealer and Professional Customers 5 when providing liquidity in Non-Select Symbols and FX Options, (4) to replace the current incremental tier for Priority Customer Complex average daily volume (‘‘ADV’’) with a new tier that applies retroactively to all Priority Customer complex volume, and (5) to increase the Credit for Responses to Flash Orders for trading against Priority Customers in Select Symbols. Each of these changes is explained below. The fee changes discussed apply to both Standard Options and Mini Options 6 traded on ISE. The Exchange’s Schedule of Fees has separate tables for fees applicable to Standard Options and Mini Options. The Exchange notes that while the discussion below relates to fees for Standard Options, the fees for 3 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). 4 A Firm Proprietary order is an order submitted by a Member for its own proprietary account. 5 A Professional Customer is a person who is not a broker/dealer and is not a Priority Customer. 6 Mini Options are options overlying ten (10) shares of AAPL, AMZN, GLD, GOOG and SPY. VerDate Mar<15>2010 16:04 Nov 19, 2013 Jkt 232001 The Exchange has a Firm Fee Cap of $75,000 which applies to Firm Proprietary and Non-ISE Market Maker 8 transactions that are part of the originating or contra side of a Crossing Order.9 In addition to transactions executed in a Member’s proprietary account, the fee cap also applies to crossing transactions for the account of entities affiliated with a Member.10 For example, a Member engaged in trading activity on ISE may have an affiliate engaged in a market making capacity on another exchange, which may be a separate broker/dealer entity. A crossing transaction by that Member in which a customer order is facilitated against the proprietary trading interest of the Member’s affiliate would be eligible for the fee cap. To provide more clarity on what ‘‘affiliated’’ means in this context the Exchange is now proposing a definition for this term. In particular, the Exchange will aggregate the trading fees of separate Members for purposes of the Firm Fee Cap provided there is at least 75% common ownership between the firms as reflected on each firm’s Form BD, Schedule A. The Exchange believes that aggregating fees that count towards the fee cap across Members that share at least 75% common ownership will allow Members to continue to execute trades on the Exchange through separate broker-dealer entities for different types of volume, while receiving the benefit of the fee cap based on the aggregate volume being executed across such entities. The requirement that affiliates share at least 75% common ownership is consistent with the definition of ‘‘affiliate’’ adopted on the Topaz Exchange, LLC and other options exchanges.11 7 See Securities Exchange Act Release No. 69270 (April 2, 2013), 78 FR 20988 (April 8, 2013) (SR– ISE–2013–28). 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 Fees charged by the Exchange for Responses to Crossing Orders, and surcharge fees charged by the Exchange for licensed products, are not included in the calculation of the monthly fee cap. The Exchange charges a service fee to Members that have reached the Firm Fee Cap to defray the Exchange’s costs of providing services. 10 See Securities Exchange Act Release No. 64274 (April 8, 2011), 76 FR 20754 (April 13, 2012) (SR– ISE–2011–13). 11 See e.g. Securities Exchange Act Release No. 70670 (October 11, 2013), 78 FR 62815 (October 22, 2013) (SR–Topaz–2013–08). PO 00000 Frm 00076 Fmt 4703 Sfmt 4703 69715 2. Priority Customer Taker Fee The Exchange currently assesses per contract transaction fees and provides rebates to market participants that add or remove liquidity from the Exchange (‘‘maker/taker fees and rebates’’) in Select Symbols. For regular orders that remove liquidity in Select Symbols, the Exchange currently charges a taker fee of: (i) $0.34 per contract for Market Maker 12 and Market Maker Plus 13 orders, (ii) $0.38 per contract for NonISE Market Maker orders, (iii) $0.35 per contract for Firm Proprietary/BrokerDealer and Professional Customer orders, and (iv) $0.28 per contract for Priority Customer orders. The Exchange now proposes to increase the taker fee for Priority Customer orders in Select Symbols from $0.28 per contract to $0.32 per contract. The Exchange is not proposing any change to this taker fee for any other market participants. 3. Discount for Adding Liquidity in Non-Select Symbols and FX Options In June 2013, as an incentive to route liquidity-adding order flow to ISE, the Exchange adopted a discounted fee of $0.20 per contract for Firm Proprietary/ Broker-Dealer and Professional Customers when providing liquidity in Non-Select Symbols and FX Options.14 For removing liquidity, these market participants are charged a fee of $0.30 per contract. The Exchange has determined to no longer provide this incentive for adding liquidity in NonSelect Symbols and FX Options, and is therefore proposing to charge the same $0.30 per contract fee to these market participants for adding liquidity as it charges for removing liquidity. Charging the same fee for adding and removing liquidity is consistent with the Exchange’s past practice, and with the Exchange’s general pricing structure for Non-Select Symbols and FX Options, which does not differentiate between making and taking liquidity. 4. Priority Customer Complex Order Tiers The Exchange currently provides volume-based tiered rebates for Priority Customer complex orders when these orders trade with non-Priority Customer 12 The term ‘‘Market Makers’’ refers to ‘‘Competitive Market Makers’’ and ‘‘Primary Market Makers’’ collectively. See ISE Rule 100(a)(25). 13 In order to promote liquidity in Select Symbols, the Exchange offers a rebate for adding liquidity to certain Market Makers (‘‘Market Maker Plus’’) if the quotes they send to the Exchange qualify the Market Maker to become a Market Maker Plus. 14 See Securities Exchange Act Release No. 69757 (June 13, 2013), 78 FR 36812 (June 19, 2013) (SR– ISE–2013–36). E:\FR\FM\20NON1.SGM 20NON1 69716 Federal Register / Vol. 78, No. 224 / Wednesday, November 20, 2013 / Notices tkelley on DSK3SPTVN1PROD with NOTICES orders in the complex order book,15 or trade with quotes and orders on the regular order book.16 These complex order rebates are provided to Members based on the Member’s ADV in Priority Customer complex contracts. For example, a Member that executes an ADV of at least 225,000 Priority Customer complex contracts will be entitled to a rebate of $0.40 per contract for Select Symbols (excluding SPY), $0.41 per contract for SPY, and $0.78 per contract for non-Select Symbols, in each case when trading with nonPriority Customer orders in the complex order book. When trading against quotes and orders on the regular order book this rebate is $0.18 per contract (excluding SPY) and $0.19 per contract for SPY. In March 2013 the Exchange introduced a new incremental tier to incentivize Members to increase the amount of Priority Customer complex orders that they send to the Exchange. Members that execute Priority Customer Complex ADV above 225,000 contracts are entitled to an additional rebate of $0.01 per contract when trading with non-Priority Customers in the complex order book.17 Unlike the other five volume tiers, the incremental volume tier is not retroactive and is payable only for incremental Priority Customer complex order volume above the highest tier. The Exchange is proposing to eliminate the incremental volume tier, and instead adopt a new volume tier that applies to Members that execute a Priority Customer Complex ADV of at least 300,000 contracts. Like the other existing volume tiers, this new volume tier will apply retroactively to all Priority Customer complex order volume once the threshold has been reached. And, similar to the incremental tier that it replaces, Members that achieve the new tier will be entitled to a rebate that is $0.01 per contract greater than the rebate for Members that achieve the next highest tier. The new tier will, however, apply to both orders that trade with non-Priority Customer orders in the complex order book and orders that trade with quotes and orders on the regular order book. Specifically, the proposed rebate amounts for this 15 The Exchange offers a rebate in Standard and Mini Options for Priority Customer complex orders in (i) Select Symbols (excluding SPY), (ii) SPY, and (iii) Non-Select Symbols, when these orders trade with non-Priority Customer orders in the complex order book. 16 The Exchange offers a rebate in Standard and Mini Options for Priority Customer complex orders that trade with quotes and orders on the regular order book in (i) SPY, and (ii) other symbols excluding SPY. 17 The incremental rebate does not apply to Priority Customer Complex orders that trade with quotes or orders on the regular order book. VerDate Mar<15>2010 16:04 Nov 19, 2013 Jkt 232001 volume tier will be as follows: the rebate for Select Symbols (excluding SPY) will be $0.41 per contract, the rebate for SPY will be $0.42 per contract, and the rebate for Non-Select Symbols will be $0.79 per contract, in each case when trading with non-Priority Customer orders in the complex order book. When trading with quotes and orders on the regular order book the proposed rebate will be $0.19 per contract (excluding SPY) and $0.20 per contract for SPY. With this proposed change the Exchange expects to attract additional Priority Customer complex order volume to the ISE. 5. Credit for Responses To Flash Orders Currently, when ISE is not at the National Best Bid or Offer (‘‘NBBO’’), Public Customer and Non-Customer orders are exposed to all ISE members to give them an opportunity to match the NBBO (‘‘Flash Orders’’) before the order is routed to another exchange for execution or cancelled. As an incentive to attract Public Customer orders to the ISE, the Exchange offers a Credit for Responses to Flash Orders in Select and Non-Select Symbols when trading against Priority and Professional Customers.18 For Select Symbols, this credit is $0.10 per contract when trading against each of Priority and Professional Customers. When an ISE Market Maker trades against a Preferenced Priority Customer, i.e., a Priority Customer order that is preferenced to that Market Maker, the credit is $0.12 per contract. In non-Select Symbols the credit is $0.20 per contract when trading against Professional Customers only. The Exchange now proposes to increase the Credit for Responses to Flash Orders in Select Symbols from $0.10 per contract to $0.15 per contract when trading against Priority Customers, and from $0.12 per contract to $0.17 per contract when trading against Preferenced Priority Customers.19 The respective credits for trading against a Professional Customer in Select and Non-Select Symbols will remain at their current rates. 2. Basis The Exchange believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,20 18 No fee is charged or credit provided when trading against a non-Customer. 19 The Exchange notes that it does not apply a special credit for trading against a Preferenced Priority Customer in Mini Options. The credit for trading against a Priority Customer in Mini Options will be $0.015 per contract when trading against Priority Customers in Select Symbols regardless of whether the order has been preferenced to a Market Maker. 20 15 U.S.C. 78f. PO 00000 Frm 00077 Fmt 4703 Sfmt 4703 in general, and Section 6(b)(4) of the Act,21 in particular, in that it is designed to provide for the equitable allocation of reasonable dues, fees, and other charges among its members and other persons using its facilities. 1. Affiliate Definition for Firm Fee Cap The language permitting aggregation of corporate affiliates for purposes of the Firm Fee Cap is intended to avoid disparate treatment of firms that have divided their various business activities between separate corporate entities as compared to firms that operate those business activities within a single corporate entity. By way of example, many firms that are Members of the Exchange operate several different business lines within the same corporate entity. In contrast, other firms may be part of a corporate structure that separates those business lines into different corporate affiliates, either for business, compliance or historical reasons. Those corporate affiliates, in turn, are required to maintain separate memberships with the Exchange in order to access the Exchange. The Exchange believes that the trading activity of corporate affiliates should continue to be aggregated for purposes of the Firm Fee Cap, and is adopting a definition of affiliate to clarify when Members will be considered affiliated. The Exchange notes that the proposed definition of ‘‘affiliate’’ is consistent with definitions used by other options exchanges, including the Topaz Exchange, LLC, the Chicago Board Options Exchange, Inc., and the MIAX Options Exchange.22 The Exchange is not proposing any substantive changes to the Firm Fee Cap. 2. Priority Customer Taker Fee The Exchange believes that its proposal to assess a $0.32 per contract taker fee for all regular Priority Customer orders in Select Symbols is reasonable and equitable because the fee is within the range of fees assessed by other exchanges employing similar pricing schemes. While the Exchange is proposing a fee increase, the proposed fee is substantially lower, for example, than the $0.45 per contract taker fee currently charged by the NASDAQ Options Market (‘‘NOM’’) for Customer orders in penny pilot symbols.23 The 21 15 U.S.C. 78f(b)(4). ISE Gemini Schedule of Fees, Section I, Regular Order Fees and Rebates for Standard Options, and Section II, Regular Order Fees and Rebates for Mini Options; CBOE Fee Schedule, Volume Incentive Program (VIP); MIAX Fee Schedule, Transaction Fees, Exchange Fees, Priority Customer Rebate Program. 23 See NOM Rules, Chapter XV Options Pricing, Sec. 2 NASDAQ Options Market—Fees and Rebates. 22 See E:\FR\FM\20NON1.SGM 20NON1 Federal Register / Vol. 78, No. 224 / Wednesday, November 20, 2013 / Notices Exchange also notes that with this proposed fee change, the fee charged to Priority Customer orders will remain lower (as it historically has always been) than the fee currently charged by the Exchange to other market participants. The Exchange believes that it is equitable and not unfairly discriminatory to increase the Priority Customer taker fee, as Priority Customers will continue to be assessed lower fees than other market participants. 3. Discount for Adding Liquidity in Non-Select Symbols and FX Options The Exchange believes that it is reasonable, equitable, and not unfairly discriminatory to no longer provide a discounted fee for providing liquidity in Non-Select Symbols and FX Options as it has determined it is no longer necessary provide this incentive. Firm Proprietary/Broker-Dealer and Professional Customers will once again pay the same fee regardless of whether they are adding or removing liquidity, as was the case prior to the June 2013 rule change. This is consistent with the Exchange’s general pricing structure for Non-Select Symbols and FX Options, which does not differentiate between making and taking liquidity. tkelley on DSK3SPTVN1PROD with NOTICES 4. Priority Customer Complex Order Tiers The Exchange believes that it is reasonable, equitable, and not unfairly discriminatory to provide rebates for Priority Customer complex orders when these orders trade with non-Priority Customer orders in the complex order book, or trade with quotes and orders on the regular order book, because paying a rebate will continue to attract additional order flow to the ISE and create liquidity which will ultimately benefit all market participants who trade on the Exchange. The Exchange has already established a volume-based incentive program, and is now merely proposing to replace its incremental volume tier with a new tier that applies retroactively to all Priority Customer complex order volume. The Exchange believes that the proposal will encourage Members to route additional Priority Customer complex orders to the Exchange in order to qualify for the new rebates, which would be applicable to all of a Member’s Priority Customer complex order volume. The Exchange believes that the retroactive rebates being proposed for Members that achieve the new sixth tier will help it remain competitive with other options exchanges in attracting this order flow. VerDate Mar<15>2010 16:04 Nov 19, 2013 Jkt 232001 5. Credit for Responses To Flash Orders The Exchange believes that it is reasonable and equitable to increase the credit for responding to Priority Customer orders flashed on the Exchange to encourage market participants to respond to these Flash Orders, and thereby attract Priority Customer order flow to the Exchange. The Exchange believes that the increased rebate will also result in fewer orders being subject to linkage handling, which will reduce costs for the Exchange and market participants. Furthermore, the Exchange believes that it is equitable and not unfairly discriminatory to provide a larger credit to market participants that trade against Priority Customer orders than those that trade against Professional Customer orders in Select Symbols. A Priority Customer is by definition not a broker or 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). This limitation does not apply to participants on the Exchange whose behavior is substantially similar to that of market professionals, including Professional Customers, who will generally submit a higher number of orders (many of which do not result in executions) than Priority Customers. The Exchange believes that attracting more liquidity from Priority Customers will benefit all market participants that trade on the ISE. The Exchange notes that it has determined to charge fees and provide rebates in Mini Options at a rate that is 1/10th the rate of fees and rebates the Exchange 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 have a smaller exercise and assignment value, specifically 1/10th that of a standard option contract, and, as such, is providing fees and rebates for Mini Options that are 1/10th of those applicable to Standard Options. B. Self-Regulatory Organization’s Statement on Burden on Competition In accordance with Section 6(b)(8) of the Act,24 the Exchange does not believe that the proposed rule change will impose any burden on intermarket or intramarket competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange notes that other exchanges have substantially similar requirements for aggregating affiliated Member ADV. As provided in the initial Firm Fee Cap filing, the Exchange currently aggregates affiliated Member fees, and this proposed rule change merely explains the how affiliate status is determined for that purpose, which will have no competitive impact. With respect to the other proposed fee changes, the Exchange believes that the proposed changes will promote competition, as they are designed to allow ISE to better compete for order flow and improve the Exchange’s competitive position, for example, by offering higher rebates to market participants that execute a large volume of Priority Customer complex orders, or respond to Priority Customer Flash Orders. While the Exchange is increasing certain fees, the Exchange believes that this does not impose a burden on competition because the new fees are consistent with those charged by other options exchanges. The Exchange operates in a highly competitive market in which market participants can readily direct their order flow to competing venues. 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 described above, the Exchange believes that the proposed fee changes reflect 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) of the Act 25 and paragraph (f) of Rule 19b–4 thereunder.26 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of 25 15 24 15 PO 00000 U.S.C. 78f(b)(8). Frm 00078 Fmt 4703 26 17 Sfmt 4703 69717 E:\FR\FM\20NON1.SGM U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f). 20NON1 69718 Federal Register / Vol. 78, No. 224 / Wednesday, November 20, 2013 / Notices investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rulecomments@sec.gov. Please include File No. SR–ISE–2013–56 on the subject line. Paper Comments tkelley on DSK3SPTVN1PROD with NOTICES • Send paper comments in triplicate to Elizabeth Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–ISE–2013–56. 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 Commissions Internet Web site (http://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 such filing also will be available for inspection and copying at the principal office of the ISE. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–ISE– 2013–56 and should be submitted by December 11, 2013. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.27 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–27753 Filed 11–19–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–70872; File No. SR–ISE– 2013–57] Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Schedule of Fees November 14, 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 November 1, 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 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. 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. The text of the proposed rule change is available on the Exchange’s Web site (http:// 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. 1 15 27 17 CFR 200.30–3(a)(12). VerDate Mar<15>2010 16:04 Nov 19, 2013 2 17 Jkt 232001 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00079 Fmt 4703 Sfmt 4703 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of this proposed rule change is to amend the Exchange’s Schedule of Fees to increase the Market Maker Plus rebate for Market Makers 3 that meet certain additional qualification standards. The Exchange assesses a per contract transaction charge and provides rebates to market participants that add or remove liquidity from the Exchange (‘‘maker/ taker fees and rebates’’) in all symbols that are in the Penny Pilot program (‘‘Select Symbols’’). In order to promote and encourage liquidity in Select Symbols, the Exchange currently offers Market Makers that meet the quoting requirements for Market Maker Plus a rebate of $0.10 per contract in Standard Options, and $0.010 per contract in Mini Options, for adding liquidity in those symbols.4 The Exchange now proposes to pay a higher rebate of $0.12 per contract and $0.012 per contract for Standard and Mini Options, respectively, to Market Makers that meet the quoting requirements for Market Maker Plus and are affiliated with an Electronic Access Member that executes a total affiliated Priority Customer 5 average daily volume (‘‘ADV’’) of 200,000 contracts in a calendar month.6 3 The term ‘‘Market Makers’’ refers to ‘‘Competitive Market Makers’’ and ‘‘Primary Market Makers’’ collectively. See ISE Rule 100(a)(25). 4 A Market Maker qualifies for Market Maker Plus if it 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, are excluded in calculating whether a Market Maker qualifies for Market Maker Plus, if doing so will qualify a Market Maker for the rebate. 5 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). 6 Priority Customer ADV includes all volume in all symbols and order types. Volume in Standard Options and Mini Options will be combined to calculate Priority Customer ADV but Market Makers will be rebated for all Standard Options traded at the Standard Option rebate amount and for all the E:\FR\FM\20NON1.SGM 20NON1

Agencies

[Federal Register Volume 78, Number 224 (Wednesday, November 20, 2013)]
[Notices]
[Pages 69714-69718]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-27753]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70873; File No. SR-ISE-2013-56]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change To Amend the Schedule of Fees

November 14, 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 November 1, 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 
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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The ISE proposes to amend its Schedule of Fees. The text of the 
proposed rule change is available on the Exchange's Web site (http://

[[Page 69715]]

www.ise.com), at the principal office of the Exchange, and at the 
Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of these statements may be examined at 
the places specified in Item IV below. The self-regulatory organization 
has prepared summaries, set forth in sections A, B and C below, of the 
most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this proposed rule change is to amend the Exchange's 
Schedule of Fees (1) to adopt a definition of ``affiliate'' for the 
purpose of aggregating affiliated Member fees for the Firm Fee Cap, (2) 
to increase the taker fee for Priority Customers \3\ in symbols that 
are in the Penny Pilot program (``Select Symbols''), (3) to increase 
the fee charged to Firm Proprietary \4\/Broker[hyphen]Dealer and 
Professional Customers \5\ when providing liquidity in Non-Select 
Symbols and FX Options, (4) to replace the current incremental tier for 
Priority Customer Complex average daily volume (``ADV'') with a new 
tier that applies retroactively to all Priority Customer complex 
volume, and (5) to increase the Credit for Responses to Flash Orders 
for trading against Priority Customers in Select Symbols. Each of these 
changes is explained below. The fee changes discussed apply to both 
Standard Options and Mini Options \6\ traded on ISE. The Exchange's 
Schedule of Fees has separate tables for fees applicable to Standard 
Options and Mini Options. The Exchange notes that while the discussion 
below relates to fees for Standard Options, the fees for Mini Options, 
which are not discussed below, are and shall continue to be 1/10th of 
the fees for Standard Options.\7\
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    \3\ 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).
    \4\ A Firm Proprietary order is an order submitted by a Member 
for its own proprietary account.
    \5\ A Professional Customer is a person who is not a broker/
dealer and is not a Priority Customer.
    \6\ Mini Options are options overlying ten (10) shares of AAPL, 
AMZN, GLD, GOOG and SPY.
    \7\ See Securities Exchange Act Release No. 69270 (April 2, 
2013), 78 FR 20988 (April 8, 2013) (SR-ISE-2013-28).
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1. Affiliate Definition for Firm Fee Cap
    The Exchange has a Firm Fee Cap of $75,000 which applies to Firm 
Proprietary and Non[hyphen]ISE Market Maker \8\ transactions that are 
part of the originating or contra side of a Crossing Order.\9\ In 
addition to transactions executed in a Member's proprietary account, 
the fee cap also applies to crossing transactions for the account of 
entities affiliated with a Member.\10\ For example, a Member engaged in 
trading activity on ISE may have an affiliate engaged in a market 
making capacity on another exchange, which may be a separate broker/
dealer entity. A crossing transaction by that Member in which a 
customer order is facilitated against the proprietary trading interest 
of the Member's affiliate would be eligible for the fee cap. To provide 
more clarity on what ``affiliated'' means in this context the Exchange 
is now proposing a definition for this term. In particular, the 
Exchange will aggregate the trading fees of separate Members for 
purposes of the Firm Fee Cap provided there is at least 75% common 
ownership between the firms as reflected on each firm's Form BD, 
Schedule A. The Exchange believes that aggregating fees that count 
towards the fee cap across Members that share at least 75% common 
ownership will allow Members to continue to execute trades on the 
Exchange through separate broker-dealer entities for different types of 
volume, while receiving the benefit of the fee cap based on the 
aggregate volume being executed across such entities. The requirement 
that affiliates share at least 75% common ownership is consistent with 
the definition of ``affiliate'' adopted on the Topaz Exchange, LLC and 
other options exchanges.\11\
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    \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\ Fees charged by the Exchange for Responses to Crossing 
Orders, and surcharge fees charged by the Exchange for licensed 
products, are not included in the calculation of the monthly fee 
cap. The Exchange charges a service fee to Members that have reached 
the Firm Fee Cap to defray the Exchange's costs of providing 
services.
    \10\ See Securities Exchange Act Release No. 64274 (April 8, 
2011), 76 FR 20754 (April 13, 2012) (SR-ISE-2011-13).
    \11\ See e.g. Securities Exchange Act Release No. 70670 (October 
11, 2013), 78 FR 62815 (October 22, 2013) (SR-Topaz-2013-08).
---------------------------------------------------------------------------

2. Priority Customer Taker Fee
    The Exchange currently assesses per contract transaction fees and 
provides rebates to market participants that add or remove liquidity 
from the Exchange (``maker/taker fees and rebates'') in Select Symbols. 
For regular orders that remove liquidity in Select Symbols, the 
Exchange currently charges a taker fee of: (i) $0.34 per contract for 
Market Maker \12\ and Market Maker Plus \13\ orders, (ii) $0.38 per 
contract for Non-ISE Market Maker orders, (iii) $0.35 per contract for 
Firm Proprietary/Broker-Dealer and Professional Customer orders, and 
(iv) $0.28 per contract for Priority Customer orders. The Exchange now 
proposes to increase the taker fee for Priority Customer orders in 
Select Symbols from $0.28 per contract to $0.32 per contract. The 
Exchange is not proposing any change to this taker fee for any other 
market participants.
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    \12\ The term ``Market Makers'' refers to ``Competitive Market 
Makers'' and ``Primary Market Makers'' collectively. See ISE Rule 
100(a)(25).
    \13\ In order to promote liquidity in Select Symbols, the 
Exchange offers a rebate for adding liquidity to certain Market 
Makers (``Market Maker Plus'') if the quotes they send to the 
Exchange qualify the Market Maker to become a Market Maker Plus.
---------------------------------------------------------------------------

3. Discount for Adding Liquidity in Non-Select Symbols and FX Options
    In June 2013, as an incentive to route liquidity-adding order flow 
to ISE, the Exchange adopted a discounted fee of $0.20 per contract for 
Firm Proprietary/Broker[hyphen]Dealer and Professional Customers when 
providing liquidity in Non-Select Symbols and FX Options.\14\ For 
removing liquidity, these market participants are charged a fee of 
$0.30 per contract. The Exchange has determined to no longer provide 
this incentive for adding liquidity in Non-Select Symbols and FX 
Options, and is therefore proposing to charge the same $0.30 per 
contract fee to these market participants for adding liquidity as it 
charges for removing liquidity. Charging the same fee for adding and 
removing liquidity is consistent with the Exchange's past practice, and 
with the Exchange's general pricing structure for Non-Select Symbols 
and FX Options, which does not differentiate between making and taking 
liquidity.
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    \14\ See Securities Exchange Act Release No. 69757 (June 13, 
2013), 78 FR 36812 (June 19, 2013) (SR-ISE-2013-36).
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4. Priority Customer Complex Order Tiers
    The Exchange currently provides volume-based tiered rebates for 
Priority Customer complex orders when these orders trade with non-
Priority Customer

[[Page 69716]]

orders in the complex order book,\15\ or trade with quotes and orders 
on the regular order book.\16\ These complex order rebates are provided 
to Members based on the Member's ADV in Priority Customer complex 
contracts. For example, a Member that executes an ADV of at least 
225,000 Priority Customer complex contracts will be entitled to a 
rebate of $0.40 per contract for Select Symbols (excluding SPY), $0.41 
per contract for SPY, and $0.78 per contract for non-Select Symbols, in 
each case when trading with non-Priority Customer orders in the complex 
order book. When trading against quotes and orders on the regular order 
book this rebate is $0.18 per contract (excluding SPY) and $0.19 per 
contract for SPY. In March 2013 the Exchange introduced a new 
incremental tier to incentivize Members to increase the amount of 
Priority Customer complex orders that they send to the Exchange. 
Members that execute Priority Customer Complex ADV above 225,000 
contracts are entitled to an additional rebate of $0.01 per contract 
when trading with non-Priority Customers in the complex order book.\17\ 
Unlike the other five volume tiers, the incremental volume tier is not 
retroactive and is payable only for incremental Priority Customer 
complex order volume above the highest tier. The Exchange is proposing 
to eliminate the incremental volume tier, and instead adopt a new 
volume tier that applies to Members that execute a Priority Customer 
Complex ADV of at least 300,000 contracts. Like the other existing 
volume tiers, this new volume tier will apply retroactively to all 
Priority Customer complex order volume once the threshold has been 
reached. And, similar to the incremental tier that it replaces, Members 
that achieve the new tier will be entitled to a rebate that is $0.01 
per contract greater than the rebate for Members that achieve the next 
highest tier. The new tier will, however, apply to both orders that 
trade with non-Priority Customer orders in the complex order book and 
orders that trade with quotes and orders on the regular order book. 
Specifically, the proposed rebate amounts for this volume tier will be 
as follows: the rebate for Select Symbols (excluding SPY) will be $0.41 
per contract, the rebate for SPY will be $0.42 per contract, and the 
rebate for Non-Select Symbols will be $0.79 per contract, in each case 
when trading with non-Priority Customer orders in the complex order 
book. When trading with quotes and orders on the regular order book the 
proposed rebate will be $0.19 per contract (excluding SPY) and $0.20 
per contract for SPY. With this proposed change the Exchange expects to 
attract additional Priority Customer complex order volume to the ISE.
---------------------------------------------------------------------------

    \15\ The Exchange offers a rebate in Standard and Mini Options 
for Priority Customer complex orders in (i) Select Symbols 
(excluding SPY), (ii) SPY, and (iii) Non-Select Symbols, when these 
orders trade with non-Priority Customer orders in the complex order 
book.
    \16\ The Exchange offers a rebate in Standard and Mini Options 
for Priority Customer complex orders that trade with quotes and 
orders on the regular order book in (i) SPY, and (ii) other symbols 
excluding SPY.
    \17\ The incremental rebate does not apply to Priority Customer 
Complex orders that trade with quotes or orders on the regular order 
book.
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5. Credit for Responses To Flash Orders
    Currently, when ISE is not at the National Best Bid or Offer 
(``NBBO''), Public Customer and Non-Customer orders are exposed to all 
ISE members to give them an opportunity to match the NBBO (``Flash 
Orders'') before the order is routed to another exchange for execution 
or cancelled. As an incentive to attract Public Customer orders to the 
ISE, the Exchange offers a Credit for Responses to Flash Orders in 
Select and Non-Select Symbols when trading against Priority and 
Professional Customers.\18\ For Select Symbols, this credit is $0.10 
per contract when trading against each of Priority and Professional 
Customers. When an ISE Market Maker trades against a Preferenced 
Priority Customer, i.e., a Priority Customer order that is preferenced 
to that Market Maker, the credit is $0.12 per contract. In non-Select 
Symbols the credit is $0.20 per contract when trading against 
Professional Customers only. The Exchange now proposes to increase the 
Credit for Responses to Flash Orders in Select Symbols from $0.10 per 
contract to $0.15 per contract when trading against Priority Customers, 
and from $0.12 per contract to $0.17 per contract when trading against 
Preferenced Priority Customers.\19\ The respective credits for trading 
against a Professional Customer in Select and Non-Select Symbols will 
remain at their current rates.
---------------------------------------------------------------------------

    \18\ No fee is charged or credit provided when trading against a 
non-Customer.
    \19\ The Exchange notes that it does not apply a special credit 
for trading against a Preferenced Priority Customer in Mini Options. 
The credit for trading against a Priority Customer in Mini Options 
will be $0.015 per contract when trading against Priority Customers 
in Select Symbols regardless of whether the order has been 
preferenced to a Market Maker.
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2. Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\20\ in general, and 
Section 6(b)(4) of the Act,\21\ in particular, in that it is designed 
to provide for the equitable allocation of reasonable dues, fees, and 
other charges among its members and other persons using its facilities.
---------------------------------------------------------------------------

    \20\ 15 U.S.C. 78f.
    \21\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

1. Affiliate Definition for Firm Fee Cap
    The language permitting aggregation of corporate affiliates for 
purposes of the Firm Fee Cap is intended to avoid disparate treatment 
of firms that have divided their various business activities between 
separate corporate entities as compared to firms that operate those 
business activities within a single corporate entity. By way of 
example, many firms that are Members of the Exchange operate several 
different business lines within the same corporate entity. In contrast, 
other firms may be part of a corporate structure that separates those 
business lines into different corporate affiliates, either for 
business, compliance or historical reasons. Those corporate affiliates, 
in turn, are required to maintain separate memberships with the 
Exchange in order to access the Exchange. The Exchange believes that 
the trading activity of corporate affiliates should continue to be 
aggregated for purposes of the Firm Fee Cap, and is adopting a 
definition of affiliate to clarify when Members will be considered 
affiliated. The Exchange notes that the proposed definition of 
``affiliate'' is consistent with definitions used by other options 
exchanges, including the Topaz Exchange, LLC, the Chicago Board Options 
Exchange, Inc., and the MIAX Options Exchange.\22\ The Exchange is not 
proposing any substantive changes to the Firm Fee Cap.
---------------------------------------------------------------------------

    \22\ See ISE Gemini Schedule of Fees, Section I, Regular Order 
Fees and Rebates for Standard Options, and Section II, Regular Order 
Fees and Rebates for Mini Options; CBOE Fee Schedule, Volume 
Incentive Program (VIP); MIAX Fee Schedule, Transaction Fees, 
Exchange Fees, Priority Customer Rebate Program.
---------------------------------------------------------------------------

2. Priority Customer Taker Fee
    The Exchange believes that its proposal to assess a $0.32 per 
contract taker fee for all regular Priority Customer orders in Select 
Symbols is reasonable and equitable because the fee is within the range 
of fees assessed by other exchanges employing similar pricing schemes. 
While the Exchange is proposing a fee increase, the proposed fee is 
substantially lower, for example, than the $0.45 per contract taker fee 
currently charged by the NASDAQ Options Market (``NOM'') for Customer 
orders in penny pilot symbols.\23\ The

[[Page 69717]]

Exchange also notes that with this proposed fee change, the fee charged 
to Priority Customer orders will remain lower (as it historically has 
always been) than the fee currently charged by the Exchange to other 
market participants. The Exchange believes that it is equitable and not 
unfairly discriminatory to increase the Priority Customer taker fee, as 
Priority Customers will continue to be assessed lower fees than other 
market participants.
---------------------------------------------------------------------------

    \23\ See NOM Rules, Chapter XV Options Pricing, Sec. 2 NASDAQ 
Options Market--Fees and Rebates.
---------------------------------------------------------------------------

3. Discount for Adding Liquidity in Non-Select Symbols and FX Options
    The Exchange believes that it is reasonable, equitable, and not 
unfairly discriminatory to no longer provide a discounted fee for 
providing liquidity in Non-Select Symbols and FX Options as it has 
determined it is no longer necessary provide this incentive. Firm 
Proprietary/Broker[hyphen]Dealer and Professional Customers will once 
again pay the same fee regardless of whether they are adding or 
removing liquidity, as was the case prior to the June 2013 rule change. 
This is consistent with the Exchange's general pricing structure for 
Non-Select Symbols and FX Options, which does not differentiate between 
making and taking liquidity.
4. Priority Customer Complex Order Tiers
    The Exchange believes that it is reasonable, equitable, and not 
unfairly discriminatory to provide rebates for Priority Customer 
complex orders when these orders trade with non-Priority Customer 
orders in the complex order book, or trade with quotes and orders on 
the regular order book, because paying a rebate will continue to 
attract additional order flow to the ISE and create liquidity which 
will ultimately benefit all market participants who trade on the 
Exchange. The Exchange has already established a volume-based incentive 
program, and is now merely proposing to replace its incremental volume 
tier with a new tier that applies retroactively to all Priority 
Customer complex order volume. The Exchange believes that the proposal 
will encourage Members to route additional Priority Customer complex 
orders to the Exchange in order to qualify for the new rebates, which 
would be applicable to all of a Member's Priority Customer complex 
order volume. The Exchange believes that the retroactive rebates being 
proposed for Members that achieve the new sixth tier will help it 
remain competitive with other options exchanges in attracting this 
order flow.
5. Credit for Responses To Flash Orders
    The Exchange believes that it is reasonable and equitable to 
increase the credit for responding to Priority Customer orders flashed 
on the Exchange to encourage market participants to respond to these 
Flash Orders, and thereby attract Priority Customer order flow to the 
Exchange. The Exchange believes that the increased rebate will also 
result in fewer orders being subject to linkage handling, which will 
reduce costs for the Exchange and market participants. Furthermore, the 
Exchange believes that it is equitable and not unfairly discriminatory 
to provide a larger credit to market participants that trade against 
Priority Customer orders than those that trade against Professional 
Customer orders in Select Symbols. A Priority Customer is by definition 
not a broker or 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). This limitation does not apply to 
participants on the Exchange whose behavior is substantially similar to 
that of market professionals, including Professional Customers, who 
will generally submit a higher number of orders (many of which do not 
result in executions) than Priority Customers. The Exchange believes 
that attracting more liquidity from Priority Customers will benefit all 
market participants that trade on the ISE.
    The Exchange notes that it has determined to charge fees and 
provide rebates in Mini Options at a rate that is 1/10th the rate of 
fees and rebates the Exchange 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 have a smaller 
exercise and assignment value, specifically 1/10th that of a standard 
option contract, and, as such, is providing fees and rebates for Mini 
Options that are 1/10th of those applicable to Standard Options.

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

    In accordance with Section 6(b)(8) of the Act,\24\ the Exchange 
does not believe that the proposed rule change will impose any burden 
on intermarket or intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The Exchange 
notes that other exchanges have substantially similar requirements for 
aggregating affiliated Member ADV. As provided in the initial Firm Fee 
Cap filing, the Exchange currently aggregates affiliated Member fees, 
and this proposed rule change merely explains the how affiliate status 
is determined for that purpose, which will have no competitive impact. 
With respect to the other proposed fee changes, the Exchange believes 
that the proposed changes will promote competition, as they are 
designed to allow ISE to better compete for order flow and improve the 
Exchange's competitive position, for example, by offering higher 
rebates to market participants that execute a large volume of Priority 
Customer complex orders, or respond to Priority Customer Flash Orders. 
While the Exchange is increasing certain fees, the Exchange believes 
that this does not impose a burden on competition because the new fees 
are consistent with those charged by other options exchanges. The 
Exchange operates in a highly competitive market in which market 
participants can readily direct their order flow to competing venues. 
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 described above, the Exchange believes 
that the proposed fee changes reflect this competitive environment.
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    \24\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

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) of the Act \25\ and paragraph (f) of Rule 19b-4 
thereunder.\26\ At any time within 60 days of the filing of the 
proposed rule change, the Commission summarily may temporarily suspend 
such rule change if it appears to the Commission that such action is 
necessary or appropriate in the public interest, for the protection of

[[Page 69718]]

investors, or otherwise in furtherance of the purposes of the Act.
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    \25\ 15 U.S.C. 78s(b)(3)(A).
    \26\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File No. SR-ISE-2013-56 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-ISE-2013-56. 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 Commissions Internet Web site (http://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 such filing also will be available for inspection 
and copying at the principal office of the ISE. All comments received 
will be posted without change; the Commission does not edit personal 
identifying information from submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-ISE-2013-56 and should be submitted by 
December 11, 2013.
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    \27\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-27753 Filed 11-19-13; 8:45 am]
BILLING CODE 8011-01-P