[Federal Register Volume 75, Number 92 (Thursday, May 13, 2010)]
[Notices]
[Pages 27034-27036]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-11398]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62051; File No. SR-ISE-2010-38]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Order Granting Accelerated Approval to a
Proposed Rule Change Relating to the Amounts That Direct Edge ECN, in
Its Capacity as an Introducing Broker for Non-ISE Members, Passes
Through to Such Non-ISE Members
May 6, 2010.
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 April 30, 2010, the International Securities Exchange, LLC (the
``Exchange'' or the ``ISE'') filed with the Securities and Exchange
Commission (``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,
and is approving the proposal on an accelerated basis.
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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 Exchange proposes to modify the amounts that Direct Edge ECN
(``DECN''), in its capacity as an introducing broker for non-ISE
Members, passes through to such non-ISE Members.
The text of the proposed rule change is available on the Exchange's
Internet website at http://www.ise.com.
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 III 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
DECN, a facility of ISE, operates two trading platforms, EDGX and
EDGA.\3\ The changes made pursuant to SR-ISE-2010-37 became operative
on May 1, 2010. On April 30, 2010, the ISE filed for immediate
effectiveness a proposed rule change to amend Direct Edge ECN's
(``DECN'') fee schedule for ISE Members \4\ to: (i) Change the rates
for
[[Page 27035]]
routing in securities priced less than $1.00 to certain away market
centers; \5\ (ii) reintroduce the rebate on securities priced less than
$1.00 that add liquidity to EDGX; \6\ (iii) increase the rebate for
Members meeting the Ultra Tier; \7\ and (iv) pass through rebates/fees
from other market centers.\8\ The changes made pursuant to SR-ISE-2010-
37 became operative on May 1, 2010.
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\3\ This fee filing relates to the trading facility operated by
ISE and not EDGA Exchange, Inc. and EDGX Exchange, Inc. Direct Edge
ECN LLC (EDGA and EDGX) will cease to operate in its capacity as an
electronic communications network following the commencement of
operations of EDGA Exchange, Inc. and EDGX Exchange, Inc. as
national securities exchanges.
\4\ References to ISE Members in this filing refer to DECN
Subscribers who are ISE Members.
\5\ In SR-ISE-2010-37, the Exchange amended the routing rates to
certain away market centers associated with the removal of liquidity
from EDGA and EDGX in securities priced less than $1.00. For orders
in securities priced less than $1.00 that are routed to Nasdaq BX in
Tapes A & C securities and that remove liquidity, orders were
charged the Exchange's standard routing charge for securities less
than $1.00 (0.30% of the total dollar value of the transaction, both
on EDGA and EDGX). As a result of a decrease in fees by Nasdaq OMX
when removing liquidity in securities priced less than $1.00, the
Exchange amended its fee schedule in order to charge 0.10% of the
total dollar value of the transaction (instead of 0.30%) when orders
were routed to Nasdaq BX in Tapes A & C securities and removed
liquidity. This has been indicated by footnote number 3 on the
existing ``C'' flag. A conforming amendment has also been made to
the fee schedule to append footnote number 3 to indicate an
exception to the standard rate (0.30% of dollar value) for routing
liquidity in securities priced less than $1.00. See Nasdaq OMX
Equity Trader Alert, 2010-27 (April 19, 2010) (``Firms will
be charged 0.10% (i.e., 10 basis points) of the total dollar value
of the transaction when removing liquidity in stocks with prices
below $1.00'').
Additionally, in SR-ISE-2010-37, the Exchange amended its fee
schedule to charge 0.20% of the total dollar value of the
transaction when orders are routed to Nasdaq and remove liquidity in
securities on all Tapes, or orders are routed to Nasdaq using the
INET order type and remove liquidity in securities on all Tapes.
(The INET order type sweeps the EDGA or EDGX book and removes
liquidity from Nasdaq, if the order is marketable, or posts on
Nasdaq, if the order is non-marketable.) This has been indicated by
footnote number 3 being appended to the existing ``J,'' ``L,'' and
``2'' flags. A conforming amendment has also been made to the fee
schedule to append footnote number 3 to indicate an exception to the
standard rate (0.30% of dollar value) for routing liquidity in
securities priced less than $1.00.
The Exchange believes that this rate change will seek to
incentivize the removal of liquidity from EDGA and EDGX in
securities priced less than $1.00 that are routed to certain away
market centers.
\6\ There was no rebate for adding liquidity on EDGX in
securities priced less than $1.00. In SR-ISE-2010-37, the Exchange
re-introduced a rebate of $0.00003 per share for orders that add
liquidity to EDGX in securities priced less than $1.00. The Exchange
believes that this rebate was appropriate as it represented 30% of
the minimum price increment for securities priced less than $1.00
($0.0001) and effectively aligned the rebate with access fee caps
under Regulation NMS. The Access Rule of Regulation NMS limits the
fees any trading center can charge, or allow to be charged, for
accessing its protected quotations, both displayed and reserve size,
to no more than $0.003 per share. See Rule 610(c) of Regulation NMS,
Securities and Exchange Act Release No. 51808 (June 9, 2005), 70 FR
37496 (June 29, 2005).
\7\ The Exchange's fee schedule provided Members can qualify for
a rebate of $0.0031 per share for all liquidity posted on EDGX if
they add or route at least 5,000,000 shares of average daily volume
prior to 9:30 a.m. or after 4 p.m. (includes all flags except 6) and
add a minimum of 50,000,000 shares of average daily volume on EDGX
in total, including during both market hours and pre and post-
trading hours. In SR-ISE-2010-37, effective May 1, 2010, the
Exchange increased this rebate to $0.0032 per share to further
incentivize posting liquidity to EDGX. In addition, the higher
rebate also resulted, in part, from lower administrative costs
associated with higher volume.
\8\ The NYSE recently announced changes, effective May 2010,
that it will increase the fee for removing liquidity in Tape A
securities to $0.0021 per share (from 0.0018 per share) and increase
the rebate for trading in Tape A securities to $0.0013 per share
(from $0.0010 per share). In SR-ISE-2010-37, Flag D, which indicates
orders that are routed or re-routed to NYSE, and remove liquidity,
was amended to reflect the charge of $0.0021 per share. A conforming
amendment was also made to Flag F (routed to NYSE, adds liquidity)
to increase the rebate to $0.0013 per share. Footnote 3 was amended
to reflect NYSE's fee change for trading in securities with a per
share price below $1.00 (from $0.0018 per share to $0.0021 per
share). In addition, the ``Q'' flag, which denotes an order type
(ROUC) that routes to the NYSE, was increased from $0.0015 per share
to $0.0018 per share on EDGA and EDGX to reflect the increase.
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In its capacity as a member of ISE, DECN currently serves as an
introducing broker for the non-ISE Member subscribers of DECN to access
EDGX and EDGA. DECN, as an ISE Member and introducing broker, receives
rebates and is assessed charges from DECN for transactions it executes
on EDGX or EDGA in its capacity as introducing broker for non-ISE
Members. Since the amounts of such rebates and charges were changed
pursuant to SR-ISE-2010-37, DECN wishes to make corresponding changes
to the amounts it passes through to non-ISE Member subscribers of DECN
for which it acts as introducing broker. As a result, the per share
amounts that non-ISE Member subscribers receive and are charged will be
the same as the amounts that ISE Members receive and are charged.
ISE is seeking accelerated approval of this proposed rule change,
as well as an effective date of May 1, 2010. ISE represents that this
proposal will ensure that both ISE Members and non-ISE Members (by
virtue of the pass-through described above) will in effect receive and
be charged equivalent amounts and that the imposition of such amounts
will begin on the same May 1, 2010 start date.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the objectives of Section 6 of the Act,\9\ in general, and
furthers the objectives of Section 6(b)(4),\10\ 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. In particular, this proposal will ensure that dues,
fees and other charges imposed on ISE Members are equitably allocated
to both ISE Members and non-ISE Members (by virtue of the pass-through
described above).
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\9\ 15 U.S.C. 78f.
\10\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The proposed rule change does not impose any burden on competition
that is not necessary or appropriate in furtherance of the purposes of
the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
The Exchange has not solicited, and does not intend to solicit,
comments on this proposed rule change. The Exchange has not received
any unsolicited written comments from members or other interested
parties.
III. 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 e-mail to [email protected]. Please include
File Number SR-ISE-2010-38 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-2010-38. This file
number should be included on the subject line if e-mail 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 (http://www.sec.gov/rules/sro.shtml). Copies of the submission,\11\ all subsequent amendments,
all written statements with respect to the proposed rule change that
are filed with the Commission, and all written
[[Page 27036]]
communications relating to the proposed rule change between the
Commission and any person, other than those that may be withheld from
the public in accordance with the provisions of 5 U.S.C. 552, will be
available for Web site viewing and printing in the Commission's Public
Reference Room, 100 F Street, NE., Washington, DC 20549, on official
business days between the hours of 10 a.m. and 3 p.m. Copies of the
filing also will be available for inspection and copying at the
principal office of the 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-2010-38 and should be submitted on or before June 3,
2010.
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\11\ The text of the proposed rule change is available on ISE's
Web site at http://www.ise.com, on the Commission's Web site at
http://www.sec.gov, at ISE, and at the Commission's Public Reference
Room.
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IV. Commission's Findings and Order Granting Accelerated Approval of
Proposed Rule Change
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange.\12\
Specifically, the Commission finds that the proposed rule change is
consistent with Section 6(b)(4) \13\ of the Act, which requires that
the rules of a national securities exchange provide for the equitable
allocation of reasonable dues, fees, and other charges among members
and issuers and other persons using its facilities.
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\12\ In approving this proposal, the Commission has considered
its impact on efficiency, competition, and capital formation. 15
U.S.C 78c(f).
\13\ 15 U.S.C. 78f(b)(4).
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As described more fully above, ISE recently amended DECN's fee
schedule for ISE Members pursuant to SR-ISE-2010-37 (the ``Member Fee
Filing''). The fee changes made pursuant to the Member Fee Filing
became operative on May 1, 2010. DECN receives rebates and is charged
fees for transactions it executes on EGDX or EDGA in its capacity as an
introducing broker for its non-ISE member subscribers. The current
proposal, which will apply retroactively to May 1, 2010, will allow
DECN to pass through the revised rebates and fees to the non-ISE member
subscribers for which it acts an introducing broker. The Commission
finds that the proposal is consistent with the Act because it will
provide rebates and charge fees to non-ISE member subscribers that are
equivalent to those established for ISE member subscribers in the
Member Fee Filing.\14\
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\14\ Id.
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ISE has requested that the Commission find good cause for approving
the proposed rule change prior to the thirtieth day after publication
of notice of filing thereof in the Federal Register. As discussed
above, the proposal will allow DECN to pass through to non-ISE member
subscribers the revised rebate and fees established for ISE member
subscribers in the Member Fee Filing, resulting in equivalent rebates
and fees for ISE member and non-member subscribers. In addition,
because the proposal will apply the revised rebates and fees
retroactively to May 1, 2010, the revised rebates and fees will have
the same effective date, thereby promoting consistency in the DECN's
fee schedule. Accordingly, the Commission finds good cause, pursuant to
Section 19(b)(2) of the Act, for approving the proposed rule change
prior to the thirtieth day after the date of publication of notice of
filing thereof in the Federal Register.
V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\15\ that the proposed rule change (SR-ISE-2010-38) be, and hereby
is, approved on an accelerated basis.
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\15\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-11398 Filed 5-12-10; 8:45 am]
BILLING CODE 8010-01-P