[Federal Register Volume 75, Number 116 (Thursday, June 17, 2010)]
[Notices]
[Pages 34499-34501]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-14676]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62282; File No. SR-ISE-2010-54]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule
Change To Amend the Qualification Standards for Market Makers To
Receive a Rebate for Adding Liquidity
June 11, 2010.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on May 26, 2010, the International Securities Exchange, LLC (the
``ISE'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the
Exchange. The Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
[[Page 34500]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The ISE is proposing to amend the qualification standards for
market makers to receive a rebate under the Exchange's maker/taker
pricing program. 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, at the Commission's Public Reference Room, and on the
Commission's Web site at http://www.sec.gov.
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
qualification standards for market makers to receive a rebate under the
Exchange's maker/taker pricing program. The Exchange recently adopted
transaction fees and rebates for adding and removing liquidity
(``maker/taker fees'').\3\ The maker/taker fees currently apply to
trading in a select number of options classes \4\ to the following
categories of market participants: (i) Market Maker; (ii) Market Maker
Plus; (iii) Non-ISE Market Maker; \5\ (iv) Firm Proprietary; (v)
Customer (Professional); \6\ (vi) Priority Customer,\7\ 100 or more
contracts; and (vii) Priority Customer, less than 100 contracts.
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release Nos. 61869 (April 7,
2010), 75 FR 19449 (April 14, 2010); and 62048 (May 6, 2010), 75 FR
26830 (May 12, 2010).
\4\ As of May 3, 2010, the following options classes were
subject to maker/taker fees: QQQQ, BAC, C, SPY, IWM, XLF, AAPL, GE,
JPM, INTC, GS, RIMM, T, VZ, UNG, FCX, CSCO, DIA, AMZN and X.
\5\ A Non-ISE Market Maker, or Far Away Market Maker
(``FARMM''), is a market maker as defined in Section 3(a)(38) of the
Securities Exchange Act of 1934, as amended (``Exchange Act''),
registered in the same options class on another options exchange.
\6\ A Customer (Professional) is a person who is not a broker/
dealer and is not a Priority Customer.
\7\ A Priority Customer is defined in ISE Rule 100(a)(37A) as a
person or entity that is not a broker/dealer in securities, and does
not place more than 390 orders in listed options per day on average
during a calendar month for its own beneficial account(s).
---------------------------------------------------------------------------
In order to promote and encourage liquidity in options classes that
are subject to maker/taker fees, the Exchange currently offers a $0.10
per contract rebate for Market Maker Plus orders sent to the
Exchange.\8\ A Market Maker Plus is currently defined by the Exchange
as a market maker who is on the National Best Bid or National Best
Offer 80% of the time in that symbol during the current trading month
for series trading between $0.03 and $5.00 in premium.
---------------------------------------------------------------------------
\8\ The concept of incenting market makers with a rebate is not
novel. In 2008, the CBOE established a program for its Hybrid Agency
Liaison whereby it provides a $0.20 per contact rebate to its market
makers provided that at least 80% of the market maker's quotes in a
class during a month are on one side of the national best bid or
offer. Market makers not meeting CBOE's criteria are not eligible to
receive a rebate. See Securities Exchange Act Release No. 57231
(January 30, 2008), 73 FR 6752 (February 5, 2008). The CBOE has
since lowered the criteria from 80% to 60%. See Securities Exchange
Act Release No. 57470 (March 11, 2008), 73 FR 14514 (March 18,
2008).
---------------------------------------------------------------------------
The Exchange now proposes to amend the qualification standards in
order for a market maker to qualify for the $0.10 per contract rebate.
Specifically, the Exchange proposes to define a Market Maker Plus as 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 in premium in
each of the front two expiration months and 80% of the time for all
series trading between $0.03 and $5.00 in premium for all expiration
months for that symbol during the current trading month.
The Exchange currently determines whether a market maker qualifies
as a Market Maker Plus at the end of each month by looking back at each
market maker's quoting statistics during that month. If at the end of
the month, a market maker meets the current 80% criteria, the Exchange
rebates $0.10 per contract for transactions executed by that market
maker during that month. The Exchange will continue to monitor each
market maker's quoting statistics to determine whether a market maker
qualifies for a rebate under the standards proposed herein.
The Exchange also currently provides market makers a report on a
daily basis with quoting statistics so that market makers can determine
whether or not they are meeting the 80% criteria. Again, the Exchange
will continue to provide market makers a daily report so that market
makers can determine whether or not they are meeting the Exchange's new
quoting requirement to qualify for a rebate.
The Exchange believes the proposed rule change will encourage
market makers to post tighter markets in the options classes that are
subject to maker/taker fees and thereby increase liquidity and attract
order flow to the Exchange.
The Exchange has designated this proposal to be operative on June
1, 2010.
2. Statutory Basis
The basis under the Exchange Act for this proposed rule change is
the requirement under Section 6(b)(4) that an exchange have an
equitable allocation of reasonable dues, fees and other charges among
its members and other persons using its facilities. The impact of the
proposal upon the net fees paid by a particular market participant will
depend on a number of variables, most important of which will be its
propensity to add or remove liquidity in the options classes that are
subject to the Exchange's maker/taker fees. The Exchange operates in a
highly competitive market in which market participants can readily
direct order flow to another exchange if they deem fee levels at a
particular exchange to be excessive. The Exchange believes that the
fees it charges for options classes that are subject to the Exchange's
maker/taker fees remain competitive with fees charged by other
exchanges and therefore continue to be reasonable and equitably
allocated to those members that opt to direct orders to the Exchange
rather than to a competing exchange. The Exchange further believes that
amending the qualification standards for market makers to qualify for a
rebate will encourage these market participants to post tighter markets
in the options classes that are subject to the Exchange's maker/taker
fees and thereby increase liquidity and attract order flow to the
Exchange.
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
[[Page 34501]]
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) of the Act \9\ and Rule 19b 4(f)(2) \10\ thereunder. At any
time within 60 days of the filing of such proposed rule change, the
Commission may summarily abrogate 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.
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
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 e-mail to [email protected]. Please include
File Number SR-ISE-2010-54 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-ISE-2010-54. 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, 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
a.m. and 3 p.m. Copies of such 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 publicly available. All
submissions should refer to File Number SR-ISE-2010-54 and should be
submitted on or before July 8, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
Florence E. Harmon,
Deputy Secretary.
---------------------------------------------------------------------------
\11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
[FR Doc. 2010-14676 Filed 6-16-10; 8:45 am]
BILLING CODE 8010-01-P