[Federal Register Volume 75, Number 56 (Wednesday, March 24, 2010)]
[Notices]
[Pages 14233-14234]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-6513]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61731; File No. SR-ISE-2010-18]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change To Adopt a Fee Credit
March 18, 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 March 1, 2010, the International Securities Exchange, LLC (the
``Exchange'' or the ``ISE'') filed with the Securities and Exchange
Commission the proposed rule change, as described in Items I, II, and
III below, which items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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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 is proposing to amend its Schedule of Fees by adopting a
per contract fee credit related to the execution on ISE of customer
orders exposed to members before those orders are sent out for
execution on another exchange through the intermarket linkage. 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.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Before a Primary Market Maker (``PMM'') sends a customer order to
another exchange for execution when ISE is not at the national best bid
or offer (``NBBO''), the Exchange exposes these customer orders to all
its members to give them an opportunity to match the NBBO. This
exposure is intended to allow ISE to retain more order flow by giving
these customer orders additional opportunity to be executed at the NBBO
at ISE, which also reduces PMM costs by reducing the number of orders
they must send to other exchanges on behalf of customer orders.
Specifically, before a PMM sends an order on behalf of a customer,
the customer order is exposed at the NBBO price for a period
established by the Exchange not to exceed one second. During this
exposure period, Exchange members may enter responses up to the size of
the order being exposed in the regular trading increment applicable to
the option. The Exchange currently has fee waivers in place for members
who step up and match or improve the NBBO during the exposure
period.\3\ If at the end of the exposure period, the order is
executable at the then-current NBBO and ISE is not at the then-current
NBBO, the order is executed against responses that equal or better the
then-current NBBO. The exposure period is terminated if the exposed
order becomes executable on the ISE at the prevailing NBBO or if the
Exchange receives an unrelated order that could trade against the
exposed order at the prevailing NBBO price. If, after an order is
exposed, the order is not executed in full on the Exchange at the then-
current NBBO or better, and it is marketable against the then-current
NBBO, the PMM sends an order on the customer's behalf for the balance
of the order as provided in Rule 803(c)(2)(ii). If the balance of the
order is not marketable against the then-current NBBO, it is placed on
the ISE book.
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\3\ See Exchange Act Release Nos. 58164 (July 15, 2008), 73 FR
42638 (July 22, 2008); 58216 (July 23, 2008), 73 FR 44302 (July 30,
2008).
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All customer orders, including professional customer orders,
receive trade through protection under the ISE's rules.\4\ Therefore,
all customer orders are exposed when ISE is not at the best bid or
offer. Members, however, do not know whether an order being exposed is
for a Priority Customer \5\ or a professional customer. Members have a
natural incentive to step up to trade against Priority Customers as
they view this as providing a service to retail customers. Members do
not have a natural incentive to trade against professional customers
who they view as their competitors. Thus, to encourage members to
participate in the flash auction and thereby keep trades at the
Exchange, ISE proposes to adopt a fee credit. Specifically, ISE
proposes to adopt a $0.20 per contract fee credit for members who
execute a transaction as a response to a Professional Order \6\ in the
Exchange's flash auction.
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\4\ See ISE Rule 1902.
\5\ A Priority Customer is defined in ISE Rule 100(a)(37A) as a
person or entity that is 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).
\6\ A Professional Order is defined in ISE Rule 100(a)(37C) as
an order that is for the account of a person or entity that is not a
Priority Customer.
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2. Basis
The basis under the Securities Exchange Act of 1934 (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. In particular, the proposed rule change will allow ISE
to retain more order flow by giving these customer orders additional
opportunity to be executed ISE at the NBBO or better and will also
reduce PMM costs by reducing the number of orders they must send to
other exchanges for execution.
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.
[[Page 14234]]
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) of the Act \7\ and Rule 19b-4(f)(2) \8\ 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.
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\7\ 15 U.S.C. 78s(b)(3)(A).
\8\ 17 CFR 240.19b-4(f)(2).
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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 No. SR-ISE-2010-18 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 No. SR-ISE-2010-18. 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,\9\ 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 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 No. SR-ISE-2010-18 and should be
submitted on or before April 14, 2010.
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\9\ The text of the proposed rule change is available on the
Commission's Web site at http://www.sec.gov.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
Florence E. Harmon,
Deputy Secretary.
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\10\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2010-6513 Filed 3-23-10; 8:45 am]
BILLING CODE 8011-01-P