[Federal Register Volume 75, Number 71 (Wednesday, April 14, 2010)]
[Notices]
[Pages 19441-19443]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-8537]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61855; File No. SR-ISE-2010-26]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change Related to Intermarket Sweep Orders
April 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 March 26, 2010, the International Securities Exchange, LLC (the
``Exchange'' or the ``ISE'') filed with the Securities and Exchange
Commission (the ``SEC'' or the ``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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[[Page 19442]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to adopt a fee and credit related to the
execution of Intermarket Sweep Orders (``ISOs'') by Primary Market
Makers (``PMMs'') on behalf of non-broker/dealer Professional
Orders..[sic] 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--The purpose of this proposed rule change is to adopt a
fee and credit related to the execution of ISOs by PMMs on behalf of
non-broker/dealer Professional Orders.\3\
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\3\ Pursuant to ISE Rule 100(37C), a Professional Order is an
order that is for that account of a person or entity that is not a
Priority Customer. Pursuant to ISE Rule 100(37A), a Priority
Customer is 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.
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On August 31, 2009, the Exchange implemented the new Options Order
Protection and Locked/Crossed Market Plan (``Distributive Linkage'')
and the use of ISOs. Consistent with Distributive Linkage and pursuant
to ISE rules, the Exchange's Primary Market Makers (``PMMs'') have an
obligation to address customer \4\ orders when there is a better market
displayed on another exchange. ISE's PMMs meet this obligation via the
use of ISOs. In meeting their obligations, PMMs may incur fees when
they send ISOs, especially when sending ISOs to exchanges that charge
``taker'' fees. To minimize the PMM's financial burden and help offset
such fees, the ISE amended its schedule of fees on October 1, 2009 to
adopt a rebate for the PMM of $0.20 per contract on all ISO orders sent
to an away exchange (regardless of the fee charged by the exchange
where the ISO order sent away was executed).\5\
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\4\ Pursuant to ISE Rule 1900(f) of the Distributive Linkage
rules, a customer is an individual or organization that is not a
broker-dealer.
\5\ See Securities and Exchange Act Release No. 60791 (October
5, 2009), 74 FR 52521 (October 13, 2009)(SR-ISE-2009-74).
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The Exchange is now proposing to charge non-broker/dealer
Professional Orders a fee of $0.45 per contract for executions that
result from the PMM routing ISOs to away exchanges and to provide the
PMM with a credit equal to the fee charged by the destination exchange
for such non-broker/dealer Professional Orders, but not more than $0.45
per contract. Charging non-broker/dealer Professional Orders a fee to
offset the charges assessed to the PMM by other exchanges for
``linkage'' executions is appropriate because the market professionals
that are submitting non-broker/dealer Professional Orders can route
directly to the away exchanges, if desired, and, therefore, should not
be able to forgo the away market fee, at the expense of the PMM, by
directing their orders to the ISE.\6\ The Exchange will continue to
provide the existing $0.20 rebate to PMMs for Priority Customer
Orders.\7\
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\6\ The Chicago Board Options Exchange (``CBOE'') charges a
comparable route-out fee for non-customer orders. See CBOE Fee
Schedule, Item 20. See Securities Exchange Act Release No. 61701
(March 12, 2010), 75 FR 13622 (March 22, 2010)(SR-CBOE-2010-022).
\7\ See note 3.
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The proposed fee changes will become operative on April 1, 2010.
(2) Basis--The basis under the Securities Exchange Act of 1934 (the
``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 fee change will more
effectively offset fees incurred by PMMs when they send ISOs to away
markets.
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. 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 \8\ and Rule 19b-4(f)(2) \9\ 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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\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 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-2010-26 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-2010-26. 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 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 website viewing and printing in
the Commission's Public
[[Page 19443]]
Reference Room on official business days between the hours of 10 a.m.
and 3 p.m. Copies of such filing also will be available 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-2010-26 and should be submitted by
May 5, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-8537 Filed 4-13-10; 8:45 am]
BILLING CODE 8011-01-P