[Federal Register Volume 76, Number 45 (Tuesday, March 8, 2011)]
[Notices]
[Pages 12778-12780]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-5186]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64012; File No. SR-ISE-2011-11]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change Relating to a Market Maker Incentive Plan for Foreign Currency
Options
March 2, 2011.
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 February 22, 2011, 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.
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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 incentive plan for market makers
in foreign currency (``FX'') options. Specifically, ISE proposes to add
six currently listed FX options to the incentive plan. 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, on the
Commission's Web site at http://www.sec.gov, 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
incentive plan for market makers in FX options. The Exchange currently
has an incentive plan for FX options that was initially adopted on
August 3, 2009 for the following three FX options: the New Zealand
dollar (``NZD''), the Mexican peso (``PZO''), the Swedish krona
(``SKA'').\3\ The Exchange subsequently added the Brazilian real
(``BRB'') to the incentive plan.\4\ The Exchange now proposes to add
the following FX options to the incentive plan: the Australian dollar
(``AUX''), the British pound (``BPX''), the Canadian dollar (``CDD''),
the euro (``EUI''), the Japanese yen (``YUK'') and the Swiss franc
(``SFC'').\5\ Market makers will be able to enter into the incentive
plan until March 31, 2011.\6\
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\3\ See Securities Exchange Act Release No. 60536 (August 19,
2009) [sic], 74 FR 43204 (August 26, 2009) (SR-ISE-2009-59).
\4\ See Securities Exchange Act Release No. 61459 (January 19,
2010), 75 FR 6248 (February 8, 2010) (SR-ISE-2010-07).
\5\ The Commission previously approved the trading of options on
AUX, BPX, CDD, EUI, YUK and SFC. See Securities Exchange Act Release
No. 55575 (April 3, 2007), 72 FR 17963 (April 10, 2007) (SR-ISE-
2006-59).
\6\ See Securities Exchange Act Release No. 63639 (January 4,
2011), 76 FR 1488 (January 10, 2011) (SR-ISE-2010-121).
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Options on AUX, BPX, CDD, EUI, YUK and SFC began trading on the
Exchange on April 17, 2007. Until now, the market maker currently
appointed to these FX options has been trading these products without
the benefit of the privileges afforded by the incentive plan. The
Exchange notes that competition between exchanges that trade like
products, in this case, the World Currency Options traded on NASDAQ OMX
PHLX, Inc., [sic] has intensified. In order to promote the continued
growth and trading in these products, the Exchange now proposes to add
AUX, BPX, CDD, EUI, YUK and SFC to the incentive plan, effective March
1, 2011.
Participants in the incentive plan are known on the Exchange's
Schedule of Fees as Early Adopter Market Makers. Under the incentive
plan, the Exchange waives the applicable transaction fees for both the
Early Adopter FXPMM \7\
[[Page 12779]]
and all Early Adopter FXCMMs \8\ that make a market in AUX, BPX, CDD,
EUI, YUK and SFC for as long as the incentive plan is in effect.
Further, pursuant to a revenue sharing agreement entered into between
an Early Adopter Market Maker and ISE, the Exchange pays the Early
Adopter FXPMM forty percent (40%) of the transaction fees collected on
any customer trade in AUX, BPX, CDD, EUI, YUK and SFC and pays up to
ten (10) Early Adopter FXCMMs that participate in the incentive plan
twenty percent (20%) of the transaction fees collected for trades
between a customer and that FXCMM. Market makers that do not
participate in the incentive plan are charged regular transaction fees
for trades in these products.
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\7\ A FXPMM is a primary market maker selected by the Exchange
that trades and quotes in FX Options only. See ISE Rule 2213.
\8\ A FXCMM is a competitive market maker selected by the
Exchange that trades and quotes in FX Options only. See ISE Rule
2213.
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The Exchange currently charges an execution fee of $0.40 per
contract for all Public Customer Orders \9\ in options on AUX, BPX,
CDD, EUI, YUK and SFC.\10\ The amount of the execution fee for all Firm
Proprietary orders for options on AUX, BPX, CDD, EUI, YUK and SFC is
$0.20 per contract and the execution fee for all non-Early Adopter ISE
Market Makers in options on AUX, BPX, CDD, EUI, YUK and SFC is equal to
the execution fee currently charged by the Exchange for ISE Market
Maker orders in equity options.\11\ Finally, the amount of the
execution fee for all non-ISE Market Maker orders for options on AUX,
BPX, CDD, EUI, YUK and SFC is $0.45 per contract.\12\ The Exchange does
not charge a Payment for Order Flow fee for these products.
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\9\ Public Customer Order is defined in Exchange Rule 100(a)(39)
as an order for the account of a Public Customer. Public Customer is
defined in Exchange Rule 100(a)(38) as a person or entity that is
not a broker or dealer in securities.
\10\ These fees are will be [sic] charged only to Exchange
members.
\11\ The Exchange applies a sliding scale, between $0.01 and
$0.18 per contract side, based on the number of contracts an ISE
market maker trades in a month.
\12\ The amount of the execution fee for non-ISE Market Maker
transactions executed in the Exchange's Facilitation and
Solicitation Mechanisms and for Orders entered into the Price
Improvement Mechanism by the member initiating the price improvement
order is $0.20 per contract.
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The Exchange also proposes to waive transaction charges for all
Early Adopter Market Makers in AUX, BPX, CDD, EUI, YUK and SFC in order
to further encourage trading in these products. The Exchange believes
that the revenue generated from customer, firm proprietary and non-ISE
market maker transaction charges and increased order flow will offset
the transaction fees that would otherwise be applied to market makers
in AUX, BPX, CDD, EUI, YUK and SFC, thereby allowing the Exchange to
recoup those fees while increasing order flow and generating increased
revenues.
The Exchange believes the proposed rule change will further the
Exchange's goal of promoting trading of its FX options through
competitive pricing.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the objectives of Section 6 of the Act,\13\ in general, and
furthers the objectives of Section 6(b)(4),\14\ 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. The Exchange believes that extending the incentive plan
to options on AUX, BPX, CDD, EUI, YUK and SFC will generate additional
order flow in these products to the Exchange.
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\13\ 15 U.S.C. 78f(b).
\14\ 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. 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)(ii) of the Act.\15\ At any time within 60 days of the
filing of such 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 investors, or otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
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\15\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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 proposal 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-2011-11 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-2011-11. 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 changes 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-2011-11 and should be
submitted on or before March 29, 2011.
[[Page 12780]]
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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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-5186 Filed 3-7-11; 8:45 am]
BILLING CODE 8011-01-P