[Federal Register Volume 76, Number 77 (Thursday, April 21, 2011)]
[Notices]
[Pages 22425-22427]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-9623]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64303; File No. SR-ISE-2011-18]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change Relating to Fees and Rebates for Adding and Removing Liquidity
April 15, 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 April 8, 2011, 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 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 transaction fees and rebates for
adding and removing liquidity. 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 Exchange currently assesses a per contract transaction charge
to market participants that add or remove liquidity from the Exchange
(``maker/taker fees'') in 100 options classes (the ``Select
Symbols'').\3\ For complex orders in the Select Symbols, the Exchange
currently charges a take fee of: (i) $0.27 per contract for Market
Maker and Market Maker Plus \4\ orders, (ii) $0.28
[[Page 22426]]
per contract for Firm Proprietary and Customer (Professional) \5\
orders; and (iii) $0.35 per contract for Non-ISE Market Maker \6\
orders. Priority Customer \7\ orders, regardless of size, are not
assessed a fee for removing liquidity from the Complex Order book. The
Exchange now proposes to increase the take fee for complex orders in
the Select Symbols, as follows: (i) For Market Maker and Market Maker
Plus complex orders, from $0.27 per contract to $0.30 per contract, and
(ii) for Firm Proprietary and Customer (Professional) complex orders,
from $0.28 per contract to $0.30 per contract. The Exchange is not
proposing any change to the take fee for Non-ISE Market Maker and
Priority Customer complex orders.
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\3\ Options classes subject to maker/taker fees are identified
by their ticker symbol on the Exchange's Schedule of Fees. See
Securities Exchange Act Release Nos. 61869 (April 7, 2010), 75 FR
19449 (April 14, 2010) (SR-ISE-2010-25), 62048 (May 6, 2010), 75 FR
26830 (May 12, 2010) (SR-ISE-2010-43), 62282 (June 11, 2010), 75 FR
34499 (June 17, 2010) (SR-ISE-2010-54), 62319 (June 17, 2010), 75 FR
36134 (June 24, 2010) (SR-ISE-2010-57), 62508 (July 15, 2010), 75 FR
42809 (July 22, 2010) (SR-ISE-2010-65), 62507 (July 15, 2010), 75 FR
42802 (July 22, 2010) (SR-ISE-2010-68), 62665 (August 9, 2010), 75
FR 50015 (August 16, 2010) (SR-ISE-2010-82), 62805 (August 31,
2010), 75 FR 54682 (September 8, 2010) (SR-ISE-2010-90), 63283
(November 9, 2010), 75 FR 70059 (November 16, 2010) (SR-ISE-2010-
106), 63534 (December 13, 2010), 75 FR 79433 (December 20, 2010)
(SR-ISE-2010-114) and 63664 (January 6, 2011), 76 FR 2170 (January
12, 2011) (SR-ISE-2010-120).
\4\ A Market Maker Plus is 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 (for options whose underlying stock's
previous trading day's last sale price was less than or equal to
$100) and between $0.10 and $5.00 (for options whose underlying
stock's previous trading day's last sale price was greater than
$100) in premium in each of the front two expiration months and 80%
of the time for series trading between $0.03 and $5.00 (for options
whose underlying stock's previous trading day's last sale price was
less than or equal to $100) and between $0.10 and $5.00 (for options
whose underlying stock's previous trading day's last sale price was
greater than $100) in premium across all expiration months in order
to receive the rebate. The Exchange 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
Exchange's stated criteria, the Exchange rebates $0.10 per contract
for transactions executed by that market maker during that month.
The Exchange 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 Exchange's stated criteria.
\5\ A Customer (Professional) is a person who is not a broker/
dealer and is not a Priority Customer.
\6\ 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.
\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).
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Additionally, ISE Market Makers who remove liquidity in the Select
Symbols from the Complex Order book by trading with orders that are
preferenced to them are currently charged $0.25 per contract. The
Exchange now proposes to increase the take fee for these preferenced
orders from $0.25 per contract to $0.28 per contract. The Exchange
notes that NASDAQ OMX PHLX, Inc. (``PHLX'') currently assesses a fee
for complex orders for certain symbols that are preferenced to market
makers at that exchange at a rate of $0.25 per contract. For regular
complex orders that remove liquidity in those symbols, PHLX charges a
take fee of $0.27 per contract. With this proposed fee change, ISE will
maintain the two cent differential that is currently in place at
PHLX.\8\
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\8\ See PHLX Fee Schedule at http://www.nasdaqtrader.com/content/marketregulation/membership/phlx/feesched.pdf.
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Finally, as an incentive for members to direct customer order flow
to the Exchange, Priority Customer complex orders, regardless of size,
currently receive a rebate of $0.20 per contract on all legs when these
orders trade with non-customer orders in the Exchange's Complex Order
book. The Exchange proposes to increase this rebate from $0.20 per
contract to $0.25 per contract. The Exchange believes it is necessary
to pay a rebate for Customer complex orders that add liquidity in order
to continue to attract Customer complex order flow to the Exchange.
2. Statutory Basis
The Exchange believes that its proposal to amend its Schedule of
Fees is consistent with Section 6(b) of the Act \9\ in general, and
furthers the objectives of Section 6(b)(4) of the Act \10\ in
particular, in that it is an equitable allocation of reasonable dues,
fees and other charges among Exchange 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 options overlying the Select Symbols.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that the proposed fees it charges for options
overlying the Select Symbols 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 believes that its
proposal to assess a $0.30 per contract take fee for complex orders in
the Select Symbols is reasonable because the fee is within the range of
fees assessed by other exchanges employing similar pricing schemes. For
example, the proposed take fees for complex orders are comparable to
rates assessed by PHLX. PHLX currently assesses a take fee of $0.28 for
Firm and Professional orders and $0.35 for Broker-Dealer orders in its
complex order book.\11\ The Exchange also believes that its proposal to
increase the take fee for preferenced orders to $0.28 per contract is
reasonable because it will allow the Exchange to remain competitive
with other exchanges that employ a similar pricing scheme while
maintaining the two cent differential that currently exists at options
exchanges between fees charged for regular complex orders that take
liquidity and complex orders that are preferenced to market makers. For
example, PHLX currently charges $0.25 per contract to Directed
Participants for removing liquidity from its complex order book in a
select group of symbols while charging $0.27 per contract for regular
complex orders.\12\ Additionally, the Exchange believes the proposed
fee increases are reasonable and equitable in that they apply equally
to all market participants that were previously subject to these fees.
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\11\ See PHLX Fee Schedule at http://www.nasdaqtrader.com/content/marketregulation/membership/phlx/feesched.pdf.
\12\ Id.
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The Exchange also believes that it is reasonable and equitable to
provide a rebate for Priority Customer complex orders because paying a
rebate would continue to attract additional order flow to the Exchange
and thereby create liquidity that ultimately will benefit all market
participants who trade on the Exchange. The Exchange further believes
that paying a rebate is equitable and reasonable because it is similar
to rebates paid by other Exchanges.\13\
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\13\ Id.
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Moreover, the Exchange believes that the proposed fees are fair,
equitable and not unfairly discriminatory because the proposed fees are
consistent with price differentiation that exists today at other option
exchanges. Additionally, the Exchange believes it remains an attractive
venue for market participants to trade complex orders despite its
proposed fee change as its fees remain competitive with those charged
by other exchanges for similar trading strategies. 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. For the reasons noted
above, the Exchange believes that the proposed fees are fair, equitable
and not unfairly discriminatory.
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.
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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.\14\ 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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\14\ 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 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-2011-18 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-ISE-2011-18. 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 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 Web site viewing and printing in
the Commission's Public Reference Room. Copies of such 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-
2011-18 and should be submitted by May 12, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-9623 Filed 4-20-11; 8:45 am]
BILLING CODE 8011-01-P