[Federal Register Volume 74, Number 92 (Thursday, May 14, 2009)]
[Notices]
[Pages 22783-22785]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-11230]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59888; File No. SR-ISE-2009-23]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change, as Modified by Amendment No. 1, 
by the International Securities Exchange, LLC Relating to Amending the 
Direct Edge ECN Fee Schedule To Increase the Super Tier Rebate in 
Securities Reported To Tape A and Tape C

May 7, 2009.
    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 May 1, 2009, 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, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Direct Edge ECN's (``DECN'') fee 
schedule for ISE Members \3\ to raise the Super Tier Rebates, as 
defined below, for securities reported to Tape A and Tape C and to make 
certain other clarifying changes. All of the changes described herein 
are applicable to ISE Members.
---------------------------------------------------------------------------

    \3\ References to ISE Members in this filing refer to DECN 
Subscribers who are ISE Members.
---------------------------------------------------------------------------

    The text of the proposed rule change is available on the Exchange's 
Internet Web site at http://www.ise.com.

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
    DECN, a facility of ISE, operates two trading platforms, EDGX and 
EDGA. Currently, DECNs' fee schedule includes a per share rebate in 
securities reported to Tape A and Tape C of $0.0029 per share for ISE 
Members that add liquidity on EDGX if the ISE Member satisfies any of 
the following three criteria on a daily basis, measured monthly: (i) 
Adding 40,000,000 shares or more on either EDGX, EDGA or EDGX and EDGA 
combined; (ii) adding 20,000,000 shares or more on either EDGX, EDGA or 
EDGX and EDGA combined and routing 20,000,000 shares or more through 
EDGA; or (iii) adding 10,000,000 shares or more of liquidity to EDGX, 
so long as added liquidity on EDGX is at least 5,000,000 shares greater 
than the previous calendar month. The rebate described above is 
referred to as a ``Super Tier Rebate'' on the DECN fee schedule.
    The Exchange is now proposing to raise the aforementioned Super 
Tier Rebate from $0.0029 to $0.003 per share. The Exchange is raising 
this rebate to maintain a competitive rate. This fee change will become 
operative on May 1, 2009.
    In an effort to increase volume on EDGA, DECN currently offers 
volume discounts for ISE Members who route 20,000,000 shares or more on 
a daily basis, measured monthly, to Nasdaq through EDGA using order 
types that are solely eligible for routing to Nasdaq. Such orders are 
currently charged at $0.0025 per share with respect to EDGA routed 
volume. ISE Members routing 30,000,000 shares per day are charged 
$0.0024 per share with respect to EDGA routed volume. Recently, Nasdaq 
has amended its pricing by increasing its fee for orders that remove 
liquidity by $0.0004.\4\ Accordingly, the Exchange is now proposing to 
amend the DECN volume discounts that apply to ISE Members by increasing 
each volume discount fee by $0.0004, which will

[[Page 22784]]

change the fee to $0.0029 per share and $0.0028 per share, 
respectively.
---------------------------------------------------------------------------

    \4\ See Securities and Exchange Commission Release No. 59843 
(April 29, 2009), 74 FR 21046 (May 6, 2009) (SR-NASDAQ-2009-035).
---------------------------------------------------------------------------

    On April 1, 2009, the Exchange amended the DECN fee schedule to 
reduce the rebate from $0.0035 per share to $0.003 per share for orders 
that add liquidity on EDGX in securities priced at or above $1.00 that 
are reported to Tape B by ISE Members.\5\ In connection with this 
amendment, a portion of the corresponding footnote on the DECN fee 
schedule should have been deleted, but such deletion was overlooked at 
the time of the filing. The relevant portion of the footnote states 
``In the event that Direct Edge offers a rebate higher than $0.0029 per 
share for subscribers who do not meet the criteria for the Super Tier, 
then those who meet the aforementioned criteria will receive the higher 
rebate.'' The Exchange proposes to delete this language as Direct Edge 
is no longer offering this incentive.
---------------------------------------------------------------------------

    \5\ See Securities and Exchange Commission Release Nos. 59692 
(April 2, 2009), 74 FR 16024 (April 8, 2009) (SR-ISE-2009-17).
---------------------------------------------------------------------------

    The Exchange is also proposing to make certain clarifying changes 
to DECN's fee schedule. DECN's fee schedule includes a description of 
liquidity flags and associated fees. Flag D is appended to orders that 
are routed to and executed on the New York Stock Exchange (``NYSE''). 
Such orders are charged a fee on the NYSE because the order is removing 
liquidity. The fee assessed to this order is then passed back to the 
ISE Member that originated the order. The Exchange is now proposing to 
amend the description of Flag D to include, not just orders that are 
routed to NYSE, but also orders that are re-routed to NYSE. Meaning, 
the order that originates at DECN may get routed to another market 
center for execution, but that market center may re-route the order to 
NYSE, where the order ultimately receives an execution that results in 
a removal of liquidity. In this circumstance, the fee assessed to the 
order will still be passed back to the ISE Member that originated the 
order as if such order was originally routed to NYSE.
    Finally, the Exchange is proposing to delete a portion of a 
footnote on DECN's fee schedule that provides for a lower charge to ISE 
Memers [sic] whose orders in securities that are reported to Tape A and 
Tape C first get routed to Nasdaq Stock Market (``Nasdaq'') and then 
get re-routed by Nasdaq. In this circumstance, the ISE Member would be 
charged a fee of $0.0026 per share for removing liquidity in Tape A and 
Tape C securities regardless of where the order ultimately gets 
executed and regardless of what the executing market center charges 
Nasdaq. Whereas, orders that get routed to any other market center and 
then re-routed by that market center get charged a fee of $0.003 per 
share when the order removes liquidity. The Exchange is now proposing 
to delete the portion of the footnote that provides for this exception 
because Nasdaq has raised their [sic] fee to $0.003 per share for all 
orders that get routed to Nasdaq and then re-routed by Nasdaq.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\6\ in general, and 
furthers the objectives of Section 6(b)(4),\7\ 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. In particular, raising the Super Tier Rebate in Tape A 
and Tape C securities and offering pricing incentives to market 
participants who route orders to DECN allows DECN to remain 
competitive. ISE notes that DECN operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive. The proposed rule change reflects a competitive pricing 
structure designed to incentivize market participants to direct their 
order flow to DECN. Additionally, the Exchange is proposing to make 
certain clean-up and clarifying changes to the DECN fee schedule to 
assist ISE Members in understanding the charges that are applicable 
when using its facilities. ISE believes the fees and credits remain 
competitive with those charged by other venues and therefore continue 
to be reasonable and equitably allocated to those members that opt to 
direct orders to DECN rather than competing venues.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f.
    \7\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 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 No. SR-ISE-2009-23 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-2009-23. 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 inspection and copying in the 
Commission's Public Reference

[[Page 22785]]

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-2009-23 and should be submitted by 
June 4, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
---------------------------------------------------------------------------

    \10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-11230 Filed 5-13-09; 8:45 am]
BILLING CODE 8010-01-P