[Federal Register Volume 74, Number 153 (Tuesday, August 11, 2009)]
[Notices]
[Pages 40250-40252]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-19185]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60443; File No. SR-ISE-2009-58]


 Self-Regulatory Organizations; International Securities 
Exchange, LLC; Notice of Filing and Order Granting Accelerated Approval 
to a Proposed Rule Change Relating to the Amounts That Direct Edge ECN, 
in Its Capacity as an Introducing Broker for Non-ISE Members, Passes 
Through to Such Non-ISE Members

August 5, 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 July 31, 2009, the International Securities Exchange, LLC (the 
``Exchange'' or the ``ISE'') filed with the Securities and Exchange 
Commission (``Commission'') a proposed rule change as described in 
Items I and II below, which Items have been prepared by ISE. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons, and is

[[Page 40251]]

approving the proposal on an accelerated basis.
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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 Exchange proposes to modify the amounts that Direct Edge ECN 
(``DECN''), in its capacity as an introducing broker for non-ISE 
Members, passes through to such non-ISE Members.
    The text of the proposed rule change is available on the Exchange's 
Internet Web site at http://www.ise.com 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 III 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. On July 31, 2009, the ISE filed for immediate effectiveness a 
proposed rule change to: (i) Amend DECN's fee schedule for ISE Members 
\3\ to create a new tier, called the Full Sweep Tier, which provides a 
rebate for ISE Members that use ROUT orders that meet a volume 
threshold for amount of liquidity added on EDGX; \4\ and (ii) adopt new 
fees and rebates.\5\ The fee changes made pursuant to SR-ISE-2009-57 
became operative on August 1, 2009.
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    \3\ References to ISE Members in this filing refer to DECN 
Subscribers who are ISE Members.
    \4\ In SR-ISE-2009-57, the Exchange created a new tier, 
effective August 1, 2009, called the Full Sweep Tier in which ISE 
Members are provided a $0.0035 rebate per share for securities 
priced at or above $1.00 when ISE Members add liquidity on EDGX if 
the attributed MPID use of the ROUT order type adds 50,000,000 
shares or more of liquidity to EDGX on a daily basis, measured 
monthly. A ROUT order type that is sent to EDGX is an order type 
that does a full sweep of the EDGX book, before being exposed to 
Enhanced Liquidity Providers (``ELPs''). This order type will then 
route to away market centers if there is additional unexecuted 
liquidity. This order type is primarily used for agency orders, 
especially retail order flow. The rebate is designed to encourage 
the use of this particular type of liquidity.
    \5\ In SR-ISE-2009-57, the Exchange also adopted additional fees 
and rebates. First, the Exchange adopted a fee of $0.0024 per share 
for securities priced at or above $1.00 which add liquidity to 
LavaFlow ECN (``LavaFlow'') and are routed from either EDGX or EDGA. 
Such a strategy is deemed a ROLF routing strategy, which is a 
destination specific routing strategy that will first sweep the EDGA 
or EDGX order book before being delivered to LavaFlow. A conforming 
amendment was made to the fee schedule to yield an ``M'' flag to 
account for this fee. Conversely, for liquidity that is routed 
through either EDGA or EDGX and removes liquidity from LavaFlow, the 
Exchange adopted a fee for ISE members of $0.0029 per share for 
securities priced at or above $1.00. Such situation will yield a 
flag of ``U.'' However, if an ISE member posts an average of 50,000 
shares or more using a ROLF routing strategy, yielding flag M, then 
such ISE member's fee, when removing liquidity from LavaFlow, will 
decrease to $0.0022 per share and yield flag U. Finally, the 
Exchange established a rebate of $0.0025 per share for securities 
priced at or above $1.00 when ISE members add liquidity on EDGX via 
an EDGA-originated ROUC routing strategy. ROUC designated orders are 
multi- destination orders that sweep the internal order book and ELP 
destinations before any unfilled quantity is routed to low cost 
destinations. Such situation will yield liquidity Flag ``P.''
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    In its capacity as a member of ISE, DECN currently serves as an 
introducing broker for the non-ISE Member subscribers of DECN to access 
EDGX and EDGA. DECN, as an ISE Member and introducing broker, receives 
rebates and is assessed charges from DECN for transactions it executes 
on EDGX or EDGA in its capacity as introducing broker for non-ISE 
Members. Since the amounts of such rebates and charges were changed 
pursuant to SR-ISE-2009-57, DECN wishes to make corresponding changes 
to the amounts it passes through to non-ISE Member subscribers of DECN 
for which it acts as introducing broker. As a result, the per share 
amounts that non-ISE Member subscribers receive and are charged will be 
the same as the amounts that ISE Members receive and are charged.
    ISE is seeking accelerated approval of this proposed rule change, 
as well as a retroactive effective date of August 1, 2009. ISE 
represents that this proposal will ensure that both ISE Members and 
non-ISE Members (by virtue of the pass-through described above) will in 
effect receive and be charged equivalent amounts and that the 
imposition of such amounts will begin on the same August 1, 2009 start 
date.
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, this proposal will ensure that dues, 
fees and other charges imposed on ISE Members are equitably allocated 
to both ISE Members and non-ISE Members (by virtue of the pass-through 
described above).
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    \6\ 15 U.S.C. 78f.
    \7\ 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. 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-2009-58 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-2009-58. 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

[[Page 40252]]

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 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 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-2009-58 and should be submitted on or before 
September 1, 2009.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange.\8\ 
Specifically, the Commission finds that the proposed rule change is 
consistent with Section 6(b)(4) \9\ of the Act, which requires that the 
rules of a national securities exchange provide for the equitable 
allocation of reasonable dues, fees, and other charges among members 
and issuers and other persons using its facilities.
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    \8\ In approving this proposal, the Commission has considered 
its impact on efficiency, competition, and capital formation. 15 
U.S.C. 78c(f).
    \9\ 15 U.S.C. 78f(b)(4).
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    As described more fully above, ISE recently amended DECN's fee 
schedule for ISE Members to, among other things, adopt a new Full Sweep 
Tier Rebate and adopt new fees and rebates in connection with the use 
of the ROLF and ROUC routing strategies.\10\ The fee changes made 
pursuant to the Member Fee Filing became operative on August 1, 2009. 
DECN receives rebates and is charged fees for transactions it executes 
on EGDX or EDGA in its capacity as an introducing broker for its non-
ISE member subscribers.
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    \10\ See File No. SR-ISE-2009-57 (the ``Member Fee Filing'').
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    The current proposal, which will apply retroactively to August 1, 
2009, will allow DECN to pass through the revised rebates and fees to 
the non-ISE member subscribers for which it acts an introducing broker. 
The Commission finds that the proposal is consistent with the Act 
because it will provide rebates and charge fees to non-ISE member 
subscribers that are equivalent to those established for ISE member 
subscribers in the Member Fee Filing.\11\
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    \11\ Id.
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    ISE has requested that the Commission find good cause for approving 
the proposed rule change prior to the thirtieth day after publication 
of notice of filing thereof in the Federal Register. As discussed 
above, the proposal will allow DECN to pass through to non-ISE member 
subscribers the revised rebate and fees established for ISE member 
subscribers in the Member Fee Filing, resulting in equivalent rebates 
and fees for ISE member and non-member subscribers. In addition, 
because the proposal will apply the revised rebates and fees 
retroactively to August 1, 2009, the revised rebates and fees will have 
the same effective date, thereby promoting consistency in the DECN's 
fee schedule. Accordingly, the Commission finds good cause, pursuant to 
Section 19(b)(2) of the Act, for approving the proposed rule change 
prior to the thirtieth day after the date of publication of notice of 
filing thereof in the Federal Register.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\12\ that the proposed rule change (SR-ISE-2009-58) be, and hereby 
is, approved on an accelerated basis.
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    \12\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-19185 Filed 8-10-09; 8:45 am]
BILLING CODE 8010-01-P