[Federal Register Volume 74, Number 164 (Wednesday, August 26, 2009)]
[Notices]
[Pages 43204-43205]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-20540]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-60536; File No. SR-ISE-2009-59]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change Relating to Fee Changes and an Incentive Plan for Three Foreign
Currency Options
August 19, 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 August 3, 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. ISE has designated this proposal as one
establishing or changing a due, fee, or other charge applicable only to
a member under Section 19(b)(3)(A)(ii) of the Act,\3\ and Rule 19b-
4(f)(2) thereunder,\4\ which renders the proposal effective upon filing
with the Commission. 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.
\3\ 15 U.S.C. 78s(b)(3)(A)(ii).
\4\ 17 CFR 240.19b-4(f)(2).
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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 initiate an incentive plan for market
makers in three newly listed foreign currency options (``FX Options'')
and to establish fees for transactions in these FX Options. 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 initiate an
incentive plan for market makers on three newly listed FX Options,
specifically, the New Zealand dollar (``NZD''), the Mexican peso
(``PZO'') and the Swedish krona (``SKA'') \5\ and to establish fees for
transactions in these products. Options on NZD, PZO and SKA began
trading on the Exchange on August 3, 2009. As such, this proposed fee
change will be operative and effective on August 3, 2009.
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\5\ The Commission previously approved the trading of options on
NZD, PZO and SKA. See Securities Exchange Act Release No. 55575
(April 3, 2007), 72 FR 17963 (April 10, 2007) (Order approving the
listing and trading of FX Options).
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In order to promote trading in these new FX Options, the Exchange
proposes to initiate an incentive plan for market makers in NZD, PZO
and SKA. Market makers will be able to enter into the incentive plan
until October 5, 2009. 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 will waive the applicable transaction
fees for both the Early Adopter FXPMM \6\ and all Early Adopter FXCMMs
\7\ that make a market in NZD, PZO and SKA 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 will pay the Early Adopter FXPMM forty percent (40%) of the
transaction fees collected on any customer trade in NZD, PZO and SKA
and will pay 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, i.e., market makers that
begin to quote and trade in NZD, PZO and SKA after October 5, 2009,
will be charged regular transaction fees for trades in these products.
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\6\ A FXPMM is a primary market maker selected by the Exchange
that trades and quotes in FX Options only. See ISE Rule 2213.
\7\ 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 is proposing to adopt an execution fee of $0.40 per
contract for all Public Customer transactions in options on NZD, PZO
and SKA.\8\ The amount of the execution fee for all Firm Proprietary
transactions will be $0.20 per contract and the execution fee for all
non-Early Adopter ISE Market Makers in NZD, PZO and SKA shall be equal
to the execution fee currently charged by the Exchange for ISE Market
Maker transactions in equity options.\9\ Finally, the amount of the
execution fee for all non-ISE Market Maker transactions in these
products shall be $0.45 per contract.\10\ The Exchange will not charge
a Payment for Order Flow fee for these products.
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\8\ These fees will be charged only to Exchange members. Under a
pilot program that is set to expire on July 31, 2010, these fees
will also be charged to Linkage Principal Orders (``Linkage P
Orders'') and Linkage Principal Acting as Agent Orders (``Linkage P/
A Orders''). The amount of the execution fee charged by the Exchange
for Linkage P Orders and Linkage P/A Orders is $0.27 per contract
side and $0.18 per contract side, respectively. See Securities
Exchange Act Release No. 60175 (June 25, 2009), 74 FR 32026 (July 6,
2009) (SR-ISE-2009-36).
\9\ 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.
\10\ The amount of the execution fee for non-ISE Market Maker
transactions executed in the Exchange's Facilitation and
Solicitation Mechanisms is $0.20 per contract.
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The Exchange also [sic] proposes to waive transaction charges for
all Early Adopter Market Makers in NZD, PZO and SKA in order to further
encourage the trading of these FX Options. The Exchange believes that
the revenue generated from customer, firm proprietary and non-ISE
market maker transaction charges and increased order flow would offset
the transaction fees that would otherwise be applied to market makers
in NZD, PZO and SKA, 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
[[Page 43205]]
goal of introducing new products to the marketplace that are
competitively priced.
2. Basis
The Exchange believes that the proposed rule change is consistent
with the objectives of Section 6 of the Act,\11\ in general, and
furthers the objectives of Section 6(b)(4),\12\ 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 the proposed incentive plan
will generate additional order flow to the Exchange by creating
incentives to trade these FX Options as well as defray operational
costs for Early Adopter Market Makers.
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\11\ 15 U.S.C. 78f(b).
\12\ 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) of the Act \13\ and Rule 19b-4(f)(2) \14\ 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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\13\ 15 U.S.C. 78s(b)(3)(A). [sic]
\14\ 17 CFR 240.19b-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 email to [email protected]. Please include
File Number SR-ISE-2009-59 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-2009-59. This file
number should be included on the subject line if email 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 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 the filing also will be available for
inspection and copying at the principal office of the Exchange. 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-2009-59 and should be
submitted on or before September 16, 2009.
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\15\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-20540 Filed 8-25-09; 8:45 am]
BILLING CODE 8010-01-P