[Federal Register Volume 74, Number 215 (Monday, November 9, 2009)]
[Notices]
[Pages 57726-57728]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-26880]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60914; File No. SR-ISE-2009-88)


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change Relating to Amending the Direct Edge ECN Fee Schedule

November 2, 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 October 30, 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 (i) adopt new fees and rebates and 
associated flags; (ii) amend the criteria for meeting the Ultra Tier; 
(iii) amend the applicability of the Super Tier rebate to Tape B 
securities; and (iv) make typographical changes to the fee schedule. 
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.
---------------------------------------------------------------------------

    All of the changes described herein are applicable to 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. On July 1, 2009,\4\ the Exchange adopted a new Ultra Tier Rebate 
whereby ISE Members are provided a $0.0032 rebate per share for 
securities priced at or above $1.00 when ISE Members add liquidity on 
EDGX if the attributed MPID satisfies one of the following criteria on 
a daily basis, measured monthly: (i) Adding 100,000,000 shares or more 
on EDGX; or (ii) adding 50,000,000 shares or more of liquidity on EDGX, 
so long as added liquidity on EDGX is at least 20,000,000 shares 
greater than the previous calendar month. The rebate described above is 
referred to as an ``Ultra Tier Rebate'' on the DECN fee schedule.
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 60232 (July 2, 
2009), 74 FR 33309 (July 10, 2009) (SR-ISE-2009-43).

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

[[Page 57727]]

    On October 1, 2009,\5\ the Exchange amended the criteria for 
meeting this tier by allowing ISE Members to receive a $0.0032 rebate 
per share for securities priced at or above $1.00 when ISE Members add 
liquidity on EDGX if the attributed MPID posts 1% of the total 
consolidated volume (``TCV'') in average daily volume (``ADV''). TCV is 
defined as volume reported by all exchanges and trade reporting 
facilities to the consolidated transaction reporting plans for Tape A, 
B, and C securities. In addition, members can also qualify for a rebate 
of $0.0032 per share for all liquidity posted on EDGX if they (i) add 
or route at least 10,000,000 shares of average daily volume prior to 
9:30 a.m. or after 4 p.m. (includes all flags except N and W) and add a 
minimum of 75,000,000 shares of average daily volume on EDGX in total, 
including during both market hours and pre and post-trading hours.
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 60769 (October 2, 
2009) 74 FR 51903 (October 8, 2009) (SR-ISE-2009-68).
---------------------------------------------------------------------------

    The Exchange is now proposing to add liquidity flags to reflect 
adding and removing liquidity during pre- and post-trading hours. When 
members add liquidity on Tapes A & C during the pre- and post-trading 
hours, they will be rebated $0.0025 per share on EDGX and charged 
$0.0002 per share on EDGA and this situation will yield Flag 3. When 
members add liquidity during the pre and post-trading hours on Tape B, 
they will be rebated $0.0025 per share on EDGX and charged $0.0002 per 
share on EDGA and this situation will yield Flag 4. When members cross 
with themselves (internalization) during the pre and post-trading 
hours, they will be charged $0.000025 per share on EDGX and will not be 
charged on EDGA. This situation will yield flag 5. When members remove 
liquidity from any Tape during the pre- and post-trading hours, they 
will be charged $0.0028 per share on EDGX and be rebated $0.0002 on 
EDGA. This situation will yield flag 6. Finally, for members whose 
orders are routed from EDGA or EDGX during the pre- and post- trading 
hours, they will be charged $0.0030 per share. This situation will 
yield flag 7. In addition, the rebate of $0.0002 for removing liquidity 
on EDGA and charge of $0.0002 for adding liquidity on EDGA is described 
in more detail below. As discussed below, the Exchange believes that 
this fee structure will enable it to compete effectively with other 
market centers that have recently introduced such pricing.
    The Exchange is also now proposing to add an additional way to 
qualify for the Ultra Tier. Members can also qualify for a $0.0032 
rebate per share for all liquidity posted on EDGX if the attributed 
MPID on a daily basis, measured monthly, adds a minimum of 50,000,000 
shares per day to EDGX so long as the added liquidity on EDGX is at 
least 50,000,000 shares greater than the previous calendar month.
    The Exchange believes that this additional way to meet the Ultra 
Tier (a tier-based rate) will incent Members to interact with order 
flow on DECN. This discount rate arises in part from reduced 
administrative costs associated with certain volume levels.
    As discussed above, the Exchange also proposes to adopt additional 
fees and rebates to remain competitive with other market centers. 
First, the Exchange proposes to amend the fees on EDGA for adding and 
removing liquidity for securities priced $1 and over. Effective 
November 1, 2009, the Exchange proposes to rebate $0.0002 per share for 
removing liquidity on EDGA if the attributed MPID adds or routes a 
minimum average daily share volume, measured monthly, of 50,000 shares 
on either EDGX, EDGA, or EDGX and EDGA combined. As today, any 
attributed MPID not meeting the aforementioned minimum is charged 
$0.0030 per share for removing liquidity from EDGA. In addition, the 
Exchange proposes to charge $0.0002 per share for adding liquidity on 
EDGA unless the attributed MPID adds a minimum average daily share 
volume, measured monthly, of at least 50,000,000 shares on EDGA. If 
members meet or exceed such volume threshold, they will not be charged 
to add liquidity on EDGA.
    In addition, the Exchange proposes to make conforming changes to 
the flags associated with these above-described fees. Flags associated 
with adding liquidity on EDGA are proposed to be updated to reflect the 
$0.0002 charge. These flags include B, V, and Y. The fees associated 
with Flags 3 and 4, discussed in more detail above, are also consistent 
with this fee structure. Flags associated with removing liquidity on 
EDGA are also proposed to be updated to reflect the $0.0002 rebate. 
These flags include N and W. Flag 6, discussed in more detail above, is 
also consistent with this fee structure.
    Furthermore, the Exchange proposes to amend the fee on EDGX for 
adding liquidity on Tape B for securities priced $1 and over. The 
Exchange proposes to rebate $0.0025 per share (the same as currently 
exists for Tapes A & C). A conforming change is proposed to be made to 
Flag B, which indicates liquidity added to EDGX's book.
    Additionally, the Exchange proposes to modify the Super Tier rebate 
to include transactions in Tape B securities as well. Currently, the 
Super Tier only applies to Tapes A & C. As a result of this proposed 
amendment, Members who execute transactions in Tape B securities will 
also qualify for the Super Tier and will be provided a $0.0030 rebate 
per share for liquidity added on EDGX if the attributed MPID 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 Exchange proposes to amend the fees on both EDGX and EDGA for 
securities priced less than $1. For such securities, the Exchange 
proposes to amend the fees for routing to be 0.30% of the total dollar 
value of the transaction instead of 0.29% of the dollar value of the 
transaction.
    The Exchange believes that the above-described fee changes will 
enable DECN to compete effectively with other market centers.
    Finally, the Exchange proposes to make typographical changes to the 
fee schedule to clarify that Flags M, V, and Y are rebates for adding 
liquidity. For Flag M, parentheses have been added to indicate that 
$0.0024 rebate per share is both on EDGA and EDGX. For Flags V and Y, 
parentheses have been added to indicate that the $0.0025 rebate per 
share is on EDGX.
    The fee changes discussed in this filing will become operative on 
November 1, 2009.
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, adopting an additional rebate and 
providing tier-based rates for Members provide pricing incentives to 
market participants that route orders to DECN, allowing DECN to remain 
competitive. This tier-based rate arises in part from reduced 
administrative costs associated with certain volume

[[Page 57728]]

levels. 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 incent market participants to direct their order flow to 
DECN. 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. Additionally, ISE believes that the 
inverse pricing structure on EDGA, rebates and new flags enable the 
Exchange to compete effectively with other market centers. The ISE also 
believes that the proposed rates are equitable in that they apply 
uniformly to all Members.
---------------------------------------------------------------------------

    \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 Number SR-ISE-2009-88 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-2009-88. 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 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 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-2009-88 and 
should be submitted on or before November 30, 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. E9-26880 Filed 11-6-09; 8:45 am]
BILLING CODE 8011-01-P