[Federal Register Volume 74, Number 234 (Tuesday, December 8, 2009)]
[Notices]
[Pages 64783-64786]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-29137]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61086; File No. SR-ISE-2009-103]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing of Proposed Rule Change Relating to Market Data 
Fees

December 1, 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 November 25, 2009, 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, 
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.
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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 Schedule of Fees to (1) increase 
the annual subscription rate for the ISE Open/Close Trade Profile, (2) 
adopt subscription fees for the sale of three new market data 
offerings, all of which are based on the ISE Open/Close Trade Profile, 
and (3) increase the annual subscription and ad-hoc request rates for 
ISE's Historical Options Tick Data. 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
    ISE proposes to amend its Schedule of Fees to (1) increase the 
annual subscription rate for the ISE Open/Close Trade Profile, (2) 
adopt subscription fees for the sale of three new market data 
offerings, all of which are based on the ISE Open/Close Trade Profile, 
and (3) increase the annual subscription and ad-hoc request rates for 
ISE's Historical Options Tick Data. These proposed fee changes will be 
operative on January 4, 2010.

ISE Open/Close Trade Profile

    ISE currently sells a market data offering comprised of the entire 
opening and closing trade data of ISE listed options of both customers 
and firms, referred to by the Exchange as the ISE Open/Close Trade 
Profile.\3\ The ISE Open/Close Trade Profile offering is subdivided by 
origin code (i.e., customer or firm) and the customer data is then 
further subdivided by order size. The volume data is summarized by day 
and series (i.e., symbol, expiration date, strike price, call or put). 
The ISE Open/Close Trade Profile enables subscribers to create their 
own proprietary put/call calculations. The data is compiled and 
formatted by ISE as an end of day file. This market data offering is 
currently available to both members and non-members on annual [sic] 
subscription basis. The current subscription rate for both members and 
non-members is $600 per month. Over the course of the last two years, 
ISE has added numerous additional fields to this offering. As a result, 
ISE's costs of gathering and storing the voluminous data underlying the 
ISE Open/Close Trade Profile have increased. As a result, ISE proposes 
to increase the subscription rate for both members and non-members to 
$750 per month, effective January 1, 2010. [sic] \4\
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    \3\ See Securities Exchange Act Release No. 56254 (August 15, 
2007), 72 FR 47104 (August 22, 2007) (Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change Relating to ISE Open/Close 
Trade Profile Fees) (SR-ISE-2007-70).
    \4\ ISE intends to implement the new fees on January 4, 2010. 
See supra the first paragraph of Section II.A.1.
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    ISE also sells historical ISE Open/Close Trade Profile, a market 
data offering comprised of the entire opening and closing trade data of 
both customers and firms that dates back to May 2005, to both members 
and non-members, on an ad-hoc basis or as a complete set that dates 
back to May 2005. Ad-hoc subscribers can purchase this data for any 
number of months, beginning from May 2005 through the current month. 
Alternatively, subscribers can purchase the entire set of this data, 
beginning from May 2005 through the current month. The historical ISE 
Open/Close Trade Profile is compiled and formatted by ISE and sold as a 
zipped file. ISE charges ad-hoc subscribers $600 per request for each 
month of data and a discounted fee of $500 per request per month for 
subscribers that want the complete set, i.e., from May 2005 to the 
present month. ISE is not proposing any changes to the fee for 
historical ISE Open/Close Trade Profile.

ISE Open/Close Trade Profile Intraday

    The Exchange now proposes to expand its suite of ISE Open/Close 
Trade Profile market data offerings with three new products.
1. ISE Open/Close Trade Profile Intraday
    The ISE Open/Close Trade Profile Intraday offering uses the same 
process as that used for the ISE Open/Close Trade Profile. The ISE 
Open/Close Trade Profile Intraday has the same trade-related fields 
contained in the ISE Open/Close Trade Profile. The ISE

[[Page 64784]]

Open/Close Trade Profile Intraday file contains data that is updated at 
10-minute intervals throughout the trading day. ISE proposes to charge 
both members and non-members $2,000 per month on an annual subscription 
basis.
2. Historical ISE Open/Close Trade Profile Intraday
    The Historical ISE Open/Close Trade Profile Intraday offering is a 
compilation of the ISE Open/Close Trade Profile Intraday files. The 
Exchange has received numerous requests for this type of data, 
especially from proprietary trading firms and hedge funds that use this 
type of data for their quantitative models. ISE proposes to sell 
Historical ISE Open/Close Trade Profile Intraday on an ad-hoc basis. An 
ad-hoc request can be for any number of months, quarters or years for 
which the data is available. Members and non-members will be able to 
purchase this data by paying a one-time fee of $1,000 per month, $2,000 
per quarter or $8,000 per year. For example, a subscriber that wants to 
purchase data for August 2009 will pay $1,000; a subscriber that wants 
to purchase data for July, August and September of 2009 will pay 
$2,000; a subscriber that wants to purchase data for all twelve months 
of 2009 will pay $8,000.
3. ISE Open/Close Trade Profile and ISE Open/Close Trade Profile 
Intraday
    As noted above, the Exchange already sells the ISE Open/Close Trade 
Profile end of day data. The Exchange believes that current subscribers 
to the ISE Open/Close Trade Profile are likely to subscribe to the ISE 
Open/Close Trade Profile Intraday offering. However, to further 
incentivize current subscribers of ISE Open/Close Trade Profile to also 
subscribe to the ISE Open/Close Trade Profile Intraday offering, the 
Exchange proposes to offer a discounted subscription rate. Subscribers 
to both the ISE Open/Close Trade Profile and the ISE Open/Close Trade 
Profile Intraday will pay an annual subscription rate of $2,500.\5\
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    \5\ The Commission notes that this proposed annual subscription 
rate would be $2,500 per month (see Exhibit 5 to the Form 19b-4).
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    All of the ISE Open/Close Trade Profile market data offerings, 
including the new products proposed herein are compiled and formatted 
by ISE and sold as a zipped file.
Historical Options Tick Data
    ISE currently creates market data that consists of options quotes 
and orders that are generated by our members and all trades that are 
executed on the Exchange. ISE also produces a Best Bid/Offer, or BBO, 
with the aggregate size from all outstanding quotes and orders at the 
top price level, or the ``top of the book.'' This data is formatted 
according to Options Price Reporting Authority (``OPRA'') specification 
and sent to OPRA for redistribution. OPRA processes ISE data along with 
the same data sets from the other six options exchanges and creates a 
National BBO, or ``NBBO,'' from all seven options exchanges.
    ISE also captures the OPRA tick data \6\ and makes it available as 
an ``end of day'' file \7\ or as a ``historical'' file \8\ for ISE 
members and non-ISE members alike. ISE has data available from June 
2005 through the present month. ISE currently charges all subscribers 
of Historical Options Tick Data $1,500 per month per firm on an annual 
subscription basis. For ad-hoc requests, ISE charges $85 per day, with 
a minimum order size of $1,000 plus a processing fee to pay for hard 
drives and shipping. ISE also currently charges a processing fee of 
$499 per order for up to 400 Giga Bytes (GB). An order that exceeds 400 
GB is currently charged an additional $399 for up to another 400 GB.\9\
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    \6\ The Exchange collects this data throughout each trading day 
and at the end of each trading day, the Exchange compresses the data 
and uploads it onto a server. Once the data is loaded onto the 
server, it is then made available to subscribers.
    \7\ An end of day file refers to OPRA tick data for a trading 
day that is distributed prior to the opening of the next trading 
day. An end of day file is made available to subscribers as soon as 
practicable at the end of each trading day on an on-going basis 
pursuant to an annual subscription or through an ad-hoc request.
    \8\ An end of day file that is distributed after the start of 
the next trading day is called a historical file. A historical file 
is available to customers for a pre-determined date range by ad-hoc 
requests only.
    \9\ See Securities Exchange Act Release Nos. 53212 (February 2, 
2006), 71 FR 6803 (February 9, 2006) (Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change Establishing Fees for 
Historical Options Tick Market Data) (SR-ISE-2006-07); and 53390 
(February 28, 2006), 71 FR 11457 (March 7, 2006) (Order Granting 
Accelerated Approval of a Proposed Rule Change Establishing Fees for 
Historical Options Tick Market Data for Non-Members) (SR-ISE-2006-
08).
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    The Exchange now proposes to increase the annual subscription rate 
to $2,000 per month per firm. For ad-hoc requests, the Exchange 
proposes to increase the rate to $120 per day. The minimum order size 
of $1,000 will remain unchanged as will the processing fees of $499 and 
$399. As the size of the data has increased since the Exchange first 
introduced this product, the Exchange is also increasing the size 
allowance for ad-hoc requests from 400 Giga Bytes to 1.5 Terabytes 
(TB). Pursuant to this proposed rule change, for ad-hoc requests, the 
Exchange will charge a processing fee of $499 per order for up to 1.5 
TB. An order that exceeds 1.5 TB will be charged an additional $399 for 
up to another 1.5 TB. These fee changes will be made effective by the 
Exchange on January 1, 2010. [sic] \10\
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    \10\ ISE plans to implement the new fees on January 4, 2010. See 
supra the first paragraph of Section II.A.1.
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    The Exchange's market research indicates that OPRA tick data is 
primarily used by market participants in the financial services 
industry for back-testing trading models, post-trade analysis, 
compliance purposes and analyzing time and sales information. This 
market data offering provides both ISE members and non-members with a 
choice to subscribe to a service that provides a daily file on an on-
going basis (end of day file), or simply request data on an ad-hoc 
basis for a pre-determined date range (historical file).
2. Statutory Basis
    The basis under the Securities Exchange Act of 1934 (the ``Exchange 
Act'') for this proposed rule change is the requirement under Section 
6(b)(4), that an exchange have an equitable allocation of reasonable 
dues, fees and other charges among its members and other persons using 
its facilities. The Exchange believes introduction of the new products, 
all of which are based on the ISE Open/Close Trade Profile, will 
provide market participants with an opportunity to obtain additional 
data in furtherance of their investment decisions. The ISE Open/Close 
Trade Profile and the Historical Options Tick Data offerings, which 
have been available for a number of years, have provided subscribers 
with valuable market data since they were first introduced. The 
Exchange has made numerous enhancements to both these market data 
offerings and believes the proposed fee change is reasonable and 
equitable in that the fee increase is nominal in light of the increased 
costs borne by the Exchange for the enhancements.
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\11\ in general, and with 
Sections 6(b)(4) of the Act,\12\ in particular, in that it provides for 
the equitable allocation of reasonable dues, fees and other charges 
among members and issuers and other persons using any facility or 
system which ISE operates or controls.
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    \11\ 15 U.S.C. 78f.
    \12\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that the proposed rule change is also 
consistent

[[Page 64785]]

with the provisions of Section 6(b)(5) of the Act,\13\ in that it is 
designed to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and, in general, to protect investors and the public interest; 
and is not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers, or to regulate by virtue of any authority 
conferred by the Act matters not related to the purposes of the Act or 
the administration of the Exchange.
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    \13\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change is also 
consistent with Section 6(b)(8) of the Act \14\ in that it does not 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act, as set forth in more detail 
below.
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    \14\ 15 U.S.C. 78f(b)(8).
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    In adopting Regulation NMS, the Commission granted self-regulatory 
organizations and broker-dealers increased authority and flexibility to 
offer new and unique market data to the public. It was believed that 
this authority would expand the amount of data available to consumers, 
and also spur innovation and competition for the provision of market 
data.
    The Commission has recently issued an order firmly establishing 
that in reviewing non-core data products such as the ISE Open/Close 
Trade Profile, the ISE Open/Close Trade Profile Intraday and ISE's 
Historical Options Tick Data, the Commission will utilize a market-
based approach that relies primarily on competitive forces to determine 
the terms on which non-core data is made available to investors.\15\ 
The Commission adopted a two-part test:
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    \15\ Securities Exchange Act Release No. 57917 (Dec. 2, 2008) 
(``NetCoalition Order'' resolving File No. SRNYSEArca-2006-21).

    The first is to ask whether the exchange was subject to 
significant competitive forces in setting the terms of its proposal 
for non-core data, including the level of any fees. If an exchange 
was subject to significant competitive forces in setting the terms 
of a proposal, the Commission will approve the proposal unless it 
determines that there is a substantial countervailing basis to find 
that the terms nevertheless fail to meet an applicable requirement 
of the Exchange Act or the rules thereunder. If, however, the 
exchange was not subject to significant competitive forces in 
setting the terms of a proposal for non-core data, the Commission 
will require the exchange to provide a substantial basis, other than 
competitive forces, in its proposed rule change demonstrating that 
the terms of the proposal are equitable, fair, reasonable, and not 
unreasonably discriminatory.\16\
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    \16\ Id. at 48-49.

    This standard begins from the premise that no Commission rule 
requires exchanges or market participants either to distribute non-core 
data to the public or to display non-core data to investors.\17\
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    \17\ Id. at 4.
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    In its NetCoalition Order the Commission concluded that ``at least 
two broad types of significant competitive forces applied to NYSE Arca 
in setting the terms of its proposal to distribute the ArcaBook data: 
(1) NYSE Arca's compelling need to attract order flow from market 
participants; and (2) the availability to market participants of 
alternatives to purchasing the ArcaBook data. The Commission conducted 
an exhaustive 14-page review of these two competitive forces before 
concluding that the availability of alternatives, as well as the 
compelling need to attract order flow, imposed significant competitive 
pressure on that exchange's need to act equitably, fairly, and 
reasonably in setting the terms of the fees for its non-core data 
product.\18\
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    \18\ Id. at 51--65. The Commission then spent an additional 36 
pages (65-101) analyzing and refuting comments challenging the 
Commission's competition analysis.
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    The market data provided in the ISE Open/Close Trade Profile, the 
ISE Open/Close Trade Profile Intraday and ISE's Historical Options Tick 
Data is non-core data that is governed by the same analysis the 
Commission set forth in the NetCoalition Order. As with the NYSE Arca 
depth-of-book product, no rule requires ISE or any other exchange to 
offer this data; nor are vendors required to purchase or display this 
data.
    Additionally, ISE is constrained by the same two competitive forces 
in the options market as the Commission found were present in the 
NetCoalition Order. First, ISE has a compelling need to attract order 
flow from market participants in order to maintain its share of trading 
volume. This compelling need to attract order flow imposes significant 
pressure on ISE to act reasonably in setting the fees for its market 
data offerings, particularly given that the market participants that 
will pay such fees often will be the same market participants from whom 
ISE must attract order flow. These market participants include broker-
dealers that control the handling of a large volume of customer and 
proprietary order flow. Given the portability of order flow from one 
exchange to another, any exchange that sought to charge unreasonably 
high market data fees would risk alienating many of the same customers 
on whose orders it depends for competitive survival.
    Second, the Exchange is constrained in pricing the ISE Open/Close 
Trade Profile, the ISE Open/Close Trade Profile Intraday and Historical 
Options Tick Data by the availability to market participants of 
alternatives to purchasing ISE's market data offerings. ISE must 
consider the extent to which market participants would choose one or 
more alternatives instead of purchasing the exchange's data. For 
example, although ISE's Historical Options Tick Data is separate from 
the core data feed available by the Options Price Reporting Authority 
(``OPRA''), all the information available in this market data offering 
are included in the core data feed. The core OPRA data is widely 
distributed, thus constraining ISE's ability to price its market data 
offerings. Additionally, the CBOE, which enjoys greater market share 
than ISE, is also a potential competitor as it too sells an open/close 
market data offering that market participants may choose to purchase 
instead.
    In the aftermath of the NetCoalition Order, the Exchange believes 
that the competition among exchanges for order flow and the competition 
among exchanges for market data products subject ISE's proposed market 
data offerings to significant competitive forces. In addition, the 
Exchange believes that no substantial countervailing basis exists to 
support a finding that the proposed fees fail to meet the requirement 
of the Act. In sum, the availability of alternative sources of 
information imposes significant competitive pressures on the ISE Open/
Close Trade Profile, the ISE Open/Close Trade Profile Intraday and 
ISE's Historical Options Tick Data and ISE's compelling need to attract 
order flow imposes significant competitive pressure on the Exchange to 
act equitably, fairly, and reasonably in setting its fees.

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.

[[Page 64786]]

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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (a) By order approve such proposed rule change; or
    (b) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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-2009-103 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-2009-103. 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, 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 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-
2009-103 and should be submitted on or before December 29, 2009.
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    \19\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-29137 Filed 12-7-09; 8:45 am]
BILLING CODE 8011-01-P