[Federal Register Volume 74, Number 235 (Wednesday, December 9, 2009)]
[Notices]
[Pages 65178-65179]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-29240]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61100; File No. SR-ISE-2009-100]


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

December 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 November 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 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 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.

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 November 30, 2009, the ISE filed for immediate effectiveness a 
proposed rule change to: (i) Amend DECN's fee schedule for ISE Members 
\3\ to reflect pass through charges of other market centers; \4\ and 
(ii) make technical changes to the fee schedule.\5\ The changes made 
pursuant to SR-ISE-2009-99 became operative on December 1, 2009.
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    \3\ References to ISE Members in this filing refer to DECN 
Subscribers who are ISE Members.
    \4\ On October 1, 2009, the Exchange added new fee categories 
for the INET order type. When a member routes to Nasdaq using the 
INET order type and removes liquidity on Tapes A or C, the member 
incurs a fee of $0.0030 on either EDGA or EDGX. Such situation 
yields Flag ``L''. The INET order type sweeps the EDGA or EDGX book, 
and routes the remainder to Nasdaq. If the order is marketable, it 
removes liquidity from the EDGA or EDGX book, as applicable, first. 
If the order is non-marketable, the order posts on Nasdaq. With 
regards to a Member's use of the INET order type for Tapes A or C 
securities, Members routing an ADV: (i) Less than 5,000,000 shares 
are currently charged $0.0030 per share, as described in the 
schedule; (ii) equal to or greater than 5,000,000 shares but less 
than 20,000,000 shares are currently charged $0.0027 per share; 
(iii) equal to or greater than 20,000,000 shares but less than 
30,000,001 shares are currently charged $0.0026 per share; and (iv) 
equal to or greater than 30,000,001 shares are currently charged 
$0.0025 per share. The rates, in all cases, are calculated for 
shares removed from Nasdaq. The Exchange believes that these tier-
based rates incent Members to sweep the EDGA or EDGX book first and 
then offer a discounted rate to Nasdaq's rates if the remainder of 
the order is routed to Nasdaq. These discounted rates arise in part 
from reduced administrative costs associated with certain volume 
levels. See Securities Exchange Act Release No. 60769 (October 2, 
2009), 74 FR 51903 (October 8, 2009) (SR-ISE-2009-68).
    In SR-ISE-2009-99, the Exchange amended its fees in order to 
reflect changes to the actual transaction fees assessed by away 
markets. Specifically, the Exchange amended its fees schedule to 
reflect changes to Nasdaq's best removal tier rate. For example, on 
November 1, 2009, the best removal tier rate increased on Nasdaq 
from $0.0027 per share executed to $0.0028 per share executed for 
Tape A & C securities. See Securities Exchange Act Release No. 60959 
(November 6, 2009), 74 FR 58672 (November 13, 2009)(SR-NASDAQ-2009-
096). The Exchange amended its fee schedule so that when Nasdaq's 
best removal tier rate changes, EDGA and EDGX's fees change as well, 
in lock step. The new language reads as follows:
    Subscribers routing an average daily volume (``ADV''): (i) Less 
than 5,000,000 shares will be charged $0.0030 per share, as 
described in the schedule; (ii) equal to or greater than 5,000,000 
shares but less than 20,000,000 shares will be charged Nasdaq's best 
removal tier rate per share; (iii) equal to or greater than 
20,000,000 shares but less than 30,000,001 shares will be charged 
Nasdaq's best removal tier rate--$0.0001 per share; and (iv) equal 
to or greater than 30,000,001 shares will be charged Nasdaq's best 
removal tier rate--$0.0002 per share. The rates, in all cases, are 
calculated for shares removed from Nasdaq. (emphasis added)
     For the month of December this equates to $0.0028 per share for 
(ii), above, $0.0027 per share for (iii), above, and $0.0026 per 
share for (iv), as described above.
    \5\ In SR-ISE-2009-99, the Exchange made technical changes to 
the fee schedule. Effective December 1, 2009, the Exchange amended 
the meaning of several flags. In particular, the N and W flags are 
no longer used to reflect activity outside of regular market hours. 
The Exchange adopted flags 3-7 to reflect pre- and post-market 
activity. See Securities Exchange Act Release No. 60914 (November 2, 
2009), 74 FR 57726 (November 9, 2009)(SR-ISE-2009-88). In SR-ISE-
2009-99, the Exchange corrected a reference in footnote 1 to the fee 
schedule to reflect this change. The new language reads as follows:
     In addition, subscribers can also qualify for a rebate of 
$0.0032 per share for all liquidity posted on EDGX if they add or 
route at least 10,000,000 shares of average daily volume prior to 
9:30 AM or after 4:00 PM (includes all flags except 6) 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. (emphasis added)
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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-2009-99, 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 an effective date of December 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 December 1, 2009 start date.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with

[[Page 65179]]

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-2009-100 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-2009-100. 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 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-2009-100 and should be submitted on 
or before December 30, 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, indicate that its fees 
using the INET order type on Tape A and C will change in conjunction 
with Nasdaq's best removal tier rate and make technical changes to the 
fee schedule.\10\ The fee changes made pursuant to the Member Fee 
Filing became operative on December 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-2009-99 (the ``Member Fee Filing'').
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    The current proposal, which will apply retroactively to December 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 December 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-2009-100) 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. E9-29240 Filed 12-8-09; 8:45 am]
BILLING CODE 8011-01-P