[Federal Register Volume 75, Number 7 (Tuesday, January 12, 2010)]
[Notices]
[Pages 1674-1676]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-296]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61289; File No. SR-ISE-2009-108]


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

January 5, 2010.
    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 December 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.
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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 amend Direct Edge ECN's (``DECN'') fee 
schedule for ISE Members \3\ to simplify its fee schedule by (i) 
eliminating the Super Tier and Ultra Tier rebates and (ii) amending its 
fees and rebates. All of the changes described herein are applicable to 
ISE Members.
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    \3\ References to ISE Members in this filing refer to DECN 
Subscribers who are ISE Members.
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    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 were 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.
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    \4\ See Securities and Exchange Act Release No. 60232 (July 2, 
2009), 74 FR 33309 (July 10, 2009) (SR-ISE-2009-43).

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[[Page 1675]]

    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.
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    \5\ See Securities Exchange Act Release No. 60769 (October 2, 
2009) 74 FR 51903 (October 8, 2009) (SR-ISE-2009-68).
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    On May 1, 2009,\6\ the Exchange amended the Super Tier rebate, 
which provides 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.
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    \6\ See Securities Exchange Act Release No. 59887 (May 7, 2009), 
74 FR 22792 (May 14, 2009) (SR-ISE-2009-24).
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    To adjust DECN's pricing model to be more consistent with other 
exchanges (even though DECN is not an exchange),\7\ the Exchange is now 
proposing to de-link the pricing structures of DECN to eliminate 
pricing offers that are contingent on activity across both platforms. 
Secondly, the Exchange is proposing to simplify its fee schedule, which 
will provide Members with greater consistency and transparency during 
the period that the EDGA and EDGX Exchanges are preparing to launch, 
when volume will be transitioning from DECN to the EDGA and EDGX 
Exchanges (assuming their respective Form 1 applications are approved 
by the Commission). Finally, the Exchange believes that the proposed 
rate changes will help to maintain the competitive position of DECN.
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    \7\ On May 7, 2009, each of EDGA Exchange, Inc. and EDGX 
Exchange, Inc. (the ``EDGA and EDGX Exchanges'') filed their 
respective Form 1 applications to register as a national securities 
exchange (``Form 1'') pursuant to Section 6 of the Securities 
Exchange Act of 1934. On July 30, 2009, the Exchanges filed 
Amendment No. 1 to the Form 1 Application. On September 17, 2009, 
the Form 1 was published in the Federal Register for notice and 
comment. See Securities Exchange Act Release No. 60651 (September 
11, 2009), 74 FR 47827 (September 17, 2009).
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    To effectuate the foregoing, the Exchange proposes to delete the 
Super Tier and Ultra Tier rebates discussed above and proposes the 
amendments, described below, to its fees and rebates.
    For securities priced less than $1, the Exchange proposes to change 
fees for adding liquidity on EDGX from free to 0.15% of the dollar 
value of the transaction. For removing liquidity on EDGX, the Exchange 
proposes to change the removal fee from 0.20% of the dollar value of 
the transaction to 0.30% of the dollar value of the transaction.
    DECN does not charge port charges to Members executing 200,000 
shares or more of combined liquidity on EDGX and/or EDGA on a monthly 
basis, per port. Any port (or number of ports) in excess of this, 
however, is currently charged $50 per port, per month. The Exchange is 
proposing to eliminate this contingency and provide that all port 
charges are free irrespective of how much volume the Member executes.
    Currently, the Exchange provides that the current removal rate on 
EDGA, a rebate of $0.0002 per share, is contingent on the attributed 
MPID adding or routing a minimum average daily share volume, measured 
monthly, of 50,000 shares on EDGA. The Exchange proposes to provide 
that hidden order executions (Flag H) also count toward this volume. As 
a result, any attributed MPID not meeting this minimum will be charged 
$0.0030 per share for removing liquidity from EDGA. In addition, the 
Exchange proposes to eliminate this contingency (in footnote 1 of the 
fee schedule) as it applies to EDGX or EDGA/EDGX combined volume. As 
mentioned above, the Exchange is now proposing to de-link the pricing 
structures of DECN (EDGA/EDGX) to eliminate pricing offers that are 
contingent on activity across both platforms.
    For adding liquidity on EDGA, currently Members are charged $0.0002 
per share to add 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. Any attributed MPID meeting this minimum 
will not be charged to add liquidity on EDGA. The Exchange is proposing 
to delete the above paragraph in footnote 1 as the current charge of 
$0.0002 per share to add liquidity on EDGA is no longer dependent on 
Members adding a minimum average daily share volume, measured monthly, 
of at least 50,000,000 shares on EDGA. In addition, the Exchange is 
proposing that any attributed MPID meeting this minimum will also be 
charged $0.0002 per share to add liquidity on EDGA. Therefore, the text 
in footnote 1 has been deleted to reflect this change.
    Currently, Members can 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 6); and (ii) 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. For EDGX, the 
Exchange proposes to amend this as follows: For Members adding volume 
in securities priced $1 and over, they will receive a rebate of $0.0031 
per share for all liquidity posted on EDGX if they: (i) Add or route at 
least 5,000,000 shares of average daily volume prior to 9:30 a.m. or 
after 4 p.m. (includes all flags except 6); and (ii) add a minimum of 
50,000,000 shares of average daily volume on EDGX in total, including 
during both market hours and pre- and post-trading hours (emphasis 
added). The new thresholds allow more Members to receive this rebate 
and is designed to reward members who add or route significant order 
flow to EDGX both during market hours and pre- and post-trading hours. 
It is also designed to increase liquidity during pre- and post-trading 
hours. For all Members, including Members not meeting the above 
thresholds, the Exchange now proposes to rebate $0.0029 per share for 
adding liquidity (to EDGX) in securities on all Tapes. This replaces 
the Super Tier and Ultra Tier structure presently in place that is 
described above. Conforming amendments have been made to flags B, V, Y, 
3 & 4 (``add liquidity'' flags) to reflect this fee change.
    For removing liquidity, the Exchange currently charges $0.0028 per 
share for removing liquidity on EDGX for securities on all Tapes. The 
Exchange now proposes to charge $0.0029 per share for removing 
liquidity on EDGX. The Exchange believes that this fee structure will 
enable it to compete effectively with other market centers. Conforming 
amendments have been made to the N, W, and 6 flags (``remove 
liquidity'' flags) to reflect this fee change.
    Finally, the Exchange proposes to amend the fee for EDGA orders 
routed to EDGX. Currently, the Exchange charges $0.0028 per share and 
this event yields flag ``I''. The Exchange is proposing to increase 
this fee to $0.0029 per share on the EDGA platform. The Exchange 
believes that this rate change will enable it to maintain a competitive 
position with regards to other away market centers.

[[Page 1676]]

    The changes discussed in this filing will become operative on 
January 1, 2010.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\8\ in general, and 
furthers the objectives of Section 6(b)(4),\9\ in particular, as 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, simplifying the rate structure for Members 
provides pricing incentives to market participants that route orders to 
DECN, allowing DECN to remain competitive. 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. The ISE also 
believes that the proposed rates are equitable in that they apply 
uniformly to all Members. Finally, to adjust DECN's pricing model to be 
more consistent with other exchanges (even though DECN is not an 
exchange), the Exchange desires to (i) de-link the pricing structures 
of DECN (EDGA/EDGX) to eliminate pricing offers that are contingent on 
activity across both platforms; and (ii) simplify its fee schedule in 
order to provide Members with greater consistency and transparency 
during the period that the EDGA and EDGX Exchanges are preparing to 
launch, when volume will be transitioning from DECN to EDGA/EDGX 
Exchanges (assuming their respective Form 1 applications are approved 
by the Commission).
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    \8\ 15 U.S.C. 78f.
    \9\ 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 \10\ and Rule 19b-4(f)(2) \11\ 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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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 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 e-mail to [email protected]. Please include 
File Number SR-ISE-2009-108 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-2009-108. 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-2009-108 and should be 
submitted on or before February 2, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-296 Filed 1-11-10; 8:45 am]
BILLING CODE 8011-01-P