[Federal Register Volume 75, Number 23 (Thursday, February 4, 2010)]
[Notices]
[Pages 5826-5827]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-2334]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61434; File No. SR-ISE-2010-06]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change, as Modified by Amendment No. 2 Thereto, Relating to Fee Changes
January 27, 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 January 14, 2010, 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. On January 27, 2010, ISE filed Amendment No. 1
to the proposed rule change. On January 27, 2010, ISE withdrew
Amendment No. 1 and filed Amendment No. 2 to the proposed rule
change.\3\ 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\ Amendment No. 2 deleted a sentence in the purpose section of
the filing and in Exhibit 1.
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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. 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. Specifically, the
Exchange proposes to adopt a $0.20 per contract execution fee for
professional customers who execute orders as a result of posting
liquidity to ISE's order book.
ISE recently adopted a rule change to distinguish between Priority
Customer Orders and Professional Orders.\4\ A Priority Customer is
defined in ISE Rule 100(a)(37A) as a person or entity that is not a
broker or dealer in securities, and does not place more than 390 orders
in listed options per day on average during a calendar month for its
own beneficial account(s). A Professional Order is defined in ISE Rule
100(a)(37C) as an order that is for the account of a person or entity
that is not a Priority Customer. For purpose of this discussion,
``professional customers'' are non-broker/dealer participants who enter
at least 390 orders per day on average during a calendar month for
their own beneficial account(s). The level of trading activity by
professional customers more resembles that of market makers and
proprietary traders on the Exchange than it does of other customers.
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\4\ See Exchange Act Release No. 59287 (Jan. 23, 2009), 74 FR
5694 (Jan. 30, 2009).
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Currently, the primary distinction between the two types of
customers is that Priority Customers take priority on the order book
over professional customers. Professional customers are on parity with
market makers and broker/dealers. However, professional customers
generally do not pay transaction fees. Market makers and broker/dealers
on the other hand pay transaction fees to the Exchange. Specifically,
for market makers, 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. Broker/dealer orders pay a flat
execution fee of $0.20 per traded contract, regardless of whether they
post liquidity to or take liquidity from ISE's order book when they
enter orders. Broker/dealer fees are posted on the Exchange's fee
schedule under the Firm Proprietary line item.
The Exchange now proposes to adopt a $0.20 per contract execution
fee for professional customers who execute orders as a result of
posting liquidity to ISE's order book. The proposed fee applies only to
professional customer orders, i.e., non-broker/dealer customer orders;
it does not apply to market maker and broker/dealer orders who, as
noted above, already pay transaction fees.
As discussed, professional customers engage in trading activity
similar to that conducted by market makers and proprietary traders. For
example, professional customers continue to join bids and offers on the
Exchange and thus compete for incoming order flow. Professional
customers do so in direct competition with ISE's market makers, but
with the distinct advantage of generally not paying transaction fees to
the Exchange. ISE believes that adopting a ``maker fee'' for
professional customers will put these market participants on a more
equal footing with market makers and proprietary traders regarding fees
paid for transacting on the Exchange.
The Exchange further notes that the proposed fees, while comparable
to fees currently paid by broker/dealer orders, are less than those
fees as the Exchange is only proposing to charge professional customers
who execute orders as a result of posting liquidity to ISE's order
[[Page 5827]]
book. The Exchange is not currently proposing to charge professional
customers a fee for taking liquidity from ISE's order book.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the objectives of Section 6 of the Exchange Act,\5\ in general,
and furthers the objectives of Section 6(b)(4),\6\ 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, the proposed rule change
will help equalize competition between market makers, proprietary
traders and professional customers on the Exchange.
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\5\ 15 U.S.C. 78f.
\6\ 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 \7\ and Rule 19b-4(f)(2) \8\ 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.\9\
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\7\ 15 U.S.C. 78s(b)(3)(A).
\8\ 17 CFR 19b-4(f)(2).
\9\ The Commission considers the 60-day period within which the
Commission may summarily abrogate the proposal pursuant to Section
19(b)(3)(C) of the Act, 15 U.S.C. 78s(b)(3)(C), to commence on
January 27, 2010, the date ISE filed Amendment No. 2 to the
proposal.
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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-2010-06 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-2010-06. 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,\10\ 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 10:00 am 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-2010-06 and should be
submitted on or before February 25, 2010.
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\10\ The text of the proposed rule change is available on ISE's
Web site at http://www.ise.com, on the Commission's Web site at
http://www.sec.gov, at ISE, and at the Commission's Public Reference
Room.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-2334 Filed 2-3-10; 8:45 am]
BILLING CODE 8011-01-P