[Federal Register Volume 75, Number 67 (Thursday, April 8, 2010)]
[Notices]
[Pages 17983-17985]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-7975]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61826; File No. SR-ISE-2010-24]


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

April 1, 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 March 24, 2010, 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 the self-
regulatory organization. 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.\3\ On March 24, 2010, the ISE filed for immediate effectiveness a 
proposed rule change to amend Direct Edge ECN's (``DECN'') fee schedule 
for ISE Members \4\ to: (i) Reflect pass through charges of other 
market centers; \5\ and (ii) make typographical and clarifying 
changes.\6\ The changes made pursuant

[[Page 17984]]

to SR-ISE-2010-23 became operative on April 1, 2010.
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    \3\ This fee filing relates to the trading facility operated by 
ISE and not EDGA Exchange, Inc. and EDGX Exchange, Inc. Direct Edge 
ECN LLC (EDGA and EDGX) will cease to operate in its capacity as an 
electronic communications network following the commencement of 
operations of EDGA Exchange, Inc. and EDGX Exchange, Inc. as 
national securities exchanges.
    \4\ References to ISE Members in this filing refer to DECN 
Subscribers who are ISE Members.
    \5\ In SR-ISE-2009-57, the Exchange adopted a fee of $0.0024 per 
share for securities priced at or above $1.00 which add liquidity to 
LavaFlow ECN (``LavaFlow'') and are routed from either EDGX or EDGA. 
Such a strategy is deemed a ROLF routing strategy, which is a 
destination specific routing strategy that will first sweep the EDGA 
or EDGX order book before being delivered to LavaFlow. A conforming 
amendment was made to the fee schedule to yield an ``M'' flag to 
account for this fee. Conversely, for liquidity that is routed 
through either EDGA or EDGX and removes liquidity from LavaFlow, the 
Exchange adopted a fee for ISE members of $0.0029 per share for 
securities priced at or above $1.00. Such situation yields a flag of 
``U.'' However, if an ISE member posts an average of 50,000 shares 
or more using a ROLF routing strategy, yielding flag M, then such 
ISE member's fee, when removing liquidity from LavaFlow, decreased 
to $0.0022 per share and yielded flag U. See Securities Exchange Act 
Release No. 60442 (August 5, 2009), 74 FR 40249 (August 11, 2009) 
(SR-ISE-2009-57).
    In SR-ISE-2010-23, because the Exchange passed through to 
Exchange members the actual transaction fees assessed by away 
markets, the Exchange amended its fees schedule to reflect 
LavaFlow's increase in fees. Effective March 1, 2010, LavaFlow 
increased its fees and thresholds for meeting the above-described 
tier. Members that remove liquidity from LavaFlow if the Member's 
attributable MPID executes a minimum of 100,000 shares (instead of 
50,000 shares) average daily volume using strategy ROLF (yielding 
Flag M) are now charged $0.0023 per share (instead of $0.0022 per 
share). The Exchange amended its fee schedule to pass through this 
change to its members by reflecting it in footnote 6 on the fee 
schedule.
    Secondly, effective April 1, 2010, the Nasdaq Stock Market 
updated its transaction fee schedule to introduce a unified removal 
rate ($0.0030 per share executed) for all U.S. equities, across 
Tapes A, B, and C.\5\ As a result of this change, the Exchange made 
a conforming change to delete footnote number 8 on the ``2'' flag 
and re-number it as footnote number 7 since the Nasdaq Stock Market 
no longer differentiates its removal rate across Tapes A, B, and C. 
See Equity Trader Alert 2010-12 (effective April 1, 2010).
    \6\ In SR-ISE-2010-23, the Exchange made the following 
typographical and clarifying changes to the fee schedule: (i) on 
flag H, for EDGA, 0.001 was changed to read ``0.0010'' to conform 
the numbering with the other fees on the schedule (emphasis added); 
and (ii) in footnote number 6, the Exchange deleted an additional 
parenthesis at the end of the phrase ``(yielding Flag U).''
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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-2010-23, 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 April 1, 2010. 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 April 1, 2010 start date.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\7\ in general, and 
furthers the objectives of Section 6(b)(4),\8\ 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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    \7\ 15 U.S.C. 78f.
    \8\ 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 Number SR-ISE-2010-24 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-2010-24. 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,\9\ 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 Web site viewing and 
printing 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-2010-24 and should be 
submitted on or before April 29, 2010.
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    \9\ 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.
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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.\10\ 
Specifically, the Commission finds that the proposed rule change is 
consistent with Section 6(b)(4) \11\ 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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    \10\ In approving this proposal, the Commission has considered 
its impact on efficiency, competition, and capital formation. 15 
U.S.C. 78c(f).
    \11\ 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 pursuant to SR-ISE-2010-23 (the ``Member Fee 
Filing''). The fee changes made pursuant to the Member Fee Filing 
became operative on April 1, 2010. 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. The current 
proposal, which will apply retroactively to April 1, 2010, 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.\12\
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    \12\ 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

[[Page 17985]]

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 April 1, 2010, 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,\13\ that the proposed rule change (SR-ISE-2010-24) be, and hereby 
is, approved on an accelerated basis.
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    \13\ 15 U.S.C. 78s(b)(2).
    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-7975 Filed 4-7-10; 8:45 am]
BILLING CODE 8011-01-P