[Federal Register Volume 76, Number 8 (Wednesday, January 12, 2011)]
[Notices]
[Pages 2170-2171]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-477]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63664; File No. SR-ISE-2010-120]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change, as Modified by Amendment No. 1, Relating to Fees and Rebates 
for Adding and Removing Liquidity

January 6, 2011.
    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 23, 2010, the International Securities Exchange, LLC 
(the ``Exchange'' or the ``ISE'') filed with the Securities and 
Exchange Commission the proposed rule change, and on January 5, 2011, 
filed Amendment No. 1 to 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, as amended, 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 the 
Substance of the Proposed Rule Change

    The ISE is proposing to amend its transaction fees and rebates for 
adding and removing liquidity. 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
    The Exchange currently assesses a per contract transaction charge 
to market participants that add or remove liquidity from the Exchange 
(``maker/taker fees'') in 100 options classes (the ``Select 
Symbols'').\3\ The Exchange currently charges a take fee of: (i) $0.25 
per contract for Market Maker, Market Maker Plus,\4\ Firm Proprietary 
and Customer (Professional) \5\ orders; (ii) $0.35 per contract for 
Non-ISE Market Maker \6\ orders; (iii) $0.20 per contract for Priority 
Customer \7\ orders for 100 or more contracts. Priority Customer orders 
for less than 100 contracts are not assessed a fee for removing 
liquidity. The Exchange now proposes to increase the take fee for Firm 
Proprietary and Customer (Professional) orders from $0.25 per contract 
to $0.28 per contract. Additionally, in the interest of standardizing 
the take fee charged for Priority Customer orders, the Exchange 
proposes to lower the take fee for Priority Customer orders of 100 or 
more contracts from $0.20 per contract to $0.12 per contract while 
increasing the take fee for Priority Customer orders of less than 100 
contracts from $0.00 per contract to $0.12 per contract. As a result, 
all Priority Customer orders, regardless of size, will be assessed a 
take fee of $0.12 per contract.
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    \3\ Options classes subject to maker/taker fees are identified 
by their ticker symbol on the Exchange's Schedule of Fees. See 
Securities Exchange Act Release Nos. 61869 (April 7, 2010), 75 FR 
19449 (April 14, 2010) (SR-ISE-2010-25), 62048 (May 6, 2010), 75 FR 
26830 (May 12, 2010) (SR-ISE-2010-43), 62282 (June 11, 2010), 75 FR 
34499 (June 17, 2010) (SR-ISE-2010-54), 62319 (June 17, 2010), 75 FR 
36134 (June 24, 2010) (SR-ISE-2010-57), 62508 (July 15, 2010), 75 FR 
42809 (July 22, 2010) (SR-ISE-2010-65), 62507 (July 15, 2010), 75 FR 
42802 (July 22, 2010) (SR-ISE-2010-68), 62665 (August 9, 2010), 75 
FR 50015 (August 16, 2010) (SR-ISE-2010-82), 62805 (August 31, 
2010), 75 FR 54682 (September 8, 2010) (SR-ISE-2010-90), 63283 
(November 9, 2010), 75 FR 70059 (November 16, 2010) (SR-ISE-2010-
106) and 63534 (December 13, 2010), 75 FR 79433 (December 20, 2010) 
(SR-ISE-2010-114).
    \4\ A Market Maker Plus is a market maker who is on the National 
Best Bid or National Best Offer 80% of the time for series trading 
between $0.03 and $5.00 (for options whose underlying stock's 
previous trading day's last sale price was less than or equal to 
$100) and between $0.10 and $5.00 (for options whose underlying 
stock's previous trading day's last sale price was greater than 
$100) in premium in each of the front two expiration months and 80% 
of the time for series trading between $0.03 and $5.00 (for options 
whose underlying stock's previous trading day's last sale price was 
less than or equal to $100) and between $0.10 and $5.00 (for options 
whose underlying stock's previous trading day's last sale price was 
greater than $100) in premium across all expiration months in order 
to receive the rebate. The Exchange determines whether a market 
maker qualifies as a Market Maker Plus at the end of each month by 
looking back at each market maker's quoting statistics during that 
month. If at the end of the month, a market maker meets the 
Exchange's stated criteria, the Exchange rebates $0.10 per contract 
for transactions executed by that market maker during that month. 
The Exchange provides market makers a report on a daily basis with 
quoting statistics so that market makers can determine whether or 
not they are meeting the Exchange's stated criteria.
    \5\ A Customer (Professional) is a person who is not a broker/
dealer and is not a Priority Customer.
    \6\ A Non-ISE Market Maker, or Far Away Market Maker 
(``FARMM''), is a market maker as defined in Section 3(a)(38) of the 
Securities Exchange Act of 1934, as amended (``Exchange Act''), 
registered in the same options class on another options exchange.
    \7\ A Priority Customer is defined in ISE Rule 100(a)(37A) as a 
person or entity that is not a broker/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).
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    For Complex Orders, the Exchange currently charges a take fee of: 
(i) $0.27 per contract for Market Maker, Market Maker Plus, Firm 
Proprietary and Customer (Professional) orders; and (ii) $0.35 per 
contract for Non-ISE Market Maker orders. Priority Customer orders, 
regardless of size, are not assessed a fee

[[Page 2171]]

for removing liquidity from the Complex Order book. The Exchange now 
proposes to increase the take fee for Firm Proprietary and Customer 
(Professional) complex orders from $0.27 per contract to $0.28 per 
contract. The Exchange is not proposing any change to the take fee for 
Market Maker, Market Maker Plus, and Priority Customer complex orders.
    The Exchange has designated this proposal to be operative on 
January 3, 2011.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Schedule of 
Fees is consistent with Section 6(b) of the Act \8\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \9\ in 
particular, in that it is an equitable allocation of reasonable dues, 
fees and other charges among Exchange members. The impact of the 
proposal upon the net fees paid by a particular market participant will 
depend on a number of variables, most important of which will be its 
propensity to add or remove liquidity in options overlying the Select 
Symbols. The Exchange believes that its proposal to assess a $0.12 per 
contract take fee for all Priority Customer orders is reasonable as it 
will standardize the fee charged by the Exchange for this category of 
market participants. The Exchange also believes that its proposal to 
assess a $0.28 per contract take fee for Firm Proprietary and Customer 
(Professional) regular and complex orders in the Select Symbols is also 
reasonable because the fee is within the range of fees assessed by 
other exchanges employing similar pricing schemes. For example, the 
proposed fees assessed to Firm Proprietary and Customer (Professional) 
orders are comparable to rates assessed by NASDAQ OMX PHLX, Inc. 
(``PHLX''). PHLX currently assesses a take fee of $0.45 for Firm and 
Broker-Dealer orders and $0.40 for Professional orders in its regular 
order book. PHLX also currently assesses a take fee of $0.27 for Firm 
and Professional orders and $0.35 for Broker-Dealer orders in its 
complex order book.\10\
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4).
    \10\ See PHLX Fee Schedule at http://www.nasdaqtrader.com/content/marketregulation/membership/phlx/feesched.pdf.
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    The Exchange believes that the price differentiation between the 
various market participants is justified because market makers have 
obligations to the market that the other market participants, such as 
Firm Proprietary and Customer (Professional), do not. The Exchange 
believes that it is equitable to assess a nominally higher fee for Firm 
Proprietary and Customer (Professional) orders that do not have the 
quoting requirements that Exchange market makers do. Moreover, the 
Exchange believes that the proposed fees are fair, equitable and not 
unfairly discriminatory because the proposed fees are consistent with 
price differentiation that exists today at other option exchanges. The 
Exchange believes that the proposed fees are fair, equitable and not 
unfairly discriminatory for the reasons stated above.
    The Exchange operates in a highly competitive market in which 
market participants can readily direct order flow to another exchange 
if they deem fee levels at a particular exchange to be excessive.

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)(A)(ii) of the Act.\11\ At any time within 60 days of the 
filing of such proposed rule change, the Commission summarily may 
temporarily suspend 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. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.
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    \11\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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-2010-120 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-2010-120. 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 Web site viewing and 
printing 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 offices 
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-
2010-120, and should be submitted on or before February 2, 2011.

    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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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-477 Filed 1-11-11; 8:45 am]
BILLING CODE 8011-01-P