[Federal Register Volume 76, Number 108 (Monday, June 6, 2011)]
[Notices]
[Pages 32382-32383]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-13855]



[[Page 32382]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64562; File No. SR-ISE-2011-29]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change Relating to Second Market Fees

 May 27, 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 May 18, 2011, 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 and II 
below, which items have been prepared by the Exchange. 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 ISE is proposing to amend its fees for executions in the 
Exchange's Second Market. 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 has rules for the listing and trading of 
low-volume option classes that qualify for listing under ISE Rule 502. 
These option classes trade in the Exchange's ``Second Market.'' \3\ The 
Exchange currently lists eligible equity option classes (excluding 
options on exchange traded funds) that trade on another options 
exchange and that have an average daily volume below 500 contracts over 
a six-month period in the Second Market. When the Exchange launched the 
Second Market, it adopted Second Market fees that varied from those 
that were and still are currently applicable to the Exchange's primary 
market. Specifically, for Second Market transactions, Members are 
currently charged an execution fee of $.05 per contract for Priority 
Customer \4\ orders. Priority Customer orders executed in the 
Exchange's primary market, on the other hand, are, for the most part, 
not charged an execution fee.\5\
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    \3\ See Exchange Act Release No. 34-54580 (October 6, 2006), 71 
FR 60781 (October 16, 2006) (SR-ISE-2006-40).
    \4\ 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).
    \5\ Priority Customer orders in Singly Listed Indexes, Singly 
Listed ETFs and FX Options that are not a part of the FX Options 
Incentive Plan are charged $0.18 per contract. Priority Customer 
orders in FX Options that are part of the FX Options Incentive Plan 
are charged $0.40 per contract.
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    Further, the Exchange currently has a payment-for-order-flow 
(``PFOF'') program that helps its market makers establish PFOF 
arrangements with an Electronic Access Member (``EAM'') in exchange for 
that EAM preferencing some or all of its order flow to that market 
maker. The Exchange's PFOF fees are currently set at $0.65 per contract 
for all option classes that are not in the penny pilot program. For 
penny pilot classes, the Exchange charges a PFOF fee of $0.25 per 
contract. The Exchange currently does not charge a PFOF fee for option 
classes that are subject to the Exchange's maker/taker fees.\6\ And 
since the launch of the Second Market, ISE has not charged and 
currently does not charge a PFOF fee for Second Market transactions.
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    \6\ The exclusion applies to option classes that are subject to 
Rebates and Fees for Adding and Removing Liquidity in Select 
Symbols.
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    The Exchange now proposes to amend its Second Market fees to 
standardize them with the fees charged for executions in the Exchange's 
primary market. Specifically, ISE proposes to lower the execution fee 
for Priority Customer orders in the Second Market from $0.05 per 
contract to $0.00 per contract. The Exchange also proposes to adopt a 
PFOF fee for Second Market transactions. In addition to standardizing 
theses fees, the Exchange believes these fee changes will make the 
Exchange's transaction fees simpler and more concise to Exchange 
Members. The Exchange believes that the proposed fee changes for Second 
Market transactions will encourage more order flow to the Exchange and 
also allow ISE market makers to better compete for order flow.
    The Exchange has designated this proposal to be operative on June 
1, 2011.
2. Basis
    The Exchange believes that its proposal to amend its Schedule of 
Fees is consistent with Section 6(b) of the Act \7\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \8\ in 
particular, in that it is an equitable allocation of reasonable dues, 
fees and other charges among Exchange members. The Exchange believes 
that the proposed fee changes will generally allow the Exchange and its 
market makers to better compete for order flow and thus enhance 
competition. More specifically, the Exchange believes that its proposal 
to assess a $0.00 per contract fee for Second Market transactions is 
equitable and reasonable as it will standardize the fee charged by the 
Exchange for all market participants that trade in Second Market 
options. The Exchange believes that its proposal to assess a PFOF fee 
for Second Market transactions is also equitable and reasonable because 
the fee will serve to encourage order flow to the Exchange much like 
the PFOF fee does for option classes in the Exchange's primary market. 
Finally, the Exchange believes the proposed fee changes are equitable 
and reasonable as they will apply universally to all market 
participants who trade in Second Market options on the Exchange.
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    \7\ 15 U.S.C. 78f(b).
    \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.

[[Page 32383]]

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.\9\ 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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    \9\ 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 No. SR-ISE-2011-29 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-ISE-2011-29. 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 website viewing and 
printing in the Commission's Public Reference Room. 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-2011-29 and should be submitted by June 27, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-13855 Filed 6-3-11; 8:45 am]
BILLING CODE 8011-01-P