[Federal Register Volume 76, Number 199 (Friday, October 14, 2011)]
[Notices]
[Pages 63964-63966]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-26535]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65522; File No. SR-ISE-2011-56]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change Relating to Fees and Rebates for Certain Orders Executed on the 
Exchange

October 7, 2011.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that, on September 23, 2011, the International Securities Exchange, LLC 
(the ``Exchange'' or the ``ISE'') filed with the Securities and 
Exchange Commission (the ``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 transaction fees and rebates for 
certain orders executed on the Exchange. 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 103 options classes (the ``Select 
Symbols'').\3\ For removing liquidity in the Select Symbols, the 
Exchange currently charges a take fee of: (i) $0.25 per contract for 
Market Maker and Market Maker Plus orders.\4\ The Exchange now proposes 
to change the take fees for Market Maker and Market Maker Plus orders 
in the Select Symbols from $0.25 per contract to $0.26 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), 63534 (December 13, 2010), 75 FR 79433 (December 20, 2010) 
(SR-ISE-2010-114); 63664 (January 6, 2011), 76 FR 2170 (January 12, 
2011) (SR-ISE-2010-120); 64303 (April 15, 2011), 76 FR 22425 (April 
21, 2011) (SR-ISE-2011-18); 64992 (July 29, 2011), 76 FR 47279 
(August 4, 2011) (SR-ISE-2011-43); 65021 (August 3, 2011), 76 FR 
48933 (August 9, 2011) (SR-ISE-2011-45); 65087 (August 10, 2011), 76 
FR 50783 (August 16, 2011) (SR-ISE-2011-47); 65327 (September 13, 
2011), 76 FR 58068 (September 19, 2011) (SR-ISE-2011-48); 65084 
(August 10, 2011), 76 FR 50805 (September August 16, 2011) (SR-ISE-
2011-49); and 65297 (September 8, 2011), 76 FR 56844 (September 14, 
2011) (SR-ISE-2011-54).
    \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.
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    As an incentive for members to direct customer order flow to the 
Exchange, Priority Customer complex orders in a select number of 
options classes (``Designated Symbols''),\5\ currently receive a rebate 
of $0.26 per contract on

[[Page 63965]]

all legs when these orders trade with non-customer orders in the 
Exchange's complex order book. The Exchange proposes to increase this 
rebate to $0.27 per contract. The Exchange believes it is necessary to 
increase the rebate for Priority Customer complex orders in the 
Designated Symbols in order to continue to attract Priority Customer 
complex order flow to the Exchange as NASDAQ OMX PHLX, Inc. (``PHLX'') 
recently increased a similar rebate from $0.26 to $0.27 per 
contract.\6\
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    \5\ The Designated Symbols are AAPL, BAC, C, F, GLD, INTC, IWM, 
JPM, QQQ, SLV, SPY and XLF.
    \6\ See Securities and Exchange Act Release No. 65312 (September 
9, 2011) (SR-PHLX-2011-126).
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2. Statutory Basis
    The Exchange believes that its proposal to amend its Schedule of 
Fees is consistent with Section 6(b) of the Securities and Exchange Act 
of 1934 (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 and other persons using its facilities. 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 and Designated Symbols, as applicable.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that the proposed rebate for options 
overlying the Designated Symbols remain competitive with fees charged 
by other exchanges and are therefore reasonable and equitably allocated 
to those members that opt to direct orders to the Exchange rather than 
to a competing exchange. The Exchange believes that its proposal to 
assess a $0.26 per contract take fee for Market Maker and Market Maker 
Plus orders in the Select Symbols is reasonable and equitably allocated 
because the fee is within the range of fees assessed by other exchanges 
employing similar pricing schemes and the proposed nominal increase 
will bring this fee closer to the fee the Exchange currently charges to 
other market participants that employ a similar trading strategy. The 
Exchange further notes that with this proposed increase, the fee 
charged to Market Maker and Market Maker Plus orders will remain lower 
than the fee currently charged by the Exchange to other market 
participants. 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 do not. The Exchange believes that it is equitable to 
assess a nominally higher fee to market participants that do not have 
the quoting requirements that Exchange market makers do.
    The Exchange also believes that it is reasonable and equitable to 
provide a rebate for Priority Customer complex orders in the Designated 
Symbols because paying a rebate would continue to attract additional 
order flow to the Exchange and thereby create liquidity in the 
Designated Symbols that ultimately will benefit all market participants 
who trade on the Exchange. The proposed increased rebate of $0.27 per 
contract for Priority Customer complex orders in the Designated Symbols 
is identical to a proposal recently submitted by PHLX.\9\
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    \9\ See supra note 6.
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    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 
options exchanges. Additionally, the Exchange believes it remains an 
attractive venue for market participants to trade complex orders 
despite its proposed fee change as its fees remain competitive with 
those charged by other exchanges for similar trading strategies. 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. For the 
reasons noted above, the Exchange believes that the proposed fees are 
fair, equitable and not unfairly discriminatory.

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.\10\ At any time within 60 days of the 
filing of the 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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    \10\ 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-2011-56 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-2011-56. 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, 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 Exchange. All 
comments received will be posted without change; the

[[Page 63966]]

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-
2011-56 and should be submitted on or before November 4, 2011.


    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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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-26535 Filed 10-13-11; 8:45 am]
BILLING CODE 8011-01-P