[Federal Register Volume 78, Number 12 (Thursday, January 17, 2013)]
[Notices]
[Pages 3934-3940]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-00870]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68627; File No. SR-ISE-2013-01]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change To Amend the Schedule of Fees

January 11, 2013.
    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 2, 2013, 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, II, and III 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.
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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 proposes 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

[[Page 3935]]

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 per contract transaction fees and 
provides rebates to market participants that add or remove liquidity 
from the Exchange (``maker/taker fees and rebates'') in a number of 
options classes (the ``Select Symbols'').\3\ The Exchange's maker/taker 
fees and rebates are applicable to regular and complex orders executed 
in the Select Symbols. The Exchange also currently assesses maker/taker 
fees and rebates for complex orders in symbols that are in the Penny 
Pilot program but are not a Select Symbol (``Non-Select Penny Pilot 
Symbols'') \4\ and for complex orders in all symbols that are not in 
the Penny Pilot Program (``Non-Penny Pilot Symbols'').\5\
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    \3\ Options classes subject to maker/taker fees and rebates are 
identified by their ticker symbol on the Exchange's Schedule of 
Fees.
    \4\ See Exchange Act Release Nos. 65724 (November 10, 2011), 76 
FR 71413 (November 17, 2011) (SR-ISE-2011-72); and 66961 (May 10, 
2012), 77 FR 28914 (May 16, 2012) (SR-ISE-2012-38).
    \5\ See Exchange Act Release Nos. 66084 (January 3, 2012), 77 FR 
1103 (January 9, 2012) (SR-ISE-2011-84); 66392 (February 14, 2012), 
77 FR 10016 (February 21, 2012) (SR-ISE-2012-06); 66961 (May 10, 
2012), 77 FR 28914 (May 16, 2012) (SR-ISE-2012-38); and 67400 (July 
11, 2012), 77 FR 42036 (July 17, 2012) (SR-ISE-2012-63).
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    The purpose of this proposed rule change is to 1) increase the 
rebate levels for complex orders in options on the Select Symbols, on 
SPY--a Select Symbol which has a distinct rebate amount, on the Non-
Select Penny Pilot Symbols and on the Non-Penny Pilot Symbols, 2) 
increase the maker fee for complex orders that trade against Priority 
Customer complex orders in the Select Symbols, in SPY, in the Non-
Select Penny Pilot Symbols and in the Non-Penny Pilot Symbols, and 3) 
increase the taker fee for complex orders in the Select Symbols, in 
SPY, in the Non-Select Penny Pilot Symbols and in the Non-Penny Pilot 
Symbols.
Complex Order Rebates
    The Exchange currently provides volume-based tiered rebates for 
Priority Customer complex orders in the Select Symbols (excluding SPY), 
in SPY, in the Non-Select Penny Pilot Symbols and in the Non-Penny 
Pilot Symbols when these orders trade with non-Priority Customer orders 
in the complex order book.
    In the Select Symbols, the Exchange currently provides a base 
rebate of $0.34 per contract, per leg, for Priority Customer complex 
orders when these orders trade with non-Priority Customer complex 
orders in the complex order book. Additionally, Members can earn a 
higher rebate amount by achieving certain average daily volume (ADV) 
thresholds on a month-to-month basis. The current ADV threshold for the 
base tier is 0-39,999 Priority Customer complex contracts and the base 
rebate of $0.34 per contract applies to this tier. The Exchange is not 
proposing any change to the rebate for this tier. The current ADV 
threshold for the second tier is 40,000--74,999 Priority Customer 
complex contracts. The rebate amount for this tier is currently $0.36 
per contract, per leg. The Exchange proposes to increase the rebate for 
this tier to $0.37 per contract, per leg. The current ADV threshold for 
the third tier is 75,000-124,999 Priority Customer complex contracts. 
The rebate amount for this tier is currently $0.37 per contract, per 
leg. The Exchange proposes to increase the rebate for this tier to 
$0.38 per contract, per leg. The current ADV threshold for the fourth 
tier is 125,000-224,999 Priority Customer complex contracts. The rebate 
amount for this tier is currently $0.38 per contract, per leg. The 
Exchange proposes to increase the rebate for this tier to $0.39 per 
contract, per leg. Finally, the current ADV threshold for the fifth 
tier is 225,000 or more Priority Customer complex contracts. The rebate 
amount for this tier is currently $0.39 per contract, per leg. The 
Exchange proposes to increase the rebate for this tier to $0.40 per 
contract, per leg. The highest rebate amount achieved by the Member for 
the current calendar month applies retroactively to all Priority 
Customer complex order contracts that trade with non-Priority Customer 
complex orders in the complex order book executed by the Member during 
such calendar month.
    In SPY, the Exchange currently provides a base rebate of $0.36 per 
contract, per leg, for Priority Customer complex orders when these 
orders trade with non-Priority Customer complex orders in the complex 
order book. Additionally, Members can earn a higher rebate amount by 
achieving certain ADV thresholds on a month-to-month basis. The current 
ADV threshold for the base tier is 0-39,999 Priority Customer complex 
contracts and the base rebate of $0.36 per contract applies to this 
tier. The Exchange is not proposing any change to the rebate for this 
tier. The current ADV threshold for the second tier is 40,000--74,999 
Priority Customer complex contracts. The rebate amount for this tier is 
currently $0.37 per contract, per leg. The Exchange proposes to 
increase the rebate for this tier to $0.38 per contract, per leg. The 
current ADV threshold for the third tier is 75,000-124,999 Priority 
Customer complex contracts. The rebate amount for this tier is 
currently $0.38 per contract, per leg. The Exchange proposes to 
increase the rebate for this tier to $0.39 per contract, per leg. The 
current ADV threshold for the fourth tier is 125,000-224,999 Priority 
Customer complex contracts. The rebate amount for this tier is 
currently $0.39 per contract, per leg. The Exchange proposes to 
increase the rebate for this tier to $0.40 per contract, per leg. 
Finally, the current ADV threshold for the fifth tier is 225,000 or 
more Priority Customer complex contracts. The rebate amount for this 
tier is currently $0.40 per contract, per leg. The Exchange proposes to 
increase the rebate for this tier to $0.41 per contract, per leg. The 
highest rebate amount achieved by the Member for the current calendar 
month applies retroactively to all Priority Customer complex order 
contracts that trade with non-Priority Customer complex orders in the 
complex order book executed by the Member during such calendar month.
    In the Non-Select Penny Pilot Symbols, the Exchange currently 
provides a base rebate of $0.33 per contract, per leg, for Priority 
Customer complex orders when these orders trade with non-Priority 
Customer complex orders in the complex order book. Additionally, 
Members can earn a higher rebate amount by achieving certain ADV 
thresholds on a month-to-month basis. The current ADV threshold for the 
base tier is 0-39,999 Priority Customer complex contracts and the base 
rebate of $0.33 per contract applies to this tier. The Exchange is not 
proposing any change to the rebate for this tier. The current ADV 
threshold for

[[Page 3936]]

the second tier is 40,000-74,999 Priority Customer complex contracts. 
The rebate amount for this tier is currently $0.34 per contract, per 
leg. The Exchange proposes to increase the rebate for this tier to 
$0.35 per contract, per leg. The current ADV threshold for the third 
tier is 75,000-124,999 Priority Customer complex contracts. The rebate 
amount for this tier is currently $0.36 per contract, per leg. The 
Exchange proposes to increase the rebate for this tier to $0.37 per 
contract, per leg. The current ADV threshold for the fourth tier is 
125,000-224,999 Priority Customer complex contracts. The rebate amount 
for this tier is currently $0.37 per contract, per leg. The Exchange 
proposes to increase the rebate for this tier to $0.38 per contract, 
per leg. Finally, the current ADV threshold for the fifth tier is 
225,000 or more Priority Customer complex contracts. The rebate amount 
for this tier is currently $0.38 per contract, per leg. The Exchange 
proposes to increase the rebate for this tier to $0.39 per contract, 
per leg. The highest rebate amount achieved by the Member for the 
current calendar month applies retroactively to all Priority Customer 
complex order contracts that trade with non-Priority Customer complex 
orders in the complex order book executed by the Member during such 
calendar month.
    In the Non-Penny Pilot Symbols, the Exchange currently provides a 
base rebate of $0.66 per contract, per leg, for Priority Customer 
complex orders when these orders trade with non-Priority Customer 
complex orders in the complex order book. Additionally, Members can 
earn a higher rebate amount by achieving certain ADV thresholds on a 
month-to-month basis. The current ADV threshold for the base tier is 0-
39,999 Priority Customer complex contracts and the base rebate of $0.66 
per contract applies to this tier. The Exchange is not proposing any 
change to the rebate for this tier. The current ADV threshold for the 
second tier is 40,000-74,999 Priority Customer complex contracts. The 
rebate amount for this tier is currently $0.70 per contract, per leg. 
The Exchange proposes to increase the rebate for this tier to $0.72 per 
contract, per leg. The current ADV threshold for the third tier is 
75,000-124,999 Priority Customer complex contracts. The rebate amount 
for this tier is currently $0.74 per contract, per leg. The Exchange 
proposes to increase the rebate for this tier to $0.75 per contract, 
per leg. The current ADV threshold for the fourth tier is 125,000-
224,999 Priority Customer complex contracts. The rebate amount for this 
tier is currently $0.76 per contract, per leg. The Exchange proposes to 
increase the rebate for this tier to $0.77 per contract, per leg. 
Finally, the current ADV threshold for the fifth tier is 225,000 or 
more Priority Customer complex contracts. The rebate amount for this 
tier is currently $0.77 per contract, per leg. The Exchange proposes to 
increase the rebate for this tier to $0.78 per contract, per leg. The 
highest rebate amount achieved by the Member for the current calendar 
month applies retroactively to all Priority Customer complex order 
contracts that trade with non-Priority Customer complex orders in the 
complex order book executed by the Member during such calendar month.
    Further, the Exchange currently provides a base rebate of $0.06 per 
contract, per leg, for Priority Customer complex orders in all symbols 
traded on the Exchange (excluding SPY) when these orders trade against 
quotes or orders in the regular orderbook. In order to enhance the 
Exchange's competitive position and to incentivize Members to increase 
the amount of Priority Customer complex orders that they send to the 
Exchange, the Exchange has volume-based tiers similar to the volume-
based tiers currently in place for complex orders that trade with non-
Priority Customer complex orders in the complex order book. The current 
ADV threshold for the base tier is 0-39,999 Priority Customer complex 
contracts and the base rebate of $0.06 per contract, per leg, applies 
to this tier. The Exchange is not proposing any change to the rebate 
for this tier. The current ADV threshold for the second tier is 40,000-
74,999 Priority Customer complex contracts. The rebate amount for this 
tier is currently $0.07 per contract, per leg. The Exchange proposes to 
increase the rebate for this tier to $0.08 per contract, per leg. The 
current ADV threshold for the third tier is 75,000-124,999 Priority 
Customer complex contracts. The rebate amount for this tier is 
currently $0.08 per contract, per leg. The Exchange proposes to 
increase the rebate for this tier to $0.09 per contract, per leg. The 
current ADV threshold for the fourth tier is 125,000-224,999 Priority 
Customer complex contracts. The rebate amount for this tier is 
currently $0.09 per contract, per leg. The Exchange proposes to 
increase the rebate for this tier to $0.10 per contract, per leg. 
Finally, the current ADV threshold for the fifth tier is 225,000 or 
more Priority Customer complex contracts. The rebate amount for this 
tier is currently $0.10 per contract, per leg. The Exchange proposes to 
increase the rebate for this tier to $0.11 per contract, per leg. The 
highest rebate amount achieved by the Member for the current calendar 
month applies retroactively to all Priority Customer complex orders 
that trade against quotes or orders in the regular orderbook during 
such calendar month.
    For SPY, the Exchange currently provides a base rebate of $0.07 per 
contract, per leg, for Priority Customer complex orders traded on the 
Exchange when these orders trade against quotes or orders in the 
regular orderbook. The current ADV threshold for the base tier is 0-
39,999 Priority Customer complex contracts and the base rebate of $0.07 
per contract, per leg, applies to this tier. The Exchange is not 
proposing any change to the rebate for this tier. The current ADV 
threshold for the second tier is 40,000-74,999 Priority Customer 
complex contracts. The rebate amount for this tier is currently $0.08 
per contract, per leg. The Exchange proposes to increase the rebate for 
this tier to $0.09 per contract, per leg. The current ADV threshold for 
the third tier is 75,000-124,999 Priority Customer complex contracts. 
The rebate amount for this tier is currently $0.09 per contract, per 
leg. The Exchange proposes to increase the rebate for this tier to 
$0.10 per contract, per leg. The current ADV threshold for the fourth 
tier is 125,000-224,999 Priority Customer complex orders. The rebate 
amount for this tier is currently $0.10 per contract, per leg. The 
Exchange proposes to increase the rebate for this tier to $0.11 per 
contract, per leg. Finally, the current ADV threshold for the fifth 
tier is 225,000 or more Priority Customer complex contracts. The rebate 
amount for this tier is currently $0.11 per contract, per leg. The 
Exchange proposes to increase the rebate for this tier to $0.12 per 
contract, per leg. The highest rebate amount achieved by the Member for 
the current calendar month applies retroactively to all Priority 
Customer complex orders that trade against quotes or orders in the 
regular orderbook during such calendar month.
    Further, to incentivize members to trade in the Exchange's various 
auction mechanisms, the Exchange currently provides a per contract 
rebate to those contracts that do not trade with the contra order in 
the Exchange's Facilitation Mechanism and Solicited Order Mechanism, 
except when they trade against pre-existing orders and quotes, and to 
those contracts that do not trade with the contra order in the Price 
Improvement Mechanism. For the Facilitation and Solicited Order 
Mechanisms, the rebate is currently $0.15 per contract. For the Price

[[Page 3937]]

Improvement Mechanism, the rebate is currently $0.25 per contract. 
These rebates will continue to apply.
    The Exchange believes this proposed change will enhance the 
Exchange's competitive position and incentivize Members to increase the 
amount of Priority Customer complex orders that they send to the 
Exchange.
Complex Order Maker Fees
    The purpose of this proposed rule change is also to amend the 
complex order maker fees charged by the Exchange for certain complex 
orders executed on the Exchange. Specifically, the Exchange proposes to 
amend the complex order maker fees for orders that trade against 
Priority Customer \6\ complex orders in the Select Symbols (excluding 
SPY), in SPY, in the Non-Select Penny Pilot Symbols and in the Non-
Penny Pilot Symbols.
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    \6\ 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 that trade against Priority Customer orders in 
the Select Symbols (excluding SPY), the Exchange currently charges a 
maker fee of:
     $0.37 per contract for Market Maker \7\ orders;
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    \7\ The term ``Market Makers'' refers to ``Competitive Market 
Makers'' and ``Primary Market Makers'' collectively. See ISE Rule 
100(a)(25).
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     $0.39 per contract for Firm Proprietary/Broker-Dealer, 
Professional Customer \8\ and Non-ISE Market Maker \9\ orders;
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    \8\ A Professional Customer is a person who is not a broker/
dealer and is not a Priority Customer.
    \9\ 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, registered in the same options 
class on another options exchange.
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     $0.00 per contract for Priority Customer orders.
    For complex orders that trade against Priority Customer complex 
orders in SPY, the Exchange currently charges a maker fee of:
     $0.38 per contract for Market Maker orders;
     $0.40 per contract for Firm Proprietary/Broker-Dealer, 
Professional Customer and Non-ISE Market Maker orders;
     $0.00 per contract for Priority Customer orders.
    For complex orders that trade against Priority Customer complex 
orders in the Non-Select Penny Pilot Symbols, the Exchange currently 
charges a maker fee of:
     $0.37 per contract for Market Maker orders;
     $0.39 per contract for Firm Proprietary/Broker-Dealer, 
Professional Customer and Non-ISE Market Maker orders;
     $0.00 per contract for Priority Customer orders.
    For orders that trade against Priority Customer complex orders in 
the Non-Penny Pilot Symbols, the Exchange currently charges a maker fee 
of:
     $0.80 per contract for Market Maker orders;
     $0.83 per contract for Firm Proprietary/Broker-Dealer, 
Professional Customer and Non-ISE Market Maker orders;
     $0.00 per contract for Priority Customer orders.
    The Exchange now proposes to increase the complex order maker fees 
for orders that trade against Priority Customer complex orders in the 
Select Symbols (excluding SPY), in SPY, in the Non-Select Penny Pilot 
Symbols and in the Non-Penny Pilot Symbols, as follows:
    For complex orders that trade against Priority Customer orders in 
the Select Symbols (excluding SPY), the Exchange proposes to increase 
the maker fee to:
     $0.39 per contract for Market Maker orders;
     $0.40 per contract for Firm Proprietary/Broker-Dealer, 
Professional Customer and Non-ISE Market Maker orders.

The Exchange is not proposing any change to the complex order maker fee 
for Priority Customer orders that trade against other Priority Customer 
orders in the Select Symbols (excluding SPY).
    For complex orders that trade against Priority Customer complex 
orders in SPY, the Exchange proposes to increase the maker fee to:
     $0.39 per contract for Market Maker orders;
     $0.41 per contract for Firm Proprietary/Broker-Dealer, 
Professional Customer and Non-ISE Market Maker orders.

The Exchange is not proposing any change to the complex order maker fee 
for Priority Customer orders that trade against other Priority Customer 
orders in SPY.
    For complex orders that trade against Priority Customer complex 
orders in the Non-Select Penny Pilot Symbols, the Exchange proposes to 
increase the maker fee to:
     $0.39 per contract for Market Maker orders;
     $0.40 per contract for Firm Proprietary/Broker-Dealer, 
Professional Customer and Non-ISE Market Maker orders.

The Exchange is not proposing any change to the complex order maker fee 
for Priority Customer orders that trade against other Priority Customer 
orders in the Non-Select Penny Pilot Symbols.
    For orders that trade against Priority Customer complex orders in 
the Non-Penny Pilot Symbols, the Exchange proposes to increase the 
maker fee to:
     $0.82 per contract for Market Maker orders;
     $0.84 per contract for Firm Proprietary/Broker-Dealer, 
Professional Customer and Non-ISE Market Maker orders.

The Exchange is not proposing any change to the complex order maker fee 
for Priority Customer orders that trade against other Priority Customer 
orders in the Non-Penny Pilot Symbols.
    Additionally, the Exchange provides Market Makers with a two cent 
discount when trading against Priority Customer complex orders that are 
preferenced to them. This discount is currently applicable when Market 
Makers add or remove liquidity in the Select Symbols, in SPY, in the 
Non-Select Penny Pilot Symbols and in the Non-Penny Pilot Symbols from 
the complex order book. Accordingly, Market Makers that add liquidity 
from the complex order book by trading against Priority Customer orders 
that are preferenced to them will be charged: (i) $0.37 per contract in 
the Select Symbols, in SPY, and in the Non-Select Penny Pilot Symbols; 
and (ii) $0.80 per contract in the Non-Penny Pilot Symbols.
Complex Order Taker and Other Fees
    The purpose of this proposed rule change is also to amend the 
complex order taker fees charged by the Exchange for certain complex 
orders executed on the Exchange. Specifically, the Exchange proposes to 
amend the complex order taker fees for orders in the Select Symbols 
(excluding SPY), in SPY, in the Non-Select Penny Pilot Symbols and in 
the Non-Penny Pilot Symbols.
    For complex orders in the Select Symbols (excluding SPY), the 
Exchange currently charges a taker fee of:
     $0.37 per contract for Market Maker orders;
     $0.39 per contract for Firm Proprietary/Broker-Dealer, 
Professional Customer and Non-ISE Market Maker orders;
     $0.00 per contract for Priority Customer orders.
    For complex orders in SPY, the Exchange currently charges a taker 
fee of:
     $0.38 per contract for Market Maker orders;
     $0.40 per contract for Firm Proprietary/Broker-Dealer, 
Professional

[[Page 3938]]

Customer and Non-ISE Market Maker orders;
     $0.00 per contract for Priority Customer orders.
    For complex orders in the Non-Select Penny Pilot Symbols, the 
Exchange currently charges a taker fee of:
     $0.37 per contract for Market Maker orders;
     $0.39 per contract for Firm Proprietary/Broker-Dealer, 
Professional Customer and Non-ISE Market Maker orders;
     $0.00 per contract for Priority Customer orders.
    For complex orders in the Non-Penny Pilot Symbols, the Exchange 
currently charges a taker fee of:
     $0.80 per contract for Market Maker orders;
     $0.83 per contract for Firm Proprietary/Broker-Dealer, 
Professional Customer and Non-ISE Market Maker orders;
     $0.00 per contract for Priority Customer orders.
    The Exchange now proposes to increase the complex order taker fees 
for orders in the Select Symbols (excluding SPY), in SPY, in the Non-
Select Penny Pilot Symbols and in the Non-Penny Pilot Symbols, as 
follows:
    For complex orders in the Select Symbols (excluding SPY), the 
Exchange proposes to increase the taker fee to:
     $0.39 per contract for Market Maker orders;
     $0.40 per contract for Firm Proprietary/Broker-Dealer, 
Professional Customer and Non-ISE Market Maker orders.

The Exchange is not proposing any change to the complex order taker fee 
for Priority Customer orders in the Select Symbols (excluding SPY).
    For complex orders in SPY, the Exchange proposes to increase the 
taker fee to:
     $0.39 per contract for Market Maker orders;
     $0.41 per contract for Firm Proprietary/Broker-Dealer, 
Professional Customer and Non-ISE Market Maker orders.

The Exchange is not proposing any change to the complex order taker fee 
for Priority Customer orders in SPY.
    For complex orders in the Non-Select Penny Pilot Symbols, the 
Exchange proposes to increase the taker fee to:
     $0.39 per contract for Market Maker orders;
     $0.40 per contract for Firm Proprietary/Broker-Dealer, 
Professional Customer and Non-ISE Market Maker orders.

The Exchange is not proposing any change to the complex order taker fee 
for Priority Customer orders in the Non-Select Penny Pilot Symbols.
    For complex orders in the Non-Penny Pilot Symbols, the Exchange 
proposes to increase the taker fee to:
     $0.82 per contract for Market Maker orders;
     $0.84 per contract for Firm Proprietary/Broker-Dealer, 
Professional Customer and Non-ISE Market Maker orders.

The Exchange is not proposing any change to the complex order taker fee 
for Priority Customer orders in the Non-Penny Pilot Symbols.
    Additionally, the Exchange provides Market Makers with a two cent 
discount when trading against Priority Customer orders that are 
preferenced to them. This discount is applicable when Market Makers add 
or remove liquidity in the Select Symbols, in SPY, in the Non-Select 
Penny Pilot Symbols and in the Non-Penny Pilot Symbols from the complex 
order book. Accordingly, Market Makers that remove liquidity from the 
complex order book by trading against Priority Customer orders that are 
preferenced to them will be charged: (i) $0.37 per contract in the 
Select Symbols, in SPY and in the Non-Select Penny Pilot Symbols; and 
(ii) $0.80 per contract in the Non-Penny Pilot Symbols Select Symbols.
    Finally, for Responses to Crossing Orders \10\ in the Non-Penny 
Pilot Symbols, ISE currently charges a fee of $0.80 per contract for 
Market Maker complex orders and $0.83 per contract for Firm 
Proprietary/Broker-Dealer, Professional Customer and Non-ISE Market 
Maker complex orders. The Exchange now proposes to increase the fee for 
Responses to Crossing Orders for Non-Penny Pilot Symbols to $0.82 per 
contract for Market Maker complex orders, and to $0.84 per contract to 
Firm Proprietary/Broker-Dealer, Professional Customer and Non-ISE 
Market Maker complex orders.
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    \10\ A Response to a Crossing Order (other than Regular Orders 
in Non-Select Symbols) is any contra-side interest submitted after 
the commencement of an auction in the Exchange's Facilitation 
Mechanism, Solicited Order Mechanism, Block Order Mechanism or PIM. 
A Response to a Crossing Order (for Regular Orders in Non-Select 
Symbols) is any response message entered with respect to a specific 
auction in the Exchange's Facilitation Mechanism, Solicited Order 
Mechanism, Block Order Mechanism or PIM. See ISE Schedule of Fees, 
Preface. See also Securities Exchange Act Release No. 67973 (October 
3, 2012), 77 FR 61645 (October 10, 2012) (SR-ISE-2012-73).
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    The Exchange is not proposing any other changes in this filing.
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'') \11\ in general, and furthers the objectives of 
Section 6(b)(4) of the Act \12\ 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, SPY, the Non-Select Penny Pilot Symbols and the Non-
Penny Pilot Symbols.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that it is reasonable and equitable to 
provide rebates for Priority Customer complex orders when these orders 
trade with Non-Priority Customer complex orders in the complex order 
book because paying a rebate would continue to attract additional order 
flow to the Exchange and create liquidity in the symbols that are 
subject to the rebate, which the Exchange believes ultimately will 
benefit all market participants who trade on ISE. The Exchange has 
already established a volume-based incentive program, and is now merely 
proposing to increase the rebate amounts in that program. The Exchange 
believes that the proposed rebates are competitive with rebates 
provided by other exchanges and are therefore reasonable and equitably 
allocated to those members that direct orders to the Exchange rather 
than to a competing exchange.
    The Exchange also believes that it is reasonable and equitable to 
provide rebates for Priority Customer complex orders when these orders 
trade against quotes or orders in the regular orderbook. Again, the 
Exchange has already established a volume-based incentive program, and 
is now merely proposing to increase the rebate amounts in that program. 
The Exchange believes paying these rebates would also attract 
additional order flow to the Exchange.
    The Exchange believes that the proposed fee change will generally 
allow the Exchange and its Members to better compete for order flow and 
thus enhance competition. Specifically, the Exchange believes that its 
proposal, which, among other things, increases rebate amounts, so 
Members can qualify for larger rebates, is reasonable as it will 
encourage Members to increase the amount of Priority Customer complex 
orders that they send to the Exchange instead of sending this order 
flow to a

[[Page 3939]]

competing exchange. The Exchange believes that with the proposed rebate 
levels, Members are now likely to qualify for larger rebates.
    The Exchange believes it is reasonable and equitable to charge a 
maker fee of $0.39 per contract for Market Maker complex orders that 
trade against Priority Customer interest in the Select Symbols and in 
the Non-Select Penny Pilot Symbols and $0.40 per contract for Non-ISE 
Market Maker, Firm Proprietary/Broker-Dealer, and Professional Customer 
complex orders that trade against Priority Customer interest in the 
Select Symbols and in the Non-Select Penny Pilot Symbols. The Exchange 
believes it is reasonable and equitable to charge a maker fee of $0.39 
per contract for Market Maker complex orders that trade against 
Priority Customer interest in SPY and $0.41 per contract for Non-ISE 
Market Maker, Firm Proprietary/Broker-Dealer and Professional Customer 
complex orders that trade against Priority Customer interest in SPY. 
The Exchange believes it is reasonable and equitable to charge a maker 
fee of $0.82 per contract for Market Maker complex orders that trade 
against Priority Customer interest in the Non-Penny Pilot Symbols and 
$0.84 per contract for Non-ISE Market Maker, Firm Proprietary/Broker-
Dealer, and Professional Customer complex orders that trade against 
Priority Customer interest in the Non-Penny Pilot Symbols. The Exchange 
believes the proposed fees are reasonable and equitably allocated 
because the Exchange is seeking to recoup the cost associated with 
paying a higher per contract rebate to Priority Customers. The proposed 
fees are also within the range of fees assessed by other exchanges 
employing similar pricing schemes. For example, the Chicago Board 
Options Exchange, Inc. (``CBOE'') currently charges $0.25 per contract 
plus a payment for order flow fee (PFOF) of $0.25 per contract 
(applicable to customer orders), as well as a $0.10 per contract 
surcharge, when trading against Priority Customer orders for a total of 
$0.60 per contract for executing market maker complex orders in SPY and 
charges $0.45 per contract, as well as the $0.10 per contract 
surcharge, when trading against Priority Customer orders, for a total 
of $0.55 per contract for executing Broker-Dealer and non-CBOE market 
maker complex orders in SPY.\13\ Therefore, while ISE is proposing a 
fee increase for Market Maker, Firm Proprietary/Broker-Dealer, 
Professional Customer and Non-ISE Market Maker complex orders, in SPY, 
for example, the resulting fee will remain lower than the fee currently 
charged by CBOE for similar orders in that symbol.
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    \13\ See CBOE Fee Schedule at http://www.cboe.com/publish/feeschedule/CBOEFeeSchedule.pdf.
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    The complex order pricing employed by the Exchange has proven to be 
an effective pricing mechanism and attractive to Exchange participants 
and their customers. The Exchange believes that charging distinct maker 
fees for orders that trade against Priority Customer orders in the 
Select Symbols, in SPY, in the Non-Select Penny Pilot Symbols and in 
the Non-Penny Pilot Symbols will continue to attract additional 
business to the Exchange. 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. 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. 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.
    The Exchange believes that its proposal to assess a $0.39 per 
contract taker fee for Market Maker complex orders in the Select 
Symbols (including SPY) and in the Non-Select Penny Pilot Symbols, and 
$0.40 per contract ($0.41 per contract in SPY) for Firm Proprietary/
Broker-Dealer, Professional Customer and Non-ISE Market Maker complex 
orders in the Select Symbols and in the Non-Select Penny Pilot Symbols 
is reasonable and equitably allocated because the Exchange is seeking 
to recoup the cost associated with paying increased rebates for 
Priority Customer complex orders. The Exchange believes the proposed 
fees are also reasonable and equitably allocated because they are 
within the range of fees assessed by other exchanges employing similar 
pricing schemes and in some cases, is lower that the fees assessed by 
other exchanges. For example, NASDAQ OMX PHLX, Inc. (``PHLX'') 
currently charges $0.25 per contract plus a payment for order flow fee 
of $0.25 per contract (applicable to customer orders), for a total rate 
of $0.50 per contract for removing liquidity in complex orders in SPY 
for Specialist and Market Maker orders and charges $0.50 per contract 
for Firm, Broker-Dealer and Professional orders.\14\ Therefore, while 
ISE is proposing a fee increase for Market Maker, Firm Proprietary/
Broker-Dealer, Professional Customer and Non-ISE Market Maker orders, 
the resulting fee will remain lower than the fee currently charged by 
PHLX for similar orders.
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    \14\ See PHLX Pricing Schedule at  http://nasdaqomxphlx.cchwallstreet.com/NASDAQOMXPHLXTools/PlatformViewer.asp?selectednode=chp_1_4&manual=%2Fnasdaqomxphlx%2Fphlx%2Fphlx-rulesbrd%2F.
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    The Exchange believes its proposal to increase the taker fee to 
$0.82 per contract for Market Maker complex orders and $0.84 per 
contract for Firm Proprietary/Broker-Dealer, Professional Customer and 
Non-ISE Market Maker complex orders in the Non-Penny Pilot Symbols is 
reasonable and equitably allocated because the proposed fees are within 
the range of fees assessed by other exchanges employing similar pricing 
schemes. For example, the fee for similar orders at CBOE is between 
$0.60 per contract and $1.00 per contract for Market Makers and other 
non-Priority Customer orders when considering surcharges and PFOF rates 
of $0.65 applicable to Market Makers on top of regular transaction 
fees. Further, the Exchange is seeking to recoup the cost associated 
with paying a higher per contract rebate to Priority Customer orders.
    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, in this instance, it is equitable to assess 
a higher fee to market participants that do not have the quoting 
requirements that Exchange Market Makers have. Therefore, the Exchange 
believes it is appropriate and not unfairly discriminatory to assess a 
higher transaction fee on these other market participants because the 
Exchange incurs costs associated with these types of orders that are 
not recovered by non-transaction based fees paid by members. [sic]
    While ISE is proposing fee increases for Market Maker, Non-ISE 
Market Maker, Firm Proprietary/Broker-Dealer and Professional Customer 
orders in the Select Symbols, in SPY, in the Non-Select Penny Pilot 
Symbols and in the Non-Penny Pilot Symbols, the resulting fees 
generally remain lower than the fees currently charged by CBOE and PHLX 
for similar orders.
    The Exchange believes it is reasonable and equitable to charge a 
fee of $0.82 per contract for Market Maker orders ($0.84 per contract 
for Non-ISE Market Maker, Firm Proprietary/Broker-Dealer

[[Page 3940]]

and Professional Customer orders) when such members are responding to 
crossing orders because a response to a crossing order is akin to 
taking liquidity, thus the Exchange is proposing to adopt an identical 
fee for Responses to Crossing Orders in the Non-Penny Pilot Symbols as 
the Exchange currently charges for taking liquidity in these symbols.
    The Exchange believes that it is reasonable and equitable to 
provide a two cent discount to Market Makers on preferenced orders as 
an incentive for them to quote in the complex order book. Accordingly, 
Market Makers who add or remove liquidity in the Select Symbols, the 
Non-Select Penny Pilot Symbols, the Non-Penny Pilot Symbols and SPY 
from the complex order book will be charged $0.02 less per contract 
when trading with Priority Customer orders that are preferenced to 
them. ISE notes that with this proposed fee change, the Exchange will 
continue to maintain a two cent differential that was previously in 
place.
    The complex order pricing employed by the Exchange has proven to be 
an effective pricing mechanism and attractive to Exchange participants 
and their customers. The Exchange believes that this proposed rule 
change will continue to attract additional complex order business in 
the symbols that are subject of this proposed rule change.
    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 direct their order flow in 
the symbols that are subject to this proposed rule change as its fees 
are 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

    ISE believes that the proposed rule change, which will maintain 
fees that are competitive and are within the range of fees charged by 
other exchanges for similar orders, will not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. Indeed, the Exchange believes that the proposed 
changes will promote competition, as they are designed to allow ISE to 
better compete for order flow and improve the Exchange's competitive 
position.

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 \15\ and subparagraph (f)(2) of Rule 19b-4 
thereunder,\16\ because it establishes a due, fee, or other charge 
imposed by ISE.
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    \15\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \16\ 17 CFR 240.19b-4(f)(2).
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    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.

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 email to [email protected]. Please include 
File Number SR-ISE-2013-01 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-2013-01. This file 
number should be included on the subject line if email 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 
10:00 a.m. and 3:00 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 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-2013-01 and should be 
submitted on or before February 7, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-00870 Filed 1-16-13; 8:45 am]
BILLING CODE 8011-01-P