[Federal Register Volume 78, Number 12 (Thursday, January 17, 2013)]
[Notices]
[Pages 3952-3958]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-00873]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68631; File No. SR-ISE-2013-03]


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 3, 2013, 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, 
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 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 190 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 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); 66597 (March 14, 
2012), 77 FR 16295 (March 20, 2012) (SR-ISE-2012-17); 66961 (May 10, 
2012), 77 FR 28914 (May 16, 2012) (SR-ISE-2012-38); 67628 (August 9, 
2012), 77 FR 49049 (August 15, 2012) (SR-ISE-2012-71); and 68034 
(October 11, 2012), 77 FR 63911 (October 17, 2012) (SR-ISE-2012-85).
    \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); 66962 (May 10, 
2012), 77 FR 28917 (May 16, 2012) (SR-ISE-2012-35); 67400 (July 11, 
2012), 77 FR 42036 (July 17, 2012) (SR-ISE-2012-63); 67628 (August 
9, 2012), 77 FR 49049 (August 15, 2012) (SR-ISE-2012-71); and 68034 
(October 11, 2012), 77 FR 63911 (October 17, 2012) (SR-ISE-2012-85).

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[[Page 3953]]

    The purpose of this proposed rule change is to amend the list of 
Select Symbols. Specifically, the Exchange proposes to add the 
following 39 symbols to the list of Select Symbols: Aetna, Inc. 
(``AET''), Amgen, Inc. (``AMGN''), Amarin Corp. PLC (``AMRN''), Celgene 
Corporation (``CELG''), CF Industries Holdings, Inc. (``CF''), Comcast 
Corporation (``CMCSA''), Costco Wholesale Corporation (``COST''), Cree, 
Inc. (``CREE''), Electronic Arts, Inc. (``EA''), Express Scripts, Inc. 
(``ESRX''), Facebook, Inc. (``FB''), Fifth Third Bancorp. (``FITB''), 
The Gap, Inc. (``GPS''), Groupon, Inc. (``GRPN''), Starwoods Hotels and 
Resorts (``HOT''), Interoil Corporation (``IOC''), JDS Uniphase 
Corporation (``JDSU''), Juniper Networks, Inc. (``JNPR''), Knight 
Capital Group, Inc. (``KCG''), Keycorp. (``KEY''), Lennar Corporation 
(``LEN''), Eli Lilly & Company (``LLY''), Cheniere Energy, Inc. 
(``LNG''), LinkedIn Corporation (``LNKD''), Macys, Inc. (``M''), 
Marathon Oil (``MRO''), Noble Drilling Corporation (``NE''), Annaly 
Mortgage Management (``NLY''), Occidental Petroleum Corporation 
(``OXY''), MetroPCS Communications, Inc. (``PCS''), Pulte Group, Inc. 
(``PHM''), Philip Morris International, Inc. (``PM''), Suntech Power 
Holdings (``STP''), Seagate Technology (``STX''), Direxion Small Cap 
Bull 3X (``TNA''), Vringo, Inc. (``VRNG''), Consumer Discretionary 
Select Sector SPDR Fund (``XLY''), SPDR S&P Metals & Mining ETF 
(``XME'') and Xerox Corporation (``XRX'') (``Additional Select 
Symbols'').\6\
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    \6\ The following 9 of the Additional Select Symbols were added 
to the Penny Pilot Program on January 3, 2013: AMRN, FB, GRPN, KCG, 
LNG, LNKD, PCS, TNA and VRNG (``New Penny Pilot Symbols''). The New 
Penny Pilot Symbols are a subset of the Additional Select Symbols.
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    With the addition of the Additional Select Symbols to Select 
Symbols, the fees currently applicable to regular and complex orders in 
the Select Symbols will now be applied to regular and complex orders in 
the Additional Select Symbols.
Regular Order Fees and Rebates
    The Exchange currently applies transaction fees to regular orders 
in the Additional Select Symbols, as follows:\7\
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    \7\ Additional Select Symbols are currently subject to the 
standard transaction fee listed in the table titled Non-Select 
Symbols. See Schedule of Fees, Section I, Regular Order Fees and 
Rebates.
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    [rtarr8] for Market Maker \8\ orders, a fee of $0.18 per contract 
\9\;
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    \8\ The term ``Market Makers'' refers to ``Competitive Market 
Makers'' and ``Primary Market Makers'' collectively. See ISE Rule 
100(a)(25).
    \9\ The Exchange provides a volume-based discount to fees to ISE 
Market Maker contracts for regular orders in Non-Select Symbols. See 
Schedule of Fees, Section IV, C. ISE Market Maker Discount Tiers.
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    [rtarr8] for Market Maker (for orders sent by Electronic Access 
Members), Firm Proprietary/Broker-Dealer and Professional Customer \10\ 
orders, a fee of $0.20 per contract;
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    \10\ A Professional Customer is a person who is not a broker/
dealer and is not a Priority Customer.
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    [rtarr8] for Non-ISE Market Maker \11\ orders, a fee of $0.45 per 
contract;
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    \11\ 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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    [rtarr8] for Priority Customer \12\ orders, a fee of $0.00 per 
contract.
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    \12\ 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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    The Exchange currently charges a fee of $0.20 per contract to all 
market participants (except for Market Makers, this fee is currently 
$0.18 per contract,\13\ and for Priority Customers, this fee is $0.00 
per contract) for regular Crossing Orders in the Non-Select Symbols 
(this fee currently applies to the Additional Select Symbols as they 
are a subset of Non-Select Symbols). The Exchange also currently 
charges a fee of $0.20 per contract to all market participants (except 
for Non-ISE Market Makers, this fee is currently $0.45 per contract, 
and for Market Makers, this fee is $0.18 per contract \14\) for regular 
Responses to Crossing Orders in the Non-Select Symbols (this fee 
currently applies to the Additional Select Symbols as they are a subset 
of Non-Select Symbols).
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    \13\ The volume-based discount to fees to ISE Market Maker 
contracts also applies to regular Crossing Orders. See supra, note 
9.
    \14\ The volume-based discount to fees to ISE Market Maker 
contracts also applies to regular Responses to Crossing Orders. See 
supra, note 9.
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    With this proposed rule change, the Additional Select Symbols will 
now be subject to the maker/taker fees and rebates applicable to 
Regular orders in the Select Symbols.\15\ The Exchange currently 
charges the following maker fees and rebates for Select Symbols: (i) 
for Market Maker, Non-ISE Market Maker, Firm Proprietary/Broker-Dealer 
and Professional Customer orders, $0.10 per contract; (ii) for Priority 
Customer orders, $0.00 per contract; and (iii) for Market Maker Plus 
\16\ orders, a rebate of $0.10 per contract. The Exchange also 
currently charges the following taker fees for Select Symbols: (i) For 
Market Maker and Market Maker Plus orders, $0.32 per contract; (ii) for 
Non-ISE Market Maker orders, $0.36 per contract; (iii) for Firm 
Proprietary/Broker-Dealer and Professional Customer orders, $0.33 per 
contract; and iv) for Priority Customer orders, $0.25 per contract.
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    \15\ See Schedule of Fees, Section I, Regular Order Fees and 
Rebates.
    \16\ In order to promote and encourage liquidity in the Select 
Symbols, the Exchange currently offers a $0.10 per contract rebate 
to Market Makers if the quotes they sent to the Exchange qualify the 
Market Maker to become a Market Maker Plus. 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 for all expiration months in that symbol during the current 
trading month. A Market Maker's single best and single worst overall 
quoting days each month, on a per symbol basis, is excluded in 
calculating whether a Market Maker qualifies for this rebate, if 
doing so will qualify a Market Maker for the rebate.
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    The Exchange currently charges Market Maker, Non-ISE Market Maker, 
Firm Proprietary/Broker-Dealer and Professional Customers a fee of 
$0.20 per contract ($0.00 per contract for Priority Customers) for 
regular Crossing Orders in the Select Symbols, and a fee of $0.40 per 
contract to all market participants for regular Responses to Crossing 
Orders in the Select Symbols. With this proposed rule change, the fee 
for regular Crossing Orders in the Additional Select Symbols will 
remain at $0.20 per contract for most market participants. For Priority 
Customers, this fee will remain at $0.00 per contract, and for Market 
Makers, this fee will increase, from $0.18 per contract \17\ to $0.20 
per contract. With this proposed rule change, the fee for regular 
Responses to Crossing Orders will increase for most market 
participants, from $0.20 per contract to $0.40 per contract, with the 
exception of Non-ISE Market Makers who will now pay a lower fee of 
$0.40 per contract as opposed to $0.45 per contract.
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    \17\ The volume-based discount to fees to ISE Market Maker 
contracts also applies. See supra, note 9.
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    The Exchange also currently provides a rebate of $0.25 per contract 
for contracts that are submitted to the Price Improvement Mechanism 
that do not trade with their contra order in the Select Symbols, and a 
rebate of $0.15

[[Page 3954]]

per contract for contracts that are submitted to the Facilitation and 
Solicited Order Mechanisms that do not trade with their contra order in 
the Select Symbols except when those contracts trade against pre-
existing orders and quotes on the Exchange's orderbook. With this 
proposed rule change, market participants trading in the Additional 
Select Symbols will now be eligible for rebates that were not 
previously available for this group of symbols. Specifically, market 
participants will now receive a rebate of $0.25 per contract for 
contracts that are submitted to the Price Improvement Mechanism that do 
not trade with their contra order in the Additional Select Symbols. 
Further, market participants will now also receive a rebate of $0.15 
per contract for contracts that are submitted to the Facilitation and 
Solicited Order Mechanisms that do not trade with their contra order in 
the Additional Select Symbols except when those contracts trade against 
pre-existing orders and quotes on the Exchange's orderbook.
    Further, the Exchange currently charges Primary Market Makers 
(PMMs) a transaction fee of $0.18 per contract \18\ in the Additional 
Select Symbols when they trade report a Priority Customer or 
Professional Customer order in accordance with their obligation to 
provide away market price protection. PMMs in Select Symbols do not 
receive a maker rebate nor pay a taker fee when trade reporting.\19\ 
With this proposed rule change, PMMs in the Additional Select Symbols 
will also not receive a maker rebate nor pay a taker fee when trade 
reporting.
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    \18\ The volume-based discount to fees to ISE Market Maker 
contracts also applies. See supra, note 9.
    \19\ See Schedule of Fees, Section I, Regular Order Fees and 
Rebates, footnote 9.
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    Finally, for the New Penny Pilot Symbols (prior to their inclusion 
to the Penny Pilot Program), the Exchange charged a payment for order 
flow (PFOF) fee of $0.70 per contract, applicable to Market Makers when 
trading against Priority Customer orders, and for the remaining 
Additional Select Symbols, the Exchange currently charges a PFOF fee of 
$0.25 per contract, applicable to Market Makers when trading against 
Priority Customer orders. With this proposed rule change, the Exchange 
will no longer charge a PFOF fee for trading in the Additional Select 
Symbols.
Complex Order Fees and Rebates
    With this proposed rule change, the maker fee for complex orders in 
the Additional Select Symbols will remain unchanged because the 
Exchange currently charges the same maker fee for complex orders in the 
Select Symbols, in the Penny Pilot Symbols and in the Non-Penny Pilot 
Symbols.\20\ Specifically, for Select Symbols, Penny Pilot Symbols and 
Non-Penny Pilot Symbols, the Exchange currently charges a complex order 
maker fee of: (i) $0.10 per contract for Market Maker, Firm 
Proprietary/Broker-Dealer and Professional Customer orders; (ii) $0.20 
per contract for Non-ISE Market Maker orders; and (iii) $0.00 per 
contract for Priority Customer orders.
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    \20\ The New Penny Pilot Symbols were subject to the fee listed 
in the Column titled Maker Fee for Non-Penny Pilot Symbols. The 
remaining Additional Select Symbols are currently subject to the fee 
listed in the column titled Maker Fee for Select Symbols and Penny 
Pilot Symbols. See Schedule of Fees, Section II, Complex Order Fees 
and Rebates.
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    With this proposed rule change, the maker fee for complex orders in 
the Additional Select Symbols (except for the New Penny Pilot Symbols) 
when trading against Priority Customers will remain unchanged because 
the Exchange currently charges the same maker fee for complex orders in 
the Select Symbols (excluding SPY) when trading against Priority 
Customers and in the Non-Select Penny Pilot Symbols when trading 
against Priority Customers.\21\ Specifically, for complex orders in the 
Select Symbols (excluding SPY) when trading against Priority Customer 
and for complex orders in the Non-Select Penny Pilot Symbols when 
trading against Priority Customers, the Exchange currently charges a 
maker fee of: (i) $0.39 per contract for Market Maker orders; (ii) 
$0.40 per contract for Non-ISE Market Maker, Firm Proprietary/Broker-
Dealer and Professional Customer orders; and (iii) $0.00 per contract 
for Priority Customer orders. Thus, these fees will remain unchanged.
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    \21\ The New Penny Pilot Symbols were subject to the fee listed 
in the Column titled Maker Fee for Non-Penny Pilot Symbols when 
trading against Priority Customer. The remaining Additional Select 
Symbols are currently subject to the fee listed in the column titled 
Maker Fee for Non-Select Penny Pilot Symbols when trading against 
Priority Customer. See Schedule of Fees, Section II, Complex Order 
Fees and Rebates.
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    Prior to their inclusion to the Penny Pilot Program, the New Penny 
Pilot Symbols, which are a subset of the Additional Select Symbols, 
were charged a higher maker fee when trading against Priority Customer 
complex orders. Specifically, for complex orders in the New Penny Pilot 
Symbols when trading against Priority Customer complex orders, the 
Exchange charged a maker fee of: (i) $0.82 per contract for Market 
Maker orders; (ii) $0.84 per contract for Non-ISE Market Maker, Firm 
Proprietary/Broker-Dealer and Professional Customer orders; and (iii) 
$0.00 per contract for Priority Customer orders.\22\ With this proposed 
rule change, the New Penny Pilot Symbols will now be subject to the 
same maker fee as the remaining Additional Select Symbols, as noted 
above, which is lower (except for Priority Customer orders which fee 
will remain the same) than those the Exchange charged for the New Penny 
Pilot Symbols when trading against Priority Customer complex orders.
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    \22\ The per contract fees noted reflect changes proposed by the 
Exchange in an earlier filing. See SR-ISE-2013-01.
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    With this proposed rule change, the taker fee for complex orders in 
the Additional Select Symbols (except for the New Penny Pilot Symbols) 
will remain unchanged because the Exchange currently charges the same 
taker fee for complex orders in the Select Symbols (excluding SPY) and 
in the Non-Select Penny Pilot Symbols.\23\ Specifically, for complex 
orders in the Select Symbols (excluding SPY) and in the Non-Select 
Penny Pilot Symbols, the Exchange currently charges a taker fee of: (i) 
$0.39 per contract for Market Maker orders; (ii) $0.40 per contract for 
Non-ISE Market Maker, Firm Proprietary/Broker-Dealer and Professional 
Customer orders; and (iii) $0.00 per contract for Priority Customer 
orders. Thus, these fees will remain unchanged.
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    \23\ The New Penny Pilot Symbols were subject to the fee listed 
in the Column titled Taker Fee for Non-Penny Pilot Symbols. The 
remaining Additional Select Symbols are currently subject to the fee 
listed in the column titled Taker Fee for Non-Select Penny Pilot 
Symbols. See Schedule of Fees, Section II, Complex Order Fees and 
Rebates.
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    Prior to their inclusion to the Penny Pilot Program, the New Penny 
Pilot Symbols, which are a subset of the Additional Select Symbols, 
were charged a higher taker fee for trading complex orders. 
Specifically, for complex orders in the New Penny Pilot Symbols, the 
Exchange charged a taker fee of: (i) $0.82 per contract for Market 
Maker orders; (ii) $0.84 per contract for Non-ISE Market Maker, Firm 
Proprietary/Broker-Dealer and Professional Customer orders; and (iii) 
$0.00 per contract for Priority Customer orders.\24\ With this proposed 
rule change, the New Penny Pilot Symbols will now be subject to the 
same taker fee as the remaining Additional Select Symbols, as noted 
above, which is lower (except for Priority Customer orders which fee 
will remain the same) than

[[Page 3955]]

those the Exchange charged for the New Penny Pilot Symbols.
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    \24\ The per contract fees noted reflect changes proposed by the 
Exchange in an earlier filing. See SR-ISE-2013-01.
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    With this proposed rule change, the Fee for Crossing Orders when 
trading complex orders in the Additional Select Symbols will remain 
unchanged because the Exchange currently charges $0.20 per contract 
(for largest leg only) for complex Crossing Orders in all symbols, 
except for Priority Customers who are currently charged $0.00 per 
contract.
    With this proposed rule change, the Fee for Responses to Crossing 
Orders when trading complex orders in the Additional Select Symbols 
will remain unchanged (except for the New Penny Pilot Symbols) because 
the Exchange currently charges $0.40 per contract for Responses to 
Crossing Orders when trading complex orders in the Select Symbols and 
in the Penny Pilot Symbols. The Fee for Responses to Crossing Orders 
when trading complex orders in the New Penny Pilot Symbols will, 
however, decrease because the Exchange currently charges $0.82 per 
contract for Market Maker orders and $0.84 per contract for Non-ISE 
Market Maker, Firm Proprietary/Broker-Dealer and Professional Customer 
orders.\25\ The New Penny Pilot Symbols, which are a subset of the 
Additional Select Symbols, will now be charged $0.40 per contract for 
Market Maker, Non-ISE Market Maker, Firm Proprietary/Broker-Dealer and 
Professional Customer orders.\26\
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    \25\ Id.
    \26\ The New Penny Pilot Symbols were subject to the fee listed 
in the Column titled Fee for Responses to Crossing Orders for non-
Penny Pilot Symbols. The remaining Additional Select Symbols are 
currently subject to the fee listed in the column titled Fee for 
Responses to Crossing Orders for Select Symbols and Penny Pilot 
Symbols. See Schedule of Fees, Section II, Complex Order Fees and 
Rebates.
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    With this proposed rule change, the rebate levels payable for 
Priority Customer complex orders in the Additional Select Symbols 
(except for the New Penny Pilot Symbols) will increase because the 
rebate levels payable for Priority Customer complex orders in the 
Select Symbols are higher than the rebate levels currently payable for 
Priority Customer complex orders in Non-Select Penny Pilot Symbols, as 
described below.
    For the Additional Select Symbols (except for the New 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.\27\ Additionally, Members who achieve a certain level of 
average daily volume (ADV) of executed Priority Customer complex order 
contracts across all symbols during a calendar month are provided a 
rebate of $0.35 per contract, per leg, in these symbols, if a Member 
achieves an ADV of 40,000 Priority Customer complex order contracts; 
$0.37 per contract, per leg, in these symbols, if a Member achieves an 
ADV of 75,000 Priority Customer complex order contracts; $0.38 per 
contract, per leg, in these symbols, if a Member achieves an ADV of 
125,000 Priority Customer complex order contracts; and $0.39 per 
contract, per leg, in these symbols, if a Member achieves an ADV of 
225,000 Priority Customer complex order contracts.\28\ 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.
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    \27\ Additional Select Symbols (except for the New Penny Pilot 
Symbols) are currently subject to the rebate listed in the column 
titled Rebate for non-Select Penny Pilot Symbols. See Schedule of 
Fees, Section II, Complex Order Fees and Rebates.
    \28\ The per contract rebates noted reflect changes proposed by 
the Exchange in an earlier filing. See SR-ISE-2013-01.
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    For Select Symbols (excluding SPY), 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 who 
achieve a certain level of average daily volume (ADV) of executed 
Priority Customer complex order contracts across all symbols during a 
calendar month are provided a rebate of $0.37 per contract, per leg, in 
these symbols, if a Member achieves an ADV of 40,000 Priority Customer 
complex order contracts; $0.38 per contract, per leg, in these symbols, 
if a Member achieves an ADV of 75,000 Priority Customer complex order 
contracts; $0.39 per contract, per leg, in these symbols, if a Member 
achieves an ADV of 125,000 Priority Customer complex order contracts; 
and $0.40 per contract, per leg, in these symbols, if a Member achieves 
an ADV of 225,000 Priority Customer complex order contracts.\29\ 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. 
With this proposed rule change, the increased rebate levels currently 
payable for Priority Customer complex orders in Select Symbols will now 
apply to Priority Customer complex orders in the Additional Select 
Symbols.
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    \29\ Id.
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    With this proposed rule change, the rebate levels payable for 
Priority Customer complex orders in the New Penny Pilot Symbols will, 
however, decrease because the these symbols will now be subject to much 
lower maker and taker fees and thus receive lower rebates, as described 
below.
    For the New Penny Pilot Symbols (prior to their inclusion to the 
Penny Pilot Program), the Exchange provided a base rebate of $0.66 per 
contract, per leg, for Priority Customer complex orders when these 
orders traded with non-Priority Customer complex orders in the complex 
order book.\30\ Additionally, Members who achieve a certain level of 
average daily volume (ADV) of executed Priority Customer complex order 
contracts across all symbols during a calendar month are provided a 
rebate of $0.72 per contract, per leg, in these symbols, if a Member 
achieves an ADV of 40,000 Priority Customer complex order contracts; 
$0.75 per contract, per leg, in these symbols, if a Member achieves an 
ADV of 75,000 Priority Customer complex order contracts; $0.77 per 
contract, per leg, in these symbols, if a Member achieves an ADV of 
125,000 Priority Customer complex order contracts; and $0.78 per 
contract, per leg, in these symbols, if a Member achieves an ADV of 
225,000 Priority Customer complex order contracts.\31\ 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.
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    \30\ The New Penny Pilot Symbols were subject to the rebate 
listed in the column titled Rebate for non-Select non-Penny Pilot 
Symbols. See Schedule of Fees, Section II, Complex Order Fees and 
Rebates.
    \31\ The per contract rebates noted reflect changes proposed by 
the Exchange in an earlier filing. See SR-ISE-2013-01.
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    For Select Symbols (excluding SPY), 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 who 
achieve a certain level of average daily volume (ADV) of executed 
Priority Customer complex order contracts across all symbols during a

[[Page 3956]]

calendar month are provided a rebate of $0.37 per contract, per leg, in 
these symbols, if a Member achieves an ADV of 40,000 Priority Customer 
complex order contracts; $0.38 per contract, per leg, in these symbols, 
if a Member achieves an ADV of 75,000 Priority Customer complex order 
contracts; $0.39 per contract, per leg, in these symbols, if a Member 
achieves an ADV of 125,000 Priority Customer complex order contracts; 
and $0.40 per contract, per leg, in these symbols, if a Member achieves 
an ADV of 225,000 Priority Customer complex order contracts.\32\ 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. 
With this proposed rule change, the lower rebate levels currently 
payable for Priority Customer complex orders in the Select Symbols will 
now apply to Priority Customer complex orders in the New Penny Pilot 
Symbols.
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    \32\ Id.
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    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. Additionally, Members who 
achieve a certain level of average daily volume (ADV) of executed 
Priority Customer complex order contracts across all symbols during a 
calendar month are provided a rebate of $0.08 per contract, per leg, in 
these symbols, if a Member achieves an ADV of 40,000 Priority Customer 
complex order contracts; $0.09 per contract, per leg, in these symbols, 
if a Member achieves an ADV of 75,000 Priority Customer complex order 
contracts; $0.10 per contract, per leg, in these symbols, if a Member 
achieves an ADV of 125,000 Priority Customer complex order contracts; 
and $0.11 per contract, per leg, in these symbols, if a Member achieves 
an ADV of 225,000 Priority Customer complex order contracts.\33\ 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. 
This rebate is currently applicable to the Additional Select Symbols 
and with this proposed rule change, will continue to apply at the 
current rates.
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    \33\ Id.
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    Additionally, the Exchange currently provides Market Makers with a 
discount when trading against Priority Customer orders that are 
preferenced to them.\34\ This discount is applicable when Market Makers 
add or remove liquidity in, among other symbols, Select Symbols, Non-
Select Penny Pilot Symbols and Non-Penny Pilot Symbols. The Additional 
Select Symbols are currently a part of the Non-Select Penny Pilot 
Symbols and Non-Penny Pilot Symbols and therefore the discount which 
currently applies to these symbols will continue to apply to these 
symbols when they become Select Symbols.
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    \34\ The Exchange has submitted a separate filing to increase 
the discount from $0.02 per contract to $0.05 per contract. See SR-
ISE-2013-02.
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    Further, the Exchange currently provides a $0.20 per contract fee 
credit to PMMs for execution of Priority Customer orders in the Non-
Select Symbols--for classes in which it serves as a PMM--that send an 
Intermarket Sweep Order to other exchanges. This credit is applied 
regardless of the transaction fee charged by a destination market. For 
PMMs in the Select Symbols, this credit is equal to the fee charged by 
the destination market. With this proposed rule change, PMMs in the 
Additional Select Symbols will now be provided with a credit that that 
is equal to the fee charged by the destination market.
    The Exchange also currently provides a $0.20 per contract credit 
for responses to flash orders in the Non-Select Symbols when trading 
against Professional Customers. For Select Symbols, the per contract 
fee credit for responses to flash orders is (i) $0.10 per contract when 
trading against Priority Customers; (ii) $0.12 per contract when 
trading against Preferenced Priority Customers; and (iii) $0.10 per 
contract when trading against Professional Customers. Market 
participants trading in the Additional Select Symbols will now be 
provided the rebate at levels that are currently in place for Select 
Symbols, as described above.
    With this proposed rule change, the Exchange expects to attract 
additional order flow of regular and complex orders in the Additional 
Select Symbols. The Exchange's maker/taker fees and rebates have been 
effective in attracting order flow of regular and complex orders in the 
Select Symbols and increasing its market share in these symbols. The 
Exchange believes that applying its maker/taker fees and rebates to the 
Additional Select Symbols will result in the Exchange increasing its 
market share for regular and complex orders in these symbols.
    With this proposed rule change, the maker and taker fees and the 
Fee for Responses to Crossing Orders for the New Penny Pilot Symbols 
will decrease because these symbols will now be charged the fees 
currently in place for Select Symbols, which are considerably lower. 
While the fees for the New Penny Pilot Symbols will decrease, the 
rebates payable for Priority Customer complex orders in these symbols 
will also correspondingly decrease. Further, Market Makers will now be 
eligible for the Market Maker Plus rebate, which was previously not 
applicable to the Additional Select Symbols. This proposed rule change 
does not propose any change to the maker and taker fees for complex 
orders in the Additional Select Symbols (except the New Penny Pilot 
Symbols, as noted above) as those fees remain unchanged. The rebate 
levels payable for Priority Customer complex orders in the Additional 
Select Symbols will increase compared to the current rebate levels for 
this group of symbols, except as noted above, for the New Penny Pilot 
Symbols, whose rebate levels will decrease.
    Since the rate changes to the Schedule of Fees pursuant to this 
proposal will be effective upon filing, for the transactions occurring 
in January 2013 prior to the effective date of this filing, members 
will be assessed the rates in effect immediately prior to those 
proposed by this filing. For transactions occurring in January 2013 on 
and after the effective date of this filing, members will be assessed 
the rates proposed by this filing.
2. Basis
    The Exchange believes that its proposal to amend its Schedule of 
Fees is consistent with Section 6(b) of the Act \35\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \36\ in 
particular, in that it is an equitable allocation of reasonable fees 
and other charges among Exchange members and other persons using its 
facilities.
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    \35\ 15 U.S.C. 78f(b).
    \36\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that it is reasonable to add the Additional 
Select Symbols to the current list of Select Symbols. The Exchange 
believes that applying the fees and rebates applicable to Select 
Symbols to the Additional Select Symbols will attract additional order 
flow to the Exchange. Select Symbol pricing has proven beneficial for 
the Exchange and its participants and the Exchange believes that moving

[[Page 3957]]

the Additional Select Symbols to Select Symbols pricing would enhance 
liquidity and participation in those symbols.
    The Exchange believes that it is equitable and not unfairly 
discriminatory to amend its list of Select Symbols to add the 
Additional Select Symbols because the fees and rebates for Select 
Symbols would apply uniformly to all categories of participants in the 
same manner. All market participants who trade options in the Select 
Symbols would be uniformly subject to the fees and rebates applicable 
to those symbols.
    The Exchange believes the proposed rule change is reasonable and 
equitable because it generally lowers the maker fees applicable to 
market participants (and considerably lowers the maker fees for the New 
Penny Pilot Symbols) and believes that the lower maker fees will 
attract additional maker liquidity and size to the Exchange in the 
Additional Select Symbols. Additionally, while this proposed rule 
change proposes to increase the taker fees applicable to market 
participants (except for the New Penny Pilot Symbols, whose taker fees 
will become considerably lower), the Exchange believes the benefits of 
better market quality will outweigh the taker fee increases based on 
the Exchange's experience with trading in the Select Symbols. Further, 
the Exchange believes this proposed rule change is reasonable and 
equitable because it will result in market participants receiving 
higher rebates for Priority Customer complex orders when these orders 
trade with non-Priority Customer complex orders in the complex order 
book as the current rebate payable for these orders in Select Symbols 
is higher than the current rebate payable for these orders in 
Additional Select Symbols. The Exchange notes, however, that the 
rebates payable to the New Penny Pilot Symbols will be decreased to 
correspond with the lower maker and taker fees these symbols will now 
be subject to.
    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 already 
provides these rebates, and is now merely proposing to adjust the 
rebate amounts applicable to the Additional Select Symbols. With this 
proposed rule change, Market Makers will also now be eligible to 
receive the Market Maker Plus rebate which was not previously 
applicable to the Additional Select Symbols. 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 believes that it is reasonable and equitable to 
provide a discount to Market Makers on preferenced orders as an 
incentive for them to quote in the complex order book. ISE notes that 
with this proposed rule change, the Exchange will continue to maintain 
the differential that was previously in place for the Additional Select 
Symbols.
    The Exchange believes that the proposed changes are non-
discriminatory because the proposal simply moves the Additional Select 
Symbols from one category of fees into another category thereby 
applying fees currently in effect. Further, the Exchange believes that 
it is equitable and not unfairly discriminatory to amend its list of 
Select Symbols to add the Additional Select Symbols to the Select 
Symbols because the fees applicable to the Select Symbols would apply 
uniformly to all categories of participants in the same manner. All 
market participants who trade the Select Symbols would be uniformly 
subject to the fees and rebates applicable to those symbols.

B. Self-Regulatory Organization's Statement on Burden on Competition

    ISE does not believe that the proposed rule change will impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. This rule change, which 
proposes to move a group of symbols to an existing category of symbols, 
does not impose any burden on competition. With this proposed rule 
change, the Additional Select Symbols will be subject to fees that are 
already in place on the Exchange and therefore, do not impose any 
additional burden on competition that is not necessary or appropriate 
in furthering the purposes of the Act. The Exchange believes that the 
proposed changes promote competition, as they are designed to allow the 
Exchange 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 \37\ and subparagraph (f)(2) of Rule 19b-4 
thereunder,\38\ because it establishes a due, fee, or other charge 
imposed by ISE.
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    \37\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \38\ 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 No. SR-ISE-2013-03 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-2013-03. 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

[[Page 3958]]

post all comments on the Commissions 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. 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-2013-03 and should be 
submitted by February 7, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\39\
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    \39\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-00873 Filed 1-16-13; 8:45 am]
BILLING CODE 8011-01-P