[Federal Register Volume 78, Number 118 (Wednesday, June 19, 2013)]
[Notices]
[Pages 36812-36815]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-14607]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69757; File No. SR-ISE-2013-36]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change To Amend the Schedule of Fees
June 13, 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 June 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 the
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 purpose of this proposed rule change is to amend certain fees
for regular orders in Non-Select Symbols \3\ and in FX Options traded
on the Exchange. The fee changes discussed below apply to both standard
options and mini options traded on ISE. The Exchange's Schedule of Fees
has separate tables for fees applicable to standard options and mini
options. The Exchange notes that while the discussion below relates to
fees for standard options, the fees for mini options, which are not
discussed below, are and shall continue to be \1/10\th of the fees for
standard options.\4\
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\3\ Non-Select Symbols are options overlying all symbols that
are not in the Penny Pilot Program.
\4\ See Securities Exchange Act Release No. 69270 (April 2,
2013), 78 FR 20988 (April 8, 2013) (SR-ISE-2013-28).
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For regular orders in Non-Select Symbols, the Exchange currently
charges an execution fee of: i) $0.18 per
[[Page 36813]]
contract for Market Maker \5\ orders; ii) $0.20 per contract for Market
Maker orders (for orders sent by Electronic Access Members); iii) $0.30
per contract for Firm Proprietary/Broker-Dealer and Professional
Customer \6\ orders; iv) $0.45 per contract for Non-ISE Market Maker
\7\ orders; and v) $0.00 per contract for Priority Customer \8\ orders
(for Singly Listed Symbols, this fee is $0.20 per contract). The
Exchange now proposes to lower the execution fee for regular Firm
Proprietary/Broker-Dealer and Professional Customer orders, from $0.30
per contract to $0.20 per contract, when these market participants
provide liquidity in the Non-Select Symbols. The Exchange is not
proposing any change to the execution fee for other market
participants.
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\5\ The term ``Market Makers'' refers to ``Competitive Market
Makers'' and ``Primary Market Makers'' collectively. See ISE Rule
100(a)(25).
\6\ A Professional Customer is a person who is not a broker/
dealer and is not a Priority Customer.
\7\ 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.
\8\ 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 regular orders in FX Options, the Exchange currently charges an
execution fee of: (i) $0.18 per contract for Market Maker and Priority
Customer orders; (ii) $0.20 per contract for Market Maker orders (for
orders sent by Electronic Access Members); (iii) $0.30 per contract for
Firm Proprietary/Broker-Dealer and Professional Customer orders; (iv)
$0.45 per contract for Non-ISE Market Maker orders; (v) $0.40 per
contract for Priority Customer orders in Early Adopter FX Option
Symbols; and (vi) $0.00 per contract for Early Adopter Market Maker
orders. The Exchange now proposes to lower the execution fee for
regular Firm Proprietary/Broker-Dealer and Professional Customer
orders, from $0.30 per contract to $0.20 per contract, when these
market participants provide liquidity in FX Options. The Exchange is
not proposing any change to the execution fee for other market
participants.
Finally, the Exchange proposes to remove a reference to a number of
index options that previously traded on ISE pursuant to a license
agreement and that have now been delisted by the Exchange.
Specifically, ISE is removing reference to the following index options
in Section VI. B. of the Schedule of Fees: the Russell 2000[supreg]
Index (``RUT''), the Russell 1000[supreg] Index (``RUI''), the Mini
Russell 2000[supreg] Index (``RMN''), the Morgan Stanley Retail Index
(``MVR''), the Morgan Stanley High Tech Index (``MSH''), the KBW
Mortgage Finance Index ``(MFX''), the S&P[supreg] MidCap 400 Index
(``MID''), and the S&P[supreg] SmallCap 600 Index (``SML'').
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'') \9\ in general, and furthers the objectives of
Section 6(b)(4) of the Act \10\ 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.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that its proposal to assess a $0.20 per
contract fee for regular Firm Proprietary/Broker-Dealer and regular
Professional Customer orders in Non-Select Symbols and in FX Options
when they provide liquidity is reasonable and equitably allocated
because the fee is within the range of fees assessed by other exchanges
employing similar pricing schemes. For example, NASDAQ Options Market
(``NOM'') currently charges a fee of $0.45 per contract for similar
orders in non-Penny Pilot options that provide liquidity in its regular
order book,\11\ while NASDAQ OMX PHLX LLC (``PHLX'') charges $0.60 per
contract for its foreign currency options regardless of whether the
order provides liquidity or takes liquidity.\12\ The proposed fee is
also reasonable and equitably allocated because it is identical to the
fee currently charged by the Exchange for regular Crossing Orders in
Non-Select Symbols and in FX Options.\13\ With this proposed rule
change, regular Firm Proprietary/Broker-Dealer and regular Professional
Customer orders will be charged the same fee when they provide
liquidity as regular Market Maker (for orders sent by Electronic Access
Members) orders and regular Priority Customer orders (for Singly Listed
Symbols) are charged when they provide liquidity in Non-Select Symbols
and in FX Options. The Exchange further notes that regular Firm
Proprietary/Broker-Dealer and Professional Customer orders will now pay
a lower fee than the fee currently charged to these orders, which the
Exchange believes will serve as in incentive for market participants to
direct this order flow to ISE rather than to a competing exchange.
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\11\ See NOM fee schedule at http://nasdaq.cchwallstreet.com/NASDAQTools/PlatformViewer.asp?selectednode=chp_1_1_15&manual=%2Fnasdaq%2Fmain%2Fnasdaq-optionsrules%2F.
\12\ See PHLX Fee Schedule at http://nasdaqomxphlx.cchwallstreet.com/NASDAQOMXPHLXTools/PlatformViewer.asp?selectednode=chp%5F1%5F4%5F1&manual=%2Fnasdaqomxphlx%2Fphlx%2Fphlx%2Drulesbrd%2F.
\13\ See ISE Schedule of Fees, Section I, Regular Order Fees and
Rebates for Standard Options, and Section V, FX Options Fees and
Rebates.
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The Exchange believes its proposal to decrease the execution fee
for regular Firm Proprietary/Broker-Dealer and regular Professional
Customer orders in Non-Select Symbols and in FX Options when they
provide liquidity is not unfairly discriminatory because the lower fee
would apply uniformly to all regular Firm Proprietary/Broker-Dealer and
Professional Customer orders in the same manner.
The Exchange has determined to charge fees for regular orders in
mini options at a rate that is \1/10\th the rate of fees the Exchange
currently provides for trading in standard options. The Exchange
believes it is reasonable and equitable and not unfairly discriminatory
to assess lower fees to provide market participants an incentive to
trade mini options on the Exchange. The Exchange believes the proposed
fees are reasonable and equitable in light of the fact that mini
options have a smaller exercise and assignment value, specifically \1/
10\th that of a standard option contract, and, as such, levying fees
that are \1/10\th of what market participants pay today.
The Exchange believes that the price differentiation between the
various market participants is justified. As for Priority Customers,
for the most part, the Exchange does not charge Priority Customers a
fee (Priority Customers have traditionally traded options on the
Exchange without a fee) and to the extent they pay a transaction fee,
those fees are lower than or the same as fees charged to other market
participants. The Exchange believes charging lower fees, or no fees, to
Priority Customer orders attracts that order flow to the Exchange and
thereby creates liquidity to the benefit of all market participants who
trade on the Exchange. With respect to fees to Non-ISE Market Maker
orders, the Exchange believes that charging Non-ISE Market Maker orders
a higher rate than the fee charged to Market Maker, Firm Proprietary/
Broker-Dealer and Professional Customer regular orders is appropriate
and not unfairly discriminatory because Non-ISE Market Makers are not
subject to many of the non-transaction based fees that these other
categories of membership are subject to, e.g., membership fees, access
fees, API/
[[Page 36814]]
Session fees, market data fees, etc. Therefore, the Exchange believes
it is appropriate and not unfairly discriminatory to assess a higher
transaction fee to Non-ISE Market Makers because the Exchange incurs
costs associated with these types of orders that are not recovered by
non-transaction based fees paid by members. With respect to fees for
Market Maker orders, the Exchange believes that the price
differentiation between the various market participants is appropriate
and not unfairly discriminatory because Market Makers have different
requirements and obligations to the Exchange that the other market
participants do not (such as quoting requirements and paying
membership-related non-transaction fees). The Exchange believes that it
is equitable and not unfairly discriminatory to assess a higher fee to
market participants that do not have such requirements and obligations
that Exchange Market Makers do.
Moreover, the Exchange believes that the proposed fees are fair,
equitable and not unfairly discriminatory because the proposed fees are
consistent with price differentiation that exists today at other
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.
Finally, the Exchange's proposal to remove references to RUT, RUI,
RMN, MVR, MSH, MFX, MID, and SML in Section VI.B. of the Schedule of
Fees is reasonable, equitable and not unfairly discriminatory because
the Exchange has delisted these products and these products no longer
trade on the Exchange. The reference to a license surcharge on the
Exchange's Schedule of Fees for these products is therefore
unnecessary.
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. The Exchange believes the
proposed fee change does not impose a burden on competition because the
proposed fee is consistent with fees charged by other exchanges. The
proposed fee change for regular orders in Non-Select Symbols, which the
Exchange believes is lower than fees charged by its competitors for
similar orders, will encourage competition and attract additional order
flow in these symbols to ISE. The Exchange believes that the proposed
fee change for regular orders in FX Options will not impose any
unnecessary burden on competition because even though these options are
solely listed on ISE, the Exchange operates in a highly competitive
market, comprised of eleven exchanges, any of which can determine to
trade similar products. At least one other exchange currently trades
foreign currency options.\14\ While PHLX World Currency Options[supreg]
are not fungible with FX Options, they provide investors with a choice
to trade in a competing product.
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\14\ See PHLX World Currency Options[supreg] at http://www.nasdaqtrader.com/Micro.aspx?id=PHLXFOREXOptions.
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The Exchange also believes the proposed fee for regular orders in
Non-Select Symbols and in FX Options does not impose a burden on
competition because it sets the same rate and therefore, will apply
uniformly to all regular Firm Proprietary/Broker-Dealer and
Professional Customer orders in Non-Select Symbols and in FX Options
traded on the Exchange.
The Exchange notes that it operates in a highly competitive market
in which market participants can readily direct their order flow to
competing venues. In such an environment, the Exchange must continually
review, and consider adjusting, its fees and rebates to remain
competitive with other exchanges. For the reasons described above, the
Exchange believes that the proposed fee change reflects this
competitive environment.
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-2013-36 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-2013-36. 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 20549-1090, on official business days
between the hours of
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10:00 a.m. and 3:00 p.m. Copies of such filing also will be available
for inspection and copying at the principal offices of 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-2013-36, and should be
submitted on or before July 10, 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. 2013-14607 Filed 6-18-13; 8:45 am]
BILLING CODE 8011-01-P