[Federal Register Volume 78, Number 145 (Monday, July 29, 2013)]
[Notices]
[Pages 45590-45592]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-18077]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70029; File No. SR-ISE-2013-45]


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

July 23, 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 July 11, 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 to modify its 
routing fees and to eliminate a fee discount applicable to Foreign 
Currency Options (``FX Options'') traded on the Exchange. The text of 
the proposed rule change is available on the Exchange's Web site 
(http://www.ise.com), at the principal office of the Exchange, and at 
the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of these statements may be examined at 
the places specified in Item IV below. The self-regulatory organization 
has prepared summaries, set forth in sections A, B and C below, of the 
most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this proposed rule change is to amend the Schedule 
of Fees to modify the route-out fee applicable to Priority Customer \3\ 
and Professional Customer \4\ orders and to eliminate a fee discount 
applicable to FX Options traded on the Exchange. First, the Exchange 
currently charges a fee of $0.35 per contract and $0.45 per contract to 
executions of Priority Customer and Professional Customer orders, 
respectively, for standard options in all symbols that are routed to 
one or more exchanges in connection with the Options Order Protection 
and Locked/Crossed Market Plan. For Mini Options, this fee is currently 
$0.035 per contract for Priority Customer orders and $0.045 per 
contract for Professional Customer orders. The Exchange now proposes to 
increase the route-out fee for Priority Customer and Professional 
Customer orders for standard options to $0.38 per contract and $0.55 
per contract, respectively. For Mini Options, the Exchange proposes to 
increase the route fee for Priority Customer orders to $0.038 per 
contract and for Professional Customer orders to $0.055 per contract.
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    \3\ 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).
    \4\ A Professional Customer is a person who is not a broker/
dealer and is not a Priority Customer.
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    The route-out fee offsets costs incurred by the Exchange in 
connection with using unaffiliated broker-dealers to access other 
exchanges for linkage executions and is therefore appropriate because 
the market professionals that are submitting these orders can route 
them directly to away exchanges, if desired, and should not be able to 
forgo an away market fee by directing their orders to the ISE. These 
costs incurred by the Exchange recently increased as a result of the 
Exchange's changing the way Priority Customer and Professional Customer 
orders are handled under the Options Order Protection and Locked/
Crossed Market Plan.\5\
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    \5\ See Securities and Exchange Act Release No. 69396 (April 18, 
2013), 78 FR 24273 (April 24, 2013) (SR-ISE-2013-18) (Order 
Approving Order Handling Under the Options Order Protection and 
Locked/Crossed Market Plan).
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    Second, the Exchange currently provides a fee discount for large-
sized FX Options orders. The fee discount applies to orders of 250 
contracts or more and waives fees on incremental volume above 250 
contracts. Contracts at or under the threshold are charged the 
constituent's prescribed execution fee. The fee discount applies to all 
market participants who trade FX Options on the Exchange. The Exchange 
initially adopted the fee discount for large-sized FX Options orders in 
2008.\6\ The fee discount was subsequently extended \7\ and expired on 
June 30, 2013.\8\ The Exchange has determined to eliminate this fee 
discount because the Exchange believes it is no longer necessary to 
provide an incentive to attract large-sized FX Options orders to the 
Exchange and therefore, proposes to remove reference to this fee 
discount from its Schedule of Fees.
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    \6\ See Securities Exchange Act Release No. 58139 (July 10, 
2008), 73 FR 41142 (July 17, 2008) (SR-ISE-2008-54).
    \7\ See Securities Exchange Act Release Nos. 60192 (June 30, 
2009), 74 FR 32211 (July 7, 2009) (SR-ISE-2009-42); 62506 (July 15, 
2010), 75 FR 42801 (July 22, 2010) (SR-ISE-2010-67); and 64743 (June 
24, 2011, 76 FR 38434 (June 30, 2011) (SR-ISE-2011-35).
    \8\ See Securities Exchange Act Release No. 67212 (June 19, 
2012), 77 FR 37947 (June 25, 2012) (SR-ISE-2012-55).
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2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(4) that an exchange have an equitable 
allocation of reasonable dues, fees and other charges among its members 
and other persons using its facilities. In particular, the

[[Page 45591]]

Exchange believes the proposed route-out fee is reasonable and 
equitable as it provides the Exchange the ability to recover costs 
associated with using unaffiliated broker-dealers to route Priority 
Customer and Professional Customer orders to other exchanges for 
``linkage'' executions. These costs incurred by the Exchange recently 
increased as a result of the Exchange's changing the way Priority 
Customer and Professional Customer orders are handled under the Options 
Order Protection and Locked/Crossed Market Plan.\9\ The Exchange also 
believes that the proposed fees are not unfairly discriminatory because 
these fees would be uniformly applied to all Priority Customer and 
Professional Customer orders. As fees to access liquidity for Priority 
and Professional Customer orders have risen at other exchanges, it has 
become necessary for the Exchange to raise routing fees in order to 
recoup the higher costs. The Exchange notes that a number of other 
exchanges currently charge a variety of routing related fees associated 
with customer and non-customer orders that are subject to linkage 
handling. The Exchange also notes that the fees proposed herein are 
within the range of fees charged by some of the Exchange's 
competitors.\10\
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    \9\ See note 5.
    \10\ See NASDAQ OMX PHLX (``PHLX'') Fee Schedule, Section V, 
Routing Fees; and Chicago Board Options Exchange (``CBOE'') Fees 
Schedule, Linkage Fees.
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    The Exchange has determined to charge fees for regular orders in 
Mini Options at a rate that is 1/10th 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/
10th that of a standard option contract, and, as such, levying fees 
that are 1/10th of what market participants pay to trade standard 
options. As a result, routing fees for Mini Options will continue to be 
charged at 1/10th the rate of fees of standard options.
    The Exchange's proposal to remove references to the fee discount 
for large-sized FX Options from its Schedule of Fees is reasonable, 
equitable and not unfairly discriminatory because the Exchange has 
determined to no longer provide an incentive to attract this order flow 
to the Exchange. The reference to this fee discount on the Exchange's 
Schedule of Fees for large-sized FX Options 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 and 
will uniformly apply to all Priority Customer and Professional Customer 
orders in standard options and Mini Options that are routed out to 
other exchanges for linkage executions. The Exchange notes that Members 
can and do route these orders to other markets or to specify that ISE 
not route orders away on their behalf. 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. 
Furthermore, neither fee change presents a change to or impacts intra-
market competition as the route out fee applies to orders routed to 
away markets and the large-sized FX Options order incentive does not 
change the relative levels of fees paid by various ISE participants.

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 \11\ and subparagraph (f)(2) of Rule 19b-4 
thereunder,\12\ because it establishes a due, fee, or other charge 
imposed by ISE.
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    \11\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \12\ 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-2013-45 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-2013-45. 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

[[Page 45592]]

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-2013-45, and should be submitted on or before August 19, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-18077 Filed 7-26-13; 8:45 am]
BILLING CODE 8011-01-P