[Federal Register Volume 79, Number 34 (Thursday, February 20, 2014)]
[Notices]
[Pages 9783-9785]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-03668]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71554; File No. SR-ISE-2014-08]


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

February 14, 2014.
    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 February 4, 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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[[Page 9784]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The ISE proposes to amend the 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 proposes to amend the Schedule of Fees to (1) decrease 
the Credit for Responses to Flash Orders for trading against Priority 
Customer orders in Select Symbols,\3\ and (2) to remove obsolete 
references to Primary Market Maker (``PMM'') linkage handling. Each of 
these changes is explained below. The fee changes discussed 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 1/10th of 
the fees for Standard Options.
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    \3\ ``Select Symbols'' are options overlying all symbols listed 
on the ISE that are in the Penny Pilot Program.
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Credit for Responses to Flash Orders
    Currently, when the ISE is not at the National Best Bid or Offer 
(``NBBO''), Public Customer and Non-Customer orders are exposed to all 
ISE members to give them an opportunity to match the NBBO (``Flash 
Orders'') before the order is routed to another exchange for execution 
or cancelled. As an incentive to attract Public Customer orders to the 
ISE, the Exchange offers a Credit for Responses to Flash Orders when 
trading against Priority and Professional Customer orders.\4\ In Select 
Symbols, this credit is $0.15 per contract when trading against 
Priority Customer orders (or $0.17 per contract when trading against 
Preferenced Priority Customer orders),\5\ and $0.10 per contract when 
trading against Professional Customer orders. In non-Select Symbols the 
credit is $0.20 per contract when trading against Professional Customer 
orders only. These fees reflect a recent fee change filed by the ISE on 
November 1, 2013 which, among other things, increased the Credit for 
Responses to Flash Orders in Select Symbols by $0.05 per contract when 
trading against Priority Customer orders.\6\ The Exchange now proposes 
to return these credits to their previous levels. In particular, the 
Exchange proposes to decrease the Credit for Responses to Flash Orders 
in Select Symbols from $0.15 per contract to $0.10 per contract when 
trading against Priority Customer orders, and from $0.17 per contract 
to $0.12 per contract when trading against Preferenced Priority 
Customer orders.\7\ The respective credits for trading against 
Professional Customer orders will remain at their current rates.
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    \4\ No fee is charged or credit provided when trading against a 
non-Customer.
    \5\ The credit for responses to Preferenced Priority Customer 
orders applies to an ISE Market Maker when trading against a 
Priority Customer order that is preferenced to that Market Maker.
    \6\ See Securities Exchange Act Release No. 70873 (November 14, 
2013), 78 FR 69714 (November 20, 2013) (SR-ISE-2013-56).
    \7\ The Exchange does not offer a higher Credit for Responses to 
Flash Orders that trade against Preferenced Priority Customer orders 
in Mini Options. In Mini Options the credit will be $0.010 per 
contract when trading against Priority Customer orders in Select 
Symbols regardless of whether the order has been preferenced to a 
Market Maker.
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PMM Linkage Handling
    On April 18, 2013 the Commission approved a proposed rule change 
that modified the ISE's linkage handling procedures under the Options 
Order Protection and Locked/Crossed Market Plan.\8\ Prior to this rule 
change Primary Market Makers (``PMMs'') were responsible for routing 
orders to away markets when necessary to comply with the linkage 
handling rules, and would receive credits for performing this function. 
Under the newly approved rules, however, the ISE has contracted with 
unaffiliated broker dealers to route orders to other exchanges when 
necessary to comply with the linkage rules (``Linkage Handlers''). 
Since PMMs no longer perform linkage handling, which is now performed 
by the Linkage Handlers, the Exchange proposes to remove obsolete text 
in its Schedule of Fees related to PMM credits for providing that 
service. In particular, the Exchange proposes to remove the Subsection 
E of Section VI titled ``PMM Linkage Credit,'' which details the 
credits that were previously provided to PMMs in their assigned classes 
for orders routed to one or more exchanges in connection with their 
linkage handling function. The Exchange also proposes to remove related 
footnotes that indicate that PMMs do not receive a maker rebate nor pay 
a taker fee when trade reporting a Priority Customer or Professional 
Customer order in accordance with their obligation to provide away 
market price protection pursuant to ISE Rule 803(c)(2).\9\ As stated 
above, PMMs no longer perform this function.
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    \8\ See Securities Exchange Act Release No. 69396 (April 18, 
2013), 78 FR 24273 (April 24, 2013) (SR-ISE-2013-18).
    \9\ ISE Rule 803(c)(2) was removed in connection with the 
introduction of Linkage Handlers. See id.
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 2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\10\ in general, and 
Section 6(b)(4) of the Act,\11\ in particular, in that it is designed 
to provide for the equitable allocation of reasonable dues, fees, and 
other charges among its members and other persons using its facilities.
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    \10\ 15 U.S.C. 78f.
    \11\ 15 U.S.C. 78f(b)(4).
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    As explained above, the proposed credits to be provided to Members 
who respond to Flash Orders are set at the same level as was applicable 
on the ISE prior to November 1, 2013. The Exchange believes that it is 
reasonable and equitable to return these credits to their previous 
levels as the increased credit was unsuccessful in encouraging market 
participants to respond to Flash Orders. Furthermore, the Exchange 
notes that the proposed credits for responding to Priority Customer 
orders are in line with the credits currently provided by the ISE for 
responding to Professional Customer orders. The Exchange does not 
believe that the proposed change is unfairly discriminatory as the 
credit provided for responses to Priority Customer orders will once 
again be consistent with the credit provided for responses to 
Professional Customer orders. In addition, the Exchange believes that 
it is reasonable, equitable, and not unfairly discriminatory to remove 
obsolete text related to PMM linkage handling credits and away market 
price protection as PMMs are no longer responsible for performing this 
function.

[[Page 9785]]

    The Exchange notes that it has determined to charge fees and 
provide rebates in Mini Options at a rate that is 1/10th the rate of 
fees and rebates the Exchange provides for trading in Standard Options. 
The Exchange believes it is reasonable and equitable and not unfairly 
discriminatory to assess lower fees and rebates to provide market 
participants an incentive to trade Mini Options on the Exchange. The 
Exchange believes the proposed credits 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, is providing credits for Mini Options that are 
1/10th of those applicable to Standard Options.

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

    In accordance with Section 6(b)(8) of the Act,\12\ the Exchange 
does not believe that the proposed rule change will impose any burden 
on intermarket or intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The proposed 
change to Credits for Responses to Flash Orders will not have any 
significant impact on competition as the credit for trading against 
Priority Customer orders will once again be on par with the credit for 
trading against Professional Customer orders. In addition, removing 
obsolete text related to PMM linkage handling credits and away market 
price protection will have no competitive impact as PMMs no longer 
perform this function since the ISE now utilizes Linkage Handlers to 
route orders to other exchanges as required.
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    \12\ 15 U.S.C. 78f(b)(8).
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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 \13\ and subparagraph (f)(2) of Rule 19b-4 
thereunder,\14\ because it establishes a due, fee, or other charge 
imposed by ISE.
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    \13\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \14\ 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-2014-08 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-2014-08. 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-2014-08 and should be 
submitted on or before March 13, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-03668 Filed 2-19-14; 8:45 am]
BILLING CODE 8011-01-P