[Federal Register Volume 79, Number 59 (Thursday, March 27, 2014)]
[Notices]
[Pages 17216-17221]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-06759]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71765; File No. SR-ISE-2014-17]


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

March 21, 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 March 7, 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 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 purpose of the proposed rule change is to amend the Schedule of 
Fees as described in more detail below. The fee changes discussed apply 
to both Standard Options and Mini Options traded on Exchange. 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.
1. Market Maker Plus Rebate for Select Symbols
    In order to promote and encourage liquidity in symbols that are in 
the penny pilot program (``Select Symbols''), the Exchange currently 
offers Market Makers \3\ that meet the quoting requirements for Market 
Maker Plus \4\ a rebate of $0.10 per contract for adding liquidity in 
those symbols. In addition, the Exchange pays a higher rebate of $0.12 
per contract to Market Makers that meet the quoting requirements for 
Market Maker Plus and are affiliated with an Electronic Access Member 
(``EAM'') that executes a total affiliated Priority Customer \5\ 
average daily volume (``ADV'') of 200,000 contracts or more in a 
calendar month.\6\ The Exchange now proposes to increase the Market 
Maker Plus rebate to $0.20 per contract, and $0.22 per contract for 
Members that currently qualify for the higher rebate based on 
affiliated Priority Customer volume. The Exchange also proposes to 
modify the requirements for Market Maker Plus to only look to all 
expirations in the front two months,\7\ and to reduce the premium 
requirements for series on which the Market Maker Plus calculations are 
based.\8\ As proposed, a Market Maker

[[Page 17217]]

will qualify for Market Maker Plus rebates if it is on the National 
Best Bid or National Best Offer at least 80% of the time for series 
trading between $0.03 and $3.00 (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 $3.00 (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. As is currently the 
case, a Market Maker's single best and single worst overall quoting 
days each month, on a per symbol basis, will be excluded in calculating 
whether a Market Maker qualifies for Market Maker Plus, if doing so 
will qualify a Market Maker for the rebate.
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    \3\ The term ``Market Makers'' refers to ``Competitive Market 
Makers'' and ``Primary Market Makers'' collectively. See ISE Rule 
100(a)(25).
    \4\ A Market Maker Plus is a Market Maker who is on the National 
Best Bid or National Best Offer at least 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 at least 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, will be excluded in 
calculating whether a Market Maker qualifies for this rebate, if 
doing so will qualify a Market Maker for the rebate.
    \5\ 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).
    \6\ See Securities Exchange Act Release No. 70872 (November 14, 
2013), 78 FR 69718 (November 20, 2013) (SR-ISE-2013-57).
    \7\ Currently, a Market Maker qualifies for Market Maker Plus if 
it is on the NBBO a specified percentage of the time in each of the 
front two expiration months, and separately for all expiration 
months in that symbol during the current trading month. See supra 
note 2.
    \8\ The Exchange currently determines whether a Market Maker 
qualifies as a Market Maker Plus at the end of each month by looking 
back at each Market Maker's quoting statistics per symbol during 
that month. The Exchange will continue to monitor each Market 
Maker's quoting statistics to determine whether a Market Maker 
qualifies for a rebate under the standards proposed herein. The 
Exchange also currently provides Market Makers a report on a daily 
basis with quoting statistics so that Market Makers can determine 
whether or not they are meeting the Exchange's current stated 
criteria. Again, the Exchange will continue to provide Market Makers 
a daily report so that Market Makers can track their quoting 
activity to determine whether or not they qualify for the Market 
Maker Plus rebate.
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2. Taker Fee for Select Symbols
    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 Select Symbols. 
For regular orders that remove liquidity in Select Symbols, the 
Exchange currently charges a taker fee of: (i) $0.34 per contract for 
Market Maker and Market Maker Plus orders, (ii) $0.38 per contract for 
Non-ISE Market Maker orders,\9\ (iii) $0.35 per contract for Firm 
Proprietary/Broker-Dealer \10\ and Professional Customer orders,\11\ 
and (iv) $0.32 per contract for Priority Customer orders.
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    \9\ A ``Non-ISE Market Maker'' is a market maker as defined in 
Section 3(a)(38) of the Securities Exchange Act of 1934, as amended, 
registered in the same options class on another options exchange.
    \10\ A ``Firm Proprietary'' order is an order submitted by a 
member for its own proprietary account. A ``Broker-Dealer'' order is 
an order submitted by a member for a non-member broker-dealer 
account.
    \11\ A ``Professional Customer'' is a person or entity that is 
not a broker/dealer and is not a Priority Customer.
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    The Exchange now proposes to decrease the taker fee for Priority 
Customer orders and increase the taker fee for other market participant 
types. In particular, the Exchange proposes to decrease the taker fee 
for Priority Customer orders in Select Symbols to $0.25 per contract. 
For Market Maker and Market Maker Plus orders in Select Symbols the 
Exchange proposes to increase the taker fee to $0.42 per contract. And 
for Non-ISE Market Maker, Firm Proprietary/Broker-Dealer, and 
Professional Customer orders the Exchange proposes to increase the 
taker fee to $0.45 per contract.
3. Responses to Crossing Orders
    The Exchange charges a fee for responses to Crossing Orders \12\ 
for regular and complex orders in Select and Non-Select Symbols as well 
as for Foreign Currency (``FX'') Option Symbols. For Crossing Orders in 
Select Symbols this response fee is a uniform $0.40 per contract for 
regular orders, and $0.44 per contract for complex orders. For regular 
orders in Non-Select Symbols and FX Option Symbols the response fee is 
$0.22 per contract for Market Maker orders (subject to applicable tier 
discounts),\13\ $0.20 per contract for Market Maker orders sent by an 
EAM, $0.45 per contract for Non-ISE Market Maker orders, and $0.30 per 
contract for Firm Proprietary/Broker-Dealer and Professional Customer 
orders. Early Adopter Market Makers do not pay a response fee in Early 
Adopter FX Option Symbols.\14\ For Priority Customer orders the 
response fee is $0.20 per contract for regular orders in Non-Select 
Symbols,\15\ and $0.40 per contract for regular orders in FX Option 
Symbols, including the Early Adopter Symbols. For complex orders in 
Non-Select Symbols the response fee is $0.87 per contract for Market 
Maker, Non-ISE Market Maker, Firm Proprietary/Broker-Dealer, and 
Professional Customer orders.\16\ Priority Customers are not currently 
charged a fee for responses to complex Crossing Orders in Non-Select 
Symbols.
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    \12\ A ``Crossing Order'' is an order executed in the Exchange's 
Facilitation Mechanism, Solicited Order Mechanism, Price Improvement 
Mechanism (``PIM'') or submitted as a Qualified Contingent Cross 
(``QCC'') order. For purposes of the Fee Schedule, orders executed 
in the Block Order Mechanism are also considered Crossing Orders.
    \13\ See Schedule of Fees, Section VI.C for applicable tier 
discounts.
    \14\ An Early Adopter Market Maker is a Market Maker that 
entered into a revenue sharing agreement with the Exchange on or 
before March 30, 2012 to make markets in Early Adopter FX Option 
Symbols.
    \15\ This fee applies to both singly and multiply listed options 
in Non-Select Symbols.
    \16\ Complex order fees and rebates for Non-Select Symbols in 
Section II of the Schedule of Fees apply for complex orders in FX 
Option Symbols. Currently, the Schedule of Fees notes that ``Complex 
Order fees and rebates in Section II apply for FX Option Symbols.'' 
As this language is somewhat ambiguous, the Exchange proposes to 
modify it to state that ``Complex Order fees and rebates for Non-
Select Symbols in Section II apply for FX Option Symbols.''
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    The Exchange proposes to increase the fee for responses to Crossing 
Orders as follows. For regular orders in Select Symbols, Non-Select 
Symbols, and FX Options Symbols, as well as complex orders in Select 
Symbols, the fee for responses to Crossing Orders will be increased to 
$0.45 per contract for all market participants,\17\ except that Early 
Adopter Market Makers will continue to pay no response fee in Early 
Adopter FX Option Symbols. For complex orders in Non-Select Symbols the 
fee for responses to Crossing Orders will be $0.90 per contract for 
Market Maker orders and $0.95 per contract for Non-ISE Market Maker, 
Firm Proprietary/Broker-Dealer, Professional Customer, and Priority 
Customer orders.
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    \17\ Under the proposed fee structure Market Maker responses to 
Crossing Orders in Non-Select Symbols and FX Option Symbols will not 
be eligible for the current tier discounts provided under Section 
VI.C of the Schedule of Fees.
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4. PIM Fees and Break-up Rebate
    Currently, the Exchange charges a fee for Crossing Orders which 
applies to regular and complex orders executed in the ISE's 
Facilitation, Solicited Order, Block Order, or Price Improvement 
Mechanism (``PIM''), or submitted as a Qualified Contingent Cross 
(``QCC'') order.\18\ This fee applies to Market Maker, Non-ISE Market 
Maker, Firm Proprietary/Broker-Dealer, and Professional Customer orders 
in regular and complex orders in Select and Non-Select Symbols, as well 
as FX Option Symbols,\19\ and to regular Priority Customer orders in 
singly listed Non-Select Symbols and FX Option Symbols only. For Non-
ISE Market Maker, Firm Proprietary/Broker-Dealer, and Professional 
Customer orders the fee for Crossing Orders is $0.20 per contract 
across all symbols for both regular and complex orders. Priority 
Customer orders are also charged a fee of $0.20 per contract for 
regular orders in singly listed Non-Select Symbols, but pay a higher 
fee of $0.40 per contract in Early Adopter and other FX Option Symbols. 
Priority Customer orders do not pay a fee for regular Crossing Orders 
in Select Symbols or multiply listed Non-Select Symbols, or for complex 
orders. Market Maker orders pay a fee of $0.20 per contract for regular 
orders in Select Symbols,\20\ and in both Non-Select and FX Option 
Symbols for orders sent by an EAM, as well as in complex orders. 
Regular Market Maker orders in Non-Select and FX Option Symbols that 
are not sent by an EAM are charged a fee of $0.22 per contract, subject 
to

[[Page 17218]]

applicable tier discounts.\21\ Early Adopter Market Makers are not 
charged a fee for Crossing Orders in Early Adopter FX Options symbols.
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    \18\ For complex orders the Exchange currently only charges the 
largest leg.
    \19\ Complex order fees and rebates for Non-Select Symbols in 
Section II of the Schedule of Fees apply for complex orders in FX 
Option Symbols.
    \20\ This fee applies to both Market Makers and Market Maker 
Plus.
    \21\ See Schedule of Fees, Section VI.C for applicable tier 
discounts.
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    The Exchange now proposes to adopt separate fees for PIM orders 
that meet specified size requirements. In particular, the Exchange 
proposes to charge a fee of $0.05 per contract for Market Maker, Non-
ISE Market Maker, Firm Proprietary/Broker-Dealer, and Professional 
Customer orders for one hundred or fewer contracts executed in the PIM. 
For complex orders, the quantity of the largest leg will be used to 
determine if the order meets the size requirement for the reduced fee. 
While currently only the largest leg of a complex Crossing Order is 
charged a fee, however, the new proposed fee for complex PIM orders 
will apply to all legs. For example, a Broker-Dealer complex PIM order 
containing three option legs of 10 contracts each will be assessed a 
fee equal to the total number of Broker-Dealer contracts (3 legs x 10 
contracts each) multiplied by $0.05. For Members that execute an 
average daily volume (``ADV'') in Priority Customer PIM orders of 
20,000 or more contracts in a given month, the fee for Market Maker, 
Non-ISE Market Maker, Firm Proprietary/Broker-Dealer, and Professional 
Customer orders will be reduced further to $0.03 per contract, which 
will be applied retroactively to all eligible PIM volume in that month 
once the threshold has been reached.\22\ As is currently the case, 
Priority Customer orders will not pay a fee for regular orders in 
Select Symbols, multiply listed Non-Select Symbols, or for complex 
orders, and Early Adopter Market Makers will not pay a fee in Early 
Adopter FX Options Symbols, for orders executed in the PIM. The 
Exchange will continue to charge regular Priority Customer orders in 
singly listed Non-Select Symbols and FX Option Symbols (including Early 
Adopter FX Option Symbols) at the applicable rate for Crossing Orders. 
Fees for PIM orders of greater than 100 contracts, as well as orders 
executed in the Exchange's other crossing mechanisms, will also remain 
at their current rates but fees for PIM orders of greater than 100 
contracts, like the fees for a PIM order of 100 or fewer contracts, 
will now be charged for all legs.
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    \22\ Under the proposed fee structure Market Maker PIM orders of 
100 or fewer contracts in Non-Select Symbols and FX Option Symbols 
will not be eligible for the current tier discounts provided under 
Section VI.C of the Schedule of Fees.
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    For regular and complex PIM orders in Select Symbols that do not 
trade with their contra order, the Exchange currently provides a break-
up rebate of $0.25 per contract for Non-ISE Market Maker, Firm 
Proprietary/Broker-Dealer, Professional Customer, and Priority Customer 
orders in Select Symbols.\23\ The Exchange proposes to increase this 
rebate to $0.35 per contract. In addition, the Exchange proposes to 
introduce a new break-up rebate for regular and complex orders in Non-
Select Symbols and in FX Option Symbols executed in the PIM by the 
above listed market participants. This rebate will be $0.15 per 
contract for regular orders in Non-Select Symbols and in FX Option 
Symbols, and $0.80 per contract for complex orders in Non-Select 
Symbols.\24\ Market Makers are not permitted to enter orders into PIM 
and will therefore not be eligible for this rebate.
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    \23\ The fee for Crossing Orders is applied to any contracts for 
which a rebate is provided.
    \24\ The applicable fee is applied to any contracts for which a 
rebate is provided.
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5. Priority Customer Complex Order Tiers
    The Exchange currently provides volume-based tiered rebates for 
Priority Customer complex orders when these orders trade with non-
Priority Customer orders in the complex order book,\25\ or trade with 
quotes and orders on the regular order book.\26\ These complex order 
rebates are provided to Members based on the Member's ADV in Priority 
Customer complex contracts in six volume tiers as follows: 0 to 39,999 
(Tier 1), 40,000 to 74,999 (Tier 2), 75,000 to 124,999 (Tier 3), 
125,000 to 224,999 (Tier 4), 225,000 to 299,999 (Tier 5), 300,000 or 
more (Tier 6). A Member that executes an ADV of 40,000 to 74,999 
Priority Customer complex contracts (i.e., Tier 2) is entitled to a 
rebate of $0.37 per contract for Select Symbols (excluding SPY), $0.40 
per contract for SPY, and $0.75 per contract for non-Select Symbols, in 
each case when trading with non-Priority Customer orders in the complex 
order book. When trading against quotes and orders on the regular order 
book this rebate is $0.14 per contract for all symbols (excluding SPY), 
and $0.15 per contract for SPY.
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    \25\ The Exchange offers a rebate in Standard and Mini Options 
for Priority Customer complex orders in (i) Select Symbols 
(excluding SPY), (ii) SPY, and (iii) non-Select Symbols, when these 
orders trade with non-Priority Customer orders in the complex order 
book.
    \26\ The Exchange offers a rebate in Standard and Mini Options 
for Priority Customer complex orders that trade with quotes and 
orders on the regular order book in (i) SPY, and (ii) other symbols 
excluding SPY.
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    The Exchange now proposes to decrease the volume requirements 
necessary for achieving Tier 2 Priority Customer complex order rebates. 
As proposed, a Member that executes an ADV of 30,000 to 74,999 Priority 
Customer complex contracts will now be entitled to the Tier 2 rebates 
described above. Members that execute an ADV of 0 to 29,999 Priority 
Customer complex contracts will continue to receive Tier 1 rebates. By 
decreasing the lower ADV threshold for Tier 2 from 40,000 contracts to 
30,000 contracts the Exchange expects to attract additional Priority 
Customer complex order volume to the ISE.
    In addition, the Exchange proposes to delete outdated footnote 
references to an incremental tier for Priority Customer complex volume 
that was recently replaced with a new tier that applies retroactively 
to all Priority Customer complex volume.\27\
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    \27\ See Exchange Act Release No. 70873 (November 14, 2013), 78 
FR 69714 (November 20, 2013) (SR-ISE-2013-56).
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6. Credit for Responses to Flash Orders
    Currently, when the ISE is not at the National Best Bid or Offer 
(``NBBO''), Public Customer \28\ and Non-Customer \29\ 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 is cancelled.\30\ 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.\31\ In Select Symbols, this credit is $0.10 per contract when 
trading against Priority or Professional Customer orders or $0.12 per 
contract when trading against Preferenced Priority Customer orders.\32\ 
In non-Select Symbols the credit is $0.20 per contract when trading 
against Professional Customer orders only. The Exchange now proposes to 
decrease the Credit for Responses to Flash Orders to $0.05 per contract 
when trading against

[[Page 17219]]

Priority Customer orders in Select Symbols or Professional Customer 
orders in Select and Non-Select Symbols. The Exchange will no longer 
offer an increased credit for trading against Preferenced Priority 
Customer orders.
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    \28\ The term ``Public Customer'' means a person or entity that 
is not a broker or dealer in securities. Public Customers include 
both Priority and Professional Customers.
    \29\ The term ``Non-Customer'' means a person or entity that is 
a broker or dealer in securities.
    \30\ A ``Flash Order'' is an order that is exposed at the NBBO 
by the Exchange to all members for execution, as provided under 
Supplementary Material .02 to ISE Rule 1901.
    \31\ No fee is charged or credit provided when trading against a 
non-Customer.
    \32\ 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.
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7. ISE Gemini Name Change
    Finally, the Exchange notes that its sister exchange recently filed 
to change its name from the Topaz Exchange, LLC to ISE Gemini, LLC.\33\ 
Certain text in the ISE Schedule of Fees references the Topaz Exchange, 
LLC in noting that certain fees provide connectivity to both 
exchanges.\34\ The Exchange proposes to replace all references to the 
Topaz Exchange, LLC with updated references to ISE Gemini, LLC.
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    \33\ See Exchange Act Release No. 71586 (February 20, 2014), 79 
FR 10861 (February 26, 2014) (SR-Topaz-2014-06).
    \34\ See Exchange Act Release No. 71324 (January 16, 2014), 79 
FR 3911 (January 23, 2014) (SR-ISE-2014-01).
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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,\35\ in general, and 
Section 6(b)(4) of the Act,\36\ 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. 
The Exchange is retooling its fees and rebates in order to remain 
competitive with other options exchanges and believes that each of 
these changes are reasonable, equitable, and not unfairly 
discriminatory for the reasons discussed below. The Exchange believes 
that taken as a whole the proposed changes, which increase certain fees 
in addition to providing higher rebates, will be attractive to market 
participants that trade on the ISE.
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    \35\ 15 U.S.C. 78f.
    \36\ 15 U.S.C. 78f(b)(4).
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1. Market Maker Plus Rebate for Select Symbols
    The Exchange believes that the proposed increase to the Market 
Maker Plus rebate is reasonable and equitable because it will encourage 
Market Makers to post tighter markets in Select Symbols and thereby 
maintain liquidity and attract additional order flow to the ISE, which 
will ultimately benefit all market participants that trade on the 
Exchange. The Market Maker Plus rebate is competitive with incentives 
provided by other exchanges, and has proven to be an effective 
incentive for Market Makers to provide liquidity in Select Symbols. The 
Exchange believes that the proposed Market Maker Plus rebate is 
reasonable and equitably allocated to those members that direct orders 
to the Exchange rather than to a competing exchange. The Exchange also 
believes that the new Market Maker Plus rebate is not unfairly 
discriminatory because all Market Makers can achieve the higher rebates 
by satisfying the applicable Market Maker Plus requirements. 
Furthermore, the Exchange believes that the proposed changes to 
qualification requirements are reasonable, equitable, and not unfairly 
discriminatory as they are designed to focus attention on tighter 
quoting by Market Makers in the front two expiration months, and to a 
smaller subset of series trading within the proposed premium 
parameters, where the majority of trading volume occurs. The Exchange 
believes that these changes will encourage higher participation in the 
Market Maker Plus program, while still incentivizing market makers to 
post tighter markets in the series identified above.
2. Taker Fee for Select Symbols
    The Exchange believes that its proposal to decrease the taker fee 
for Priority Customer orders, and to increase the taker fee for Non-ISE 
Market Maker, Firm Proprietary/Broker-Dealer, and Professional Customer 
orders in Select Symbols is reasonable and equitable because the 
proposed fees are within the range of fees assessed by other exchanges 
employing similar pricing schemes. While the Exchange is proposing a 
fee increase for certain market participants, the proposed fees are 
lower, for example, than the fee for removing liquidity currently 
charged by the NASDAQ Options Market (``NOM''), which ranges from $0.47 
per contract to $0.49 per contract in penny pilot symbols.\37\
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    \37\ See NOM Rules, Chapter XV Options Pricing, Sec. 2 NASDAQ 
Options Market--Fees and Rebates.
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    The Exchange notes that with this proposed fee change, the fee 
charged to Priority Customer orders will remain lower (as it 
historically has always been) than the fee charged to other market 
participants, including Professional Customers. The Exchange believes 
that it is equitable and not unfairly discriminatory to charge a lower 
fee for Priority Customer orders than Professional Customer orders as a 
Priority Customer is by definition not a broker or 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). This limitation does not apply to participants whose 
behavior is substantially similar to that of market professionals, 
including Professional Customers, who will generally submit a higher 
number of orders (many of which do not result in executions) than 
Priority Customers. The Exchange believes that attracting more 
liquidity from Priority Customers will benefit all market participants 
that trade on the ISE.
3. Responses to Crossing Orders
    The Exchange believes that the proposed increase to fees for 
responses to Crossing Orders is reasonable, equitable, and not unfairly 
discriminatory. As proposed, the response fee will now be uniform for 
regular orders in Select and Non-Select Symbols, as well as FX Options 
Symbols, across all market participant types. As is currently the case, 
the Exchange will continue to charge a higher fee for responses to 
complex Crossing Orders in Non-Select symbols, which reflects the 
higher fees generally charged for complex orders in these symbols. The 
Exchange notes that Priority Customers will now pay a fee for responses 
to complex Crossing Orders in Non-Select Symbols, eliminating an 
incentive previously provided to Priority Customer orders in those 
symbols. The Exchange believes that this proposed change is reasonable, 
equitable, and not unfairly discriminatory as the response fee for 
complex Crossing Orders executed for Priority Customers in Non-Select 
Symbols will now be in line with the fees charged to other market 
participants, as is the case currently in Select Symbols. Furthermore, 
while Market Makers will be entitled to a lower response fee than other 
market participants for complex Crossing Orders in Non-Select Symbols, 
the Exchange believes that this is appropriate and not unfairly 
discriminatory because Market Makers have different requirements and 
obligations to the Exchange that other market participants do not (such 
as quoting requirements). The Exchange believes that it is equitable 
and not unfairly discriminatory to charge higher fees to market 
participants that do not have the requirements and obligations that 
Market Makers do.
4. PIM Fees and Break-up Rebate
    The Exchange believes that the proposed changes to PIM fees and the 
break-up rebate are reasonable, equitable, and not unfairly 
discriminatory. By increasing the break-up rebate provided for 
contracts that are submitted to PIM that do not trade with their contra 
order, and lowering fees for

[[Page 17220]]

PIM orders of one hundred or fewer contracts, the fee change is 
designed to encourage Members to execute this order flow in the PIM 
rather than on competing exchanges. In connection with this proposed 
change, the Exchange believes that it is reasonable and equitable to 
provide a significantly higher break-up rebate for complex PIM orders 
in Non-Select symbols, which reflects the higher level of fees and 
rebates generally offered for complex orders in these symbols. While 
the Exchange will now charge for all legs of complex PIM orders, the 
Exchange believes that market participants will benefit from lower 
overall fees for their PIM trades. In addition, providing a further 
discount to Members that execute a higher ADV of Priority Customer PIM 
orders will encourage Members to send additional order flow to the ISE 
in order to qualify for the reduced fees. While this incentive is 
specifically targeted towards Priority Customer orders, the Exchange 
does not believe that this is unfairly discriminatory. Priority 
Customer orders on the Exchange are generally entitled to lower or no 
fees as the Exchange believes that attracting more liquidity from 
Priority Customers will benefit all market participants that trade on 
the ISE.
5. Priority Customer Complex Order Tiers
    The Exchange believes that it is reasonable, equitable, and not 
unfairly discriminatory to decrease the volume requirements necessary 
for achieving Tier 2 Priority Customer complex order rebates as this 
proposed change is designed to attract additional Priority Customer 
complex order volume to the ISE. The Exchange already provides volume-
based tiered rebates for Priority Customer complex orders, and believes 
that lowering the volume threshold for the second tier of complex order 
rebates will incentivize Members to send additional order flow to the 
ISE in order to achieve the more attainable rebates for their Priority 
Customer complex order volume. In addition, the Exchange believes that 
it is reasonable, equitable, and not unfairly discriminatory to delete 
inapplicable footnote text as this is a non-substantive change intended 
to reduce investor confusion.
6. Credit for Responses to Flash Orders
    The Exchange believes that it is reasonable and equitable to 
decrease the Credit for Responses to Flash Orders as the higher credits 
previously offered were unsuccessful in encouraging market participants 
to respond to Flash Orders. The Exchange has recently experimented with 
higher credits,\38\ and has now determined to offer a reduced 
incentive. In addition, the Exchange believes that the proposed change 
is equitable and not unfairly discriminatory as the credit provided 
will now be the same for all Priority Customer orders in Select Symbols 
and Professional Customer Orders in Select and Non-Select symbols. The 
Exchange does not believe that the proposed change will affect the 
execution quality of Public Customer orders, which, in the absence of 
sufficient responses, will continue to be routed to the market with the 
best price in accordance with the ISE's linkage handling rules.
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    \38\ See Securities Exchange Act Release No. 70873 (November 14, 
2013), 78 FR 69714 (November 20, 2013) (SR-ISE-2013-56).
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7. ISE Gemini Name Change
    The Exchange believes that it is reasonable, equitable, and not 
unfairly discriminatory to update references to the name of its sister 
exchange as this is a non-substantive change. ISE Gemini, LLC, which 
was formerly known as the Topaz Exchange, LLC, recently filed to change 
its name, and the ISE believes that updating references to its sister 
exchange in the fee schedule will reduce investor confusion.
    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 fees and rebates 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 fees and rebates 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,\39\ 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. To the contrary, 
the Exchange believes that the proposed rule change is pro-competitive 
as it is designed to attract additional order flow to the ISE. While 
the Exchange is increasing the fees for certain market participants, 
the Exchange does not believe that this will cause an undue burden on 
competition as the increased fees are still within the range of fees 
charged by other options exchanges. The Exchange 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 to 
remain competitive with other exchanges. For the reasons described 
above, the Exchange believes that the proposed fee changes reflect this 
competitive environment.
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    \39\ 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 \40\ and subparagraph (f)(2) of Rule 19b-4 
thereunder,\41\ because it establishes a due, fee, or other charge 
imposed by ISE.
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    \40\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \41\ 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

[[Page 17221]]

     Send an Email to [email protected]. Please include 
File No. SR-ISE-2014-17 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-ISE-2014-17. 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 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-2014-17 and should be 
submitted by April 17, 2014.
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    \42\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\42\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-06759 Filed 3-26-14; 8:45 am]
BILLING CODE 8011-01-P