5824 Federal Register / Vol. 75, No. 23 / Thursday, February 4, 2010 / Notices 

9 15 U.S.C. 78s(b)(3)(A). 

10 17 CFR 240.19b–4(f)(6). 

11 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6)(iii) requires that a self-regulatory 

organization submit to the Commission written 

notice of its intent to file the proposed rule change, 

along with a brief description and text of the 

proposed rule change, at least five business days 

prior to the date of filing of the proposed rule 

change, or such shorter time as designated by the 

Commission. The Commission notes that NASDAQ 

has satisfied the five-day pre-filing notice 

requirement. 

12For purposes only of waiving the 30-day 

operative delay of this proposal, the Commission 

has considered the proposed rule’s impact on 

efficiency, competition, and capital formation. 15 

U.S.C. 78c(f). 

13For purposes of calculating the 60-day 

abrogation period, the Commission considers the 

proposed rule change to have been filed on January 

21, 2010, the date Nasdaq filed Amendment No. 1. 

14 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

necessary or appropriate in furtherance 

of the purposes of the Act, as amended. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

Written comments were neither 

solicited nor received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

change does not: (i) Significantly affect 

the protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; and (iii) become 

operative for 30 days from the date on 

which it was filed, or such shorter time 

as the Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act 9 and Rule 19b– 

4(f)(6) thereunder.10

A proposed rule change filed under 

19b–4(f)(6) normally does not become 

operative prior to 30 days after the date 

of filing. However, Rule 19b– 

4(f)(6)(iii) 11 permits the Commission to 

designate a shorter time if such action 

is consistent with the protection of 

investors and the public interest. The 

Commission believes that waiving the 

30-day operative delay is consistent 

with the protection of investors and the 

public interest. The Commission 

believes that the earlier operative date is 

consistent with the protection of 

investors and the public interest 

because the proposed rule change 

permits Nasdaq to implement the rule 

without further delay and in time for the 

operative date of FINRA’s financial 

responsibility rules.12

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission may summarily abrogate 

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.13

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change, as amended, 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 e-mail to rulecomments@sec.gov. Please include File 

Number SR–NASDAQ–2001–004 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–NASDAQ–2010–009. This 

file number should be included on the 

subject line if e-mail 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 inspection and copying in 

the Commission’s Public Reference 

Room on official business days between 

the hours of 10 a.m. and 3 p.m. Copies 

of such filing also will be available for 

inspection and copying at the principal 

offices 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–NASDAQ–2010–009, and 

should be submitted on or before 

February 25, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–2331 Filed 2–3–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–61433; File No. SR–ISE– 

2010–04] 

Self-Regulatory Organizations; 

International Securities Exchange, 

LLC; Notice of Filing and Immediate 

Effectiveness of Proposed Rule 

Change To Correct Inconsistencies in 

Certain Execution Rules 

January 27, 2010. 

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 

13, 2010, 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to correct 

inconsistencies in certain of its 

execution rules. 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 


srobinson on DSKHWCL6B1PROD with NOTICES
Federal Register / Vol. 75, No. 23 / Thursday, February 4, 2010 / Notices 5825 

3Securities Exchange Act Release No. 59287 

(January 23, 2009), 74 FR 5694 (January 30, 2009). 

4Reserve orders are limit orders that contain both 

a displayed portion and a non-displayed portion. 

The entire size of a displayed price (including 

Priority Customer Orders, Professional Orders, and 

market maker quotes) is executed in full before any 

portion of the non-displayed portion of a reserve 

order. See ISE Rule 713(c) and ISE Rule 715(g)5. 

5Under ISE Rule 717(d) and (e), members are 

required to expose trading interest to the market 

before executing agency orders as principal or 

before executing agency orders against orders that 

were solicited from other broker-dealers (i.e., 

proprietary and solicited crossing transactions). 

However, the ISE options rules do not contain any 

limitations or exposure requirements regarding the 

execution of customer orders against other customer 

orders. Customer Cross Orders was adopted to 

provide a way to enter opposing customer orders 

using a single order type that protected customer 

orders on the book. See Securities Exchange Act 

Release No. 60253 (July 7, 2009), 74 FR 34063 (July 

14, 2009). While only Priority Customers will be 

permitted to be executed using the Customer Cross 

Order under the proposed rule change, Rule 717(d) 

continues to allow the execution of all Public 

Customer Orders against other Public Customer 

Orders without an exposure period. 

Communication between Samir Patel, Assistant 

General Counsel, ISE and Ira Brandriss, Special 

Counsel, Division of Trading and Markets, 

Commission, on January 26, 2010. Members may 

continue to enter two Public Customer orders on 

the exchange with the intent to cross them without 

the use of the Customer Cross Order type. 

6 15 U.S.C. 78s(b)(3)(A). 

7 17 CFR 240.19b–4(f)(6). 

8Pursuant to Rule 19b–4(f)(6)(iii), the Exchange 

gave the Commission written notice of its intent to 

file the proposed rule change, along with a brief 

description and text of the proposed rule change, 

at least five business days prior to the date on 

which the Exchange filed the proposed rule change. 

See 17 CFR 240.19b–4(f)(6)(iii). 

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 

In January 2009,3 the Exchange 

received Commission approval of a rule 

change to give certain non-broker-dealer 

orders (identified as Professional 

Orders) the priority given broker-dealer 

orders and market maker quotes rather 

than the priority given all public 

customer orders. Those public 

customers who continue to receive 

priority in the execution algorithm are 

called Priority Customers under the rule 

change. The rule change uniformly 

changed the execution priority in each 

of the Exchange’s execution rules as 

they existed in January 2009. After 

reviewing its execution rules, the 

Exchange has identified three 

inconsistencies with the Priority 

Customer priority execution rules. 

Accordingly, the Exchange proposes to 

amend these execution rules to be 

consistent with what is now the 

standard execution algorithm: 

(i) Rule 715(g) regarding Reserve 

Orders. The proposed change clarifies 

that the execution of the displayed 

portion of a Reserve Order will follow 

the standard priority rules that now 

provide priority only to Priority 

Customers.4

(ii) Rule 715(i) and Rule 721(a) 

regarding Customer Cross Orders. A 

Customer Cross Order is currently 

defined as a Public Customer order to 

buy and a Public Customer order to sell, 

and such orders are not permitted to 

trade at the same price as Public 

Customers on the book. Since only 

Priority Customer Orders receive 

priority, the proposed change narrows 

the definition of a Customer Cross Order 

to Priority Customers only and specifies 

that such orders cannot be executed at 

the same price as Priority Customer 

Orders.5

(iii) Rule 803, Supplementary 

Material .02 regarding flash orders. 

Execution of a flash order when the ISE 

BBO changes during the exposure 

period to a price that matches against 

the order being flashed is according to 

the standard priority rules that now 

provide priority only to Priority 

Customers. 

The Exchange also proposes to delete 

a provision from Rule 721 regarding 

Customer Cross Orders that was related 

to a block exemption from the old 

linkage rules that does not now exist 

under the distributive linkage plan. 

2. Statutory Basis 

The basis under the Securities 

Exchange Act of 1934 (‘‘Exchange Act’’) 

for this proposed rule change is the 

requirement under Section 6(b)(5) that 

an exchange have rules that are 

designed to promote just and equitable 

principles of trade, and to remove 

impediments to and perfect the 

mechanism for a free and open market 

and a national market system, and in 

general, to protect investors and the 

public interest. In particular, the 

proposal corrects inconsistencies in the 

Exchange’s rules. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The proposed rule change does not 

impose any burden on competition that 

is not necessary or appropriate in 

furtherance of the purposes of the Act. 

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 

Because the foregoing proposed rule 

change does not (1) significantly affect 

the protection of investors or the public 

interest; (2) impose any significant 

burden on competition; and (3) become 

operative for thirty days from the date 

on which it was filed, or such shorter 

time as the Commission may designate 

if consistent with the protection of 

investors and the public interest, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act 6 and Rule 

19b–4(f)(6) 7 thereunder.8

At any time within 60 days of the 

filing of such proposed rule change, the 

Commission may summarily abrogate 

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. 

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 e-mail to rulecomments@sec.gov. Please include File 

Number SR–ISE–2010–04 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–2010–04. This file 

number should be included on the 

subject line if e-mail 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 


srobinson on DSKHWCL6B1PROD with NOTICES
5826 Federal Register / Vol. 75, No. 23 / Thursday, February 4, 2010 / Notices 

9The text of the proposed rule change is available 

on ISE’s Web site at http://www.ise.com, on the 

Commission’s Web site at http://www.sec.gov, at 

ISE, and at the Commission’s Public Reference 

Room. 

10 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3Amendment No. 2 deleted a sentence in the 

purpose section of the filing and in Exhibit 1. 

4See Exchange Act Release No. 59287 (Jan. 23, 

2009), 74 FR 5694 (Jan. 30, 2009). 

submission,9 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 inspection and copying in 

the Commission’s Public Reference 

Room, 100 F Street, NE., Washington, 

DC 20549, on official business days 

between the hours of 10 a.m. and 3 p.m. 

Copies of the 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–2010–04 and should be 

submitted on or before February 25, 

2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.10

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–2333 Filed 2–3–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–61434; File No. SR–ISE– 

2010–06] 

Self-Regulatory Organizations; 

International Securities Exchange, 

LLC; Notice of Filing and Immediate 

Effectiveness of Proposed Rule 

Change, as Modified by Amendment 

No. 2 Thereto, Relating to Fee Changes 

January 27, 2010. 

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 

14, 2010, 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. On January 27, 2010, ISE 

filed Amendment No. 1 to the proposed 

rule change. On January 27, 2010, ISE 

withdrew Amendment No. 1 and filed 

Amendment No. 2 to the proposed rule 

change.3 The Commission is publishing 

this notice to solicit comments on the 

proposed rule change from interested 

persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The ISE is proposing 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 

ISE proposes to amend its Schedule of 

Fees. Specifically, the Exchange 

proposes to adopt a $0.20 per contract 

execution fee for professional customers 

who execute orders as a result of posting 

liquidity to ISE’s order book. 

ISE recently adopted a rule change to 

distinguish between Priority Customer 

Orders and Professional Orders.4 A 

Priority Customer is defined in ISE Rule 

100(a)(37A) as a person or entity that is 

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). A Professional Order is 

defined in ISE Rule 100(a)(37C) as an 

order that is for the account of a person 

or entity that is not a Priority Customer. 

For purpose of this discussion, 

‘‘professional customers’’ are nonbroker/dealer participants who enter at 

least 390 orders per day on average 

during a calendar month for their own 

beneficial account(s). The level of 

trading activity by professional 

customers more resembles that of 

market makers and proprietary traders 

on the Exchange than it does of other 

customers. 

Currently, the primary distinction 

between the two types of customers is 

that Priority Customers take priority on 

the order book over professional 

customers. Professional customers are 

on parity with market makers and 

broker/dealers. However, professional 

customers generally do not pay 

transaction fees. Market makers and 

broker/dealers on the other hand pay 

transaction fees to the Exchange. 

Specifically, for market makers, the 

Exchange applies a sliding scale, 

between $0.01 and $0.18 per contract 

side, based on the number of contracts 

an ISE market maker trades in a month. 

Broker/dealer orders pay a flat 

execution fee of $0.20 per traded 

contract, regardless of whether they post 

liquidity to or take liquidity from ISE’s 

order book when they enter orders. 

Broker/dealer fees are posted on the 

Exchange’s fee schedule under the Firm 

Proprietary line item. 

The Exchange now proposes to adopt 

a $0.20 per contract execution fee for 

professional customers who execute 

orders as a result of posting liquidity to 

ISE’s order book. The proposed fee 

applies only to professional customer 

orders, i.e., non-broker/dealer customer 

orders; it does not apply to market 

maker and broker/dealer orders who, as 

noted above, already pay transaction 

fees. 

As discussed, professional customers 

engage in trading activity similar to that 

conducted by market makers and 

proprietary traders. For example, 

professional customers continue to join 

bids and offers on the Exchange and 

thus compete for incoming order flow. 

Professional customers do so in direct 

competition with ISE’s market makers, 

but with the distinct advantage of 

generally not paying transaction fees to 

the Exchange. ISE believes that adopting 

a ‘‘maker fee’’ for professional customers 

will put these market participants on a 

more equal footing with market makers 

and proprietary traders regarding fees 

paid for transacting on the Exchange. 

The Exchange further notes that the 

proposed fees, while comparable to fees 

currently paid by broker/dealer orders, 

are less than those fees as the Exchange 

is only proposing to charge professional 

customers who execute orders as a 

result of posting liquidity to ISE’s order 


srobinson on DSKHWCL6B1PROD with NOTICES