Federal Register / Vol. 74, No. 101 / Thursday, May 28, 2009 / Notices 25593 

54 15 U.S.C. 78s(b)(2). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 59679 

(April 1, 2009), 74 FR 15795 (‘‘Notice’’). 

4A ‘‘distributor’’ will be defined as any firm that 

receives an ISE data feed directly from ISE or 

indirectly through a ‘‘redistributor’’ and then 

distributes it either internally or externally. ISE 

proposes that all distributors execute an ISE 

distributor agreement. ‘‘Redistributors’’ will include 

market data vendors and connectivity providers 

such as extranets and private network providers. 

5A ‘‘controlled device’’ is defined as any device 

that a distributor of the ISE Depth of Market permits 

to access the information in the Depth of Market 

offering. 

6 In differentiating between a ‘‘Non-Professional 

Subscriber’’ and a ‘‘Professional Subscriber,’’ ISE 

will apply the same criteria for qualification as in 

the Consolidated Tape Association Plan (‘‘CTA 

Plan’’) and the Consolidated Quotation Plan (‘‘CQ 

Plan’’). 

7 In approving this proposal, the Commission has 

considered the proposed rule’s impact on 

efficiency, competition, and capital formation. See 

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

8 15 U.S.C. 78f(b)(4). 

9 15 U.S.C. 78f(b)(5). 

10U.S.C. 78f(b)(8). 

11See Securities Exchange Act Release No. 59039 

(December 2, 2008), 73 FR 74770 (December 9, 

2008) (SR–NYSEArca–2006–21) (‘‘NYSE Arca 

Order’’). 

12 Id. at 74771. 

13 Id. at 74782. 

14 Id. at 74781. 

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–FINRA–2009–012 and 

should be submitted on or before June 

18, 2009. 

V. Conclusion 

For the foregoing reasons, pursuant to 

Section 19(b)(2) of the Act,54 the 

Commission finds good cause to 

approve the proposed rule change on an 

accelerated basis. 

It is hereby ordered, pursuant to 

Section 19(b)(2) of the Act, that the 

proposed rule change (SR–FINRA– 

2009–012) be, and it hereby is, approved 

on an accelerated basis to establish an 

interim pilot program expiring on 

September 25, 2009. 

By the Commission. 

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. E9–12342 Filed 5–27–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59949; File No. SR–ISE– 

2007–97] 

Self-Regulatory Organizations; 

International Securities Exchange, 

LLC; Order Approving Proposed Rule 

Change, as Modified by Amendment 

No. 1, Relating to Market Data Fees 

May 20, 2009. 

I. Introduction 

On October 5, 2007, International 

Securities Exchange, LLC (the 

‘‘Exchange’’ or ‘‘ISE’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Act’’) 1 and Rule 19b–4 

thereunder,2 a proposed rule change to 

establish fees for a real-time depth of 

market data offering. On March 9, 2009, 

the Exchange filed Amendment No. 1 to 

the proposed rule change. The proposed 

rule change, as modified by Amendment 

No. 1, was published for comment in 

the Federal Register on April 7, 2009.3

The Commission received no comments 

on the proposal. This order approves the 

proposed rule change, as modified by 

Amendment No. 1. 

II. Description of the Proposal 

The Exchange currently produces and 

provides free of charge a data feed that 

contains the aggregate bid and offer size 

available at the first five price levels on 

ISE’s limit order book, the ISE Depth of 

Market Data Feed (‘‘Depth of Market’’). 

The Depth of Market feed includes nonmarketable orders and quotes that are 

displayed, and is distributed in real 

time. 

ISE has proposed to establish fees for 

its Depth of Market product. ISE will 

make this product available to members 

and non-members, and to professional 

and non-professional subscribers. 

Specifically, the Exchange proposes to 

charge distributors of Depth of Market 

$5,000 per month.4 In addition, the 

Exchange proposes to charge each 

distributor a monthly fee per controlled 

device 5 of $50 per controlled device for 

Professionals (for internal use or 

external redistribution through a 

controlled device) and $5 per controlled 

device for Non-Professionals who 

receive the data from a distributor 

through a controlled device.6 ISE 

proposes to cap the monthly maximum 

amount of fees payable by a distributor 

at $7,500 for Professionals where the 

data is for internal use only; $12,500 for 

Professionals where the data is 

redistributed externally; and $10,000 for 

Non-Professionals who receive the data 

from a distributor. The Exchange 

proposes to charge distributors a flat fee 

of $1,000 for the first month after 

connectivity has been established 

between ISE and the distributor. 

Further, the Exchange proposes to waive 

all user fees during this one month 

period. 

III. Discussion 

After careful review, the Commission 

finds that the proposed rule change is 

consistent with the Act and the rules 

and regulations thereunder applicable to 

a national securities exchange.7 In 

particular, the Commission finds that 

the proposed rule change is consistent 

with Section 6(b)(4) of the Act,8 which 

requires that the rules of a national 

securities exchange provide for the 

equitable allocation of reasonable dues, 

fees, and other charges among its 

members and issuers and other parties 

using its facilities, and Section 6(b)(5) of 

the Act,9 which requires, among other 

things, that the rules of an exchange be 

designed to promote just and equitable 

principles of trade, to remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general, to protect investors and the 

public interest, and not be designed to 

permit unfair discrimination between 

customers, issuers, brokers, or dealers. 

The Commission also finds that the 

proposed rule change is consistent with 

Section 6(b)(8) of the Act 10 in that it 

does not impose any burden on 

competition not necessary or 

appropriate in furtherance of the 

purposes of the Act. 

The Commission has reviewed the 

proposal using the approach set forth in 

the NYSE Arca Order for non-core 

market data fees.11 In the NYSE Arca 

Order, the Commission stated that 

‘‘when possible, reliance on competitive 

forces is the most appropriate and 

effective means to assess whether the 

terms for the distribution of non-core 

data are equitable, fair and reasonable, 

and not unreasonably 

discriminatory.’’ 12 It noted that the 

‘‘existence of significant competition 

provides a substantial basis for finding 

that the terms of an exchange’s fee 

proposal are equitable, fair, reasonable, 

and not unreasonably or unfairly 

discriminatory.’’ 13 If an exchange ‘‘was 

subject to significant competitive forces 

in setting the terms of a proposal,’’ the 

Commission will approve a proposal 

unless it determines that ‘‘there is a 

substantial countervailing basis to find 

that the terms nevertheless fail to meet 

an applicable requirement of the 

Exchange Act or the rules 

thereunder.’’ 14

25594 Federal Register / Vol. 74, No. 101 / Thursday, May 28, 2009 / Notices 

15 Id. at 74779. 

16See Plan for Reporting of Consolidated Options 

Last Sale Reports and Quotation Information 

(‘‘OPRA Plan’’), Sections V(a)–(c). 

17See NYSE Arca Order, supra, note 11, at 74779. 

18 Id. 

19 Id. 

20See generally Concept Release: Competitive 

Developments in the Options Markets, Securities 

Exchange Act Release No. 49175 (February 3, 2004), 

69 FR 6124 (February 9, 2004); see also Battalio, 

Robert, Hatch, Brian, and Jennings, Robert, Toward 

a National Market System for U.S. Exchange-listed 

Equity Options, The Journal of Finance 59 (933– 

961); De Fontnouvelle, Patrick, Fishe, Raymond P., 

and Harris, Jeffrey H., The Behavior of Bid-Ask 

Spreads and Volume in Options Markets During the 

Competition for Listings in 1999, The Journal of 

Finance 58 (2437–2463); and Mayhew, Stewart, 

Competition, Market Structure, and Bid-Ask 

Spreads in Stock Option Markets, The Journal of 

Finance 57 (931–958). 

21See, e.g. , Securities Exchange Act Release Nos. 

55162 (January 24, 2007), 72 FR 4738 (February 1, 

2007) (SR–Amex–2006–106); 55073 (January 9, 

2007), 72 FR 4741 (February 1, 2007) (SR–BSE– 

2006–48); 55154 (January 23, 2007), 72 FR 4743 

(February 1, 2007) (SR–CBOE–2006–92); 55161 

(January 24, 2007), 72 FR 4754 (February 1, 2007) 

(SR–ISE–2006–62); 55156 (January 23, 2007), 72 FR 

4759 (February 1, 2007) (SR–NYSEArca–2006–73); 

and 55153 (January 23, 2007), 72 FR 4553 (January 

31, 2007) (SR–Phlx–2006–74). 

22 In its filing, ISE states that ‘‘the options 

exchanges compete vigorously for order flow,’’ and 

that ‘‘ISE currently competes with six other options 

exchanges for order flow and ‘the competition is 

fierce’.’’ See Notice, supra note 3, at 15797. 

23 ISE states in its filing that ‘‘[i]n order for ISE 

to maintain its market share, it must compete 

vigorously for order flow.’’ Id. 

24See id. 

25 In its filing, ISE notes that despite frequent 

variations in market share, no single exchange has 

more than approximately one-third market share. It 

As noted in the NYSE Arca Order, the 

standards in Section 6 of the Act do not 

differentiate between types of data and 

therefore apply to exchange proposals to 

distribute both core data and non-core 

data.15 All U.S. options exchanges are 

required pursuant to the OPRA Plan to 

provide ‘‘core data’’—the best-priced 

quotations and comprehensive last sale 

reports—to OPRA, which data is then 

distributed to the public pursuant to the 

OPRA Plan.16 In contrast, individual 

exchanges and other market participants 

distribute non-core data voluntarily.17

The mandatory nature of the core data 

disclosure regime leaves little room for 

competitive forces to determine 

products and fees.18 Non-core data 

products and their fees are, by contrast, 

much more sensitive to competitive 

forces. The Commission therefore is able 

to rely on competitive forces in its 

determination of whether an exchange’s 

proposal to distribute non-core data 

meets the standards of Section 6.19

Because ISE’s instant proposal relates 

to the distribution of non-core data, the 

Commission will apply the marketbased approach set forth in the NYSE 

Arca Order. Pursuant to this approach, 

the first step is to determine whether 

ISE was subject to significant 

competitive forces in setting the terms 

of its non-core market data proposal, 

including the level of any fees. As in the 

Commission’s NYSE Arca Order, in 

determining whether ISE was subject to 

significant competitive forces in setting 

the terms of its proposal, the 

Commission has analyzed ISE’s 

compelling need to attract order flow 

from market participants, and the 

availability to market participants of 

alternatives to purchasing ISE’s noncore market data. 

The Commission believes that the 

options industry currently is subject to 

significant competitive forces. It is 

generally accepted that the start of widespread multiple listing of options across 

exchanges in August 1999 greatly 

enhanced competition among the 

exchanges.20 The launch of three new 

options exchanges since that time, 

numerous market structure innovations, 

and the start of the options penny 

pilot 21 have all further intensified 

intermarket competition for order flow. 

ISE currently competes with six other 

options exchanges for order flow.22

Attracting order flow is an essential part 

of ISE’s competitive success.23 If ISE 

cannot attract order flow to its market, 

it will not be able to execute 

transactions. If ISE cannot execute 

transactions on its market, it will not 

generate transaction revenue. If ISE 

cannot attract orders or execute 

transactions on its market, it will not 

have market data to distribute, for a fee 

or otherwise, and will not earn market 

data revenue and thus not be 

competitive with other exchanges that 

have this ability. In its filing, ISE 

provided market share data for the 

seven options exchanges over a two year 

period from 2006 through 2008:24

The market share percentages in this 

chart strongly indicate that ISE must 

compete vigorously for order flow to 

maintain its share of trading volume. 

This compelling need to attract order 

flow imposes significant pressure on ISE 

to act reasonably in setting its fees for 

ISE market data, particularly given that 

the market participants that will pay 

such fees often will be the same market 

participants from whom ISE must attract 

order flow. These market participants 

include broker-dealers that control the 

handling of a large volume of customer 

and proprietary order flow. Given the 

portability of order flow from one 

exchange to another, any exchange that 

sought to charge unreasonably high data 

fees would risk alienating many of the 

same customers on whose orders it 

depends for competitive survival.25


EN28MY09.024</GPH>
Federal Register / Vol. 74, No. 101 / Thursday, May 28, 2009 / Notices 25595 

further states that, given the current competitive 

pressures in the option industry, no exchange can 

take any of its share of trading for granted. ISE 

states that, in order for it to maintain its market 

share, it must compete vigorously for order flow, 

and that given the portability of order flow from one 

exchange to another, a pricing misstep can easily 

result in loss of order flow, customers and, 

ultimately, revenue. See id. 

26See id. ISE represents that as of March 9, 2009, 

of the more than 2,000 underlying securities whose 

options are traded on ISE, 41 products are singly 

listed on ISE, which collectively represent less than 

.02 percent of ISE’s total contract volume. Of those 

41 products, 16 are proprietary ISE index options, 

all of which are available for licensing by ISE to any 

other exchange, four are index options that ISE has 

non-exclusively licensed from index providers and 

that are available to other exchanges to license, 10 

are options on Exchange Traded Funds that other 

exchanges have chosen not to list, and the 

remaining 11 products are equity options that either 

the other exchanges have chosen not to list or are 

in the process of being de-listed and thus are 

available for closing only transactions on ISE. 

ISE further notes that when another exchange has 

shown an interest in trading a proprietary ISE 

product, the Exchange has licensed the trading in 

that product to the other exchange. For example, 

ISE represents that NYSE Arca recently signed a 

license agreement with ISE to list and trade ISE’s 

foreign currency options, and that this ISE 

proprietary product is now multiply listed. ISE 

states that it is ready, willing, and able to license 

its proprietary index products for trading on other 

exchanges on commercially reasonable terms. See 

id. at 15797 to 15798. 

27See NYSE Arca Order, supra note 11, at 74784. 

28See id. at 74783. 

29 Id. 30 Id. Information on transactions executed on ISE 

is available through OPRA. 31See Notice, supra note 3, at 15798. 32 In reaching its conclusion in the NYSE Arca 

Order, the Commission noted that the fact that 95% 

of the professional users of Nasdaq core data (where 

Nasdaq has a substantial market share in Nasdaqlisted stocks) choose not to purchase Nasdaq’s 

depth-of-book market data strongly suggests that no 

exchange has monopoly pricing for its depth-ofbook order data. See NYSE Arca Order, supra note 

11, at 74785. 

33The Commission stated in the NYSE Arca 

Order that broker-dealers are not required to obtain 

depth-of-book order data to meet their duty of best 

execution. See id. at 74788 for a more detailed 

discussion. Likewise, the Commission does not 

view obtaining depth-of-book data as a necessary 

prerequisite to broker-dealers satisfying the duty of 

best execution with respect to the trading of 

standardized options. 

34The Commission notes that the CTA 

participants’ fees have long provided for a lower fee 

for non-professional subscribers, and that the fees 

approved by the Commission in the NYSE Arca 

Order also provided for lower fees for nonprofessional subscribers. See NYSE Arca Order, 

supra note 11, at 74772. 

35 15 U.S.C. 78s(b)(2). 

36 17 CFR 200.30–3(a)(12). 

ISE currently trades options on 16 

proprietary index products that are not 

traded on any other exchange. ISE 

represents that these 16 options 

currently represent less than 0.02% of 

ISE’s total contract volume.26 The 

Commission believes that, given the 

small percentage of ISE’s total contract 

volume represented by these 16 

products, the inclusion of data on these 

products in ISE’s Depth of Market 

product will not confer market power 

on ISE to compel market participants to 

purchase the entire ISE data feed. The 

Commission therefore believes that the 

inclusion of depth-of-book data for these 

products in ISE’s Depth of Market 

product does not undermine the finding 

that ISE was subject to significant 

competitive forces in setting the terms 

of its proposal. 

In addition to the need to attract order 

flow, the availability of alternatives to 

ISE’s Depth of Market product 

significantly affect the terms on which 

ISE can distribute this market data.27 In 

setting the fees for its Depth of Market 

product, ISE must consider the extent to 

which market participants would 

choose one or more alternatives instead 

of purchasing its data.28 The most basic 

source of information concerning the 

depth generally available at an exchange 

is the complete record of an exchange’s 

transactions that is provided in the core 

data feeds.29 In this respect, the core 

data feeds that include an exchange’s 

own transaction information are a 

significant alternative to the exchange’s 

market data product.30 Further, other 

options exchanges can produce their 

own depth of market data products, and 

thus are sources of potential 

competition for ISE. In addition, one or 

more securities firms could act 

independently and distribute their own 

order data, with or without a fee. 

ISE states in it is filings that of the 

nearly 200 firms that are members of the 

Exchange, less than 15 percent currently 

access the Depth of Market product, 

which the Exchange has been offering at 

no cost.31 The fact that many of ISE’s 

own members did not choose to access 

the Depth of Market product even when 

there was no cost for doing so strongly 

suggests that ISE does not have 

monopoly pricing power for its Depth of 

Market product.32

The Commission believes that there 

are a number of alternative sources of 

information that impose significant 

competitive pressures on ISE in setting 

the terms for distributing its Depth of 

Market product. The Commission 

believes that the availability of those 

alternatives, as well as ISE’s compelling 

need to attract order flow, imposed 

significant competitive pressure on ISE 

to act equitably, fairly, and reasonably 

in setting the terms of its proposal.33

Because ISE was subject to significant 

competitive forces in setting the terms 

of the proposal, the Commission will 

approve the proposal in the absence of 

a substantial countervailing basis to find 

that the terms of the proposal fail to 

meet the applicable requirements of the 

Act or the rules thereunder. The 

Commission did not receive any 

comments on the terms of the proposal. 

Further, an analysis of the proposal does 

not provide such a basis. The 

Commission notes that the per 

controlled device fees as proposed will 

be the same for all Professional 

subscribers ($50) and the same for all 

Non-Professional subscribers ($5). The 

fees therefore do not unreasonably 

discriminate among types of 

subscribers, such as by favoring 

participants in the ISE market or 

penalizing participants in other 

markets.34

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,35 that the 

proposed rule change, as amended (SR– 

ISE–2007–97), be, and hereby is, 

approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.36

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–12357 Filed 5–27–09; 8:45 am] 

BILLING CODE 8010–01–P 

DEPARTMENT OF STATE 

[Public Notice 6640] 

Bureau of Educational and Cultural 

Affairs (ECA) Request for Grant 

Proposals: Critical Language 

Scholarships for Intensive Summer 

Institutes 

Announcement Type: New 

Cooperative Agreements. 

Funding Opportunity Number: ECA/ 

A/E–10–01. 

Catalog of Federal Domestic 

Assistance Number: 00.000. 

Key Dates: 

Application Deadline: July 10, 2009. 

Executive Summary: The Office of 

Academic Exchange Programs of the 

Bureau of Educational and Cultural 

Affairs announces an open competition 

for two or more assistance awards for 

the 2010 Critical Language Scholarships 

for Intensive Summer Institutes, which 

provide foreign language instruction 

overseas for American undergraduate 

and graduate students. Public and 

private non-profit organizations, or 

consortia of such organizations, meeting 

the provisions described in Internal 

Revenue Code section 26 U.S.C. 

501(c)(3), may submit proposals to 

cooperate with the Bureau in the 

administration and implementation of 

one or both of the two components