Document ID: SEC-2009-1442-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Fee Changes
Posted Date: 2009-10-08T04:00Z

[Federal Register: October 8, 2009 (Volume 74, Number 194)]
[Notices]               
[Page 51901-51902]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08oc09-96]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60767; File No. SR-ISE-2009-67]

 
Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change Relating to Fee Changes

October 1, 2009.
    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 September 25, 2009, 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 is proposing to amend its Schedule of Fees to change its 
Competitive Market Maker (``CMM'') Inactivity Fee. 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 currently charges the owner \3\ of a CMM membership an 
Inactivity Fee of $5,000 a month per trading right, with a cap of 
$25,000 on a per-firm basis,\4\ if the owner does not (i) itself 
operate the CMM membership, (ii) lease the CMM trading right to another 
member which operates the CMM membership, or (iii) avail itself to one 
of the exemptions specifically authorized in the Notes to the CMM 
Inactivity Fee on the Schedule of Fees. The CMM Inactivity Fee was

[[Page 51902]]

adopted by the Exchange in 2002 \5\ at a time when there was 
significant demand for CMM memberships and some owners were holding 
onto inactive memberships. The purpose of the CMM Inactivity Fee has 
always been to promote greater trading activity on the Exchange.
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    \3\ The Note to the CMM Inactivity Fee on the Schedule of Fees 
provides that the fee applies to the owner of the CMM membership, 
unless the inactive CMM membership is subject to a lease that was 
approved by the Exchange prior to the effective date of the fee, in 
which case the fee would apply to the lessee.
    \4\ A firm that owns five or more inactive CMMs would pay the 
$25,000 maximum fee.
    \5\ See Securities Exchange Act Release No. 46272 (July 26, 
2002); 67 FR 50497 (August 2, 2002).
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    The Exchange subsequently lowered this fee because, in the 
Exchange's opinion, the circumstances that lead to the enactment of the 
fee no longer existed to the same degree they did in 2002.\6\ For one 
thing, the demand for trading rights had waned. There were a number of 
other reasons that were taken into consideration by the Exchange when 
it lowered this fee.\7\ With the demand for CMM trading rights now much 
greater, the Exchange proposes to reinstitute the original fee. 
Specifically, the Exchange proposes to increase the fee to $25,000 per 
month per trading right and to eliminate the current cap. The Exchange 
believes that anything short of full utilization of its trading rights 
has adverse consequences. Not only does the Exchange lose fee revenues 
that these trading rights would generate, the ISE market place loses 
liquidity that additional market making would provide. Further, since 
this fee was reduced in 2006, the Exchange has relaxed quoting 
requirements applicable to CMMs thus making the operation of these 
trading rights more manageable.\8\
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    \6\ See Securities Exchange Act Release No. 53223 (February 3, 
2006); 71 FR 7098 (February 10, 2006).
    \7\ Id.
    \8\ See Securities Exchange Act Release No. 59066 (December 8, 
2008), 73 FR 76080 (December 15, 2008).
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    The options industry has grown exponentially over the last few 
years with exchanges notching record trading volumes. The increased 
trading volume has resulted in additional lost revenue for the Exchange 
because all of its trading rights are not fully utilized. ISE believes 
the proposed fee change will allow the Exchange to recoup some lost 
revenue.\9\ This proposed fee change will be operative on October 1, 
2009.
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    \9\ ISE represents that it based the amount of the fee on a 
conservative estimate of the revenues lost for an inactive CMM. ISE 
notes that the amount of the proposed fee is the same as the amount 
that ISE previously assessed to an inactive CMM. See e-mail from 
Samir Patel, Assistant General Counsel, Exchange, to Nicholas 
Shwayri, Law Clerk, Division of Trading and Markets, Commission 
dated September 30, 2009.
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    Also, as a matter of ``housekeeping,'' the Exchange proposes to 
replace certain language in the Notes to the CMM Inactivity Fee with 
language that accurately reflects CMM memberships as trading rights.
2. Statutory Basis
    The basis under the Securities Exchange Act of 1934 (the ``Exchange 
Act'') for this proposed rule change is the requirement under Section 
6(b)(4) that an exchange have an equitable allocation of reasonable 
dues, fees and other charges among its members and other persons using 
its facilities. In particular, the proposed fee change will allow the 
Exchange to recoup lost revenue because its trading rights are not 
being fully utilized.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3) of the Act \10\ and Rule 19b-4(f)(2) \11\ thereunder. 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.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 19b-4(f)(2).
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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 rule-comments@sec.gov. Please include 
File Number SR-ISE-2009-67 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-2009-67. 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, 100 F Street, NE., 
Washington, DC 20549, 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 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 publicly available. All 
submissions should refer to File Number SR-ISE-2009-67 and should be 
submitted on or before October 29, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-24261 Filed 10-7-09; 8:45 am]

BILLING CODE 8011-01-P