Document ID: SEC-2011-0312-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2011-03-08T05:00Z

[Federal Register Volume 76, Number 45 (Tuesday, March 8, 2011)]
[Notices]
[Pages 12778-12780]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-5186]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64012; File No. SR-ISE-2011-11]

Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change Relating to a Market Maker Incentive Plan for Foreign Currency 
Options

March 2, 2011.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on February 22, 2011, the International Securities Exchange, LLC 
(the ``Exchange'' or the ``ISE'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change, as 
described in Items I and II 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 incentive plan for market makers 
in foreign currency (``FX'') options. Specifically, ISE proposes to add 
six currently listed FX options to the incentive plan. 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, on the 
Commission's Web site at http://www.sec.gov, 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 this proposed rule change is to amend the Exchange's 
incentive plan for market makers in FX options. The Exchange currently 
has an incentive plan for FX options that was initially adopted on 
August 3, 2009 for the following three FX options: the New Zealand 
dollar (``NZD''), the Mexican peso (``PZO''), the Swedish krona 
(``SKA'').\3\ The Exchange subsequently added the Brazilian real 
(``BRB'') to the incentive plan.\4\ The Exchange now proposes to add 
the following FX options to the incentive plan: the Australian dollar 
(``AUX''), the British pound (``BPX''), the Canadian dollar (``CDD''), 
the euro (``EUI''), the Japanese yen (``YUK'') and the Swiss franc 
(``SFC'').\5\ Market makers will be able to enter into the incentive 
plan until March 31, 2011.\6\
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    \3\ See Securities Exchange Act Release No. 60536 (August 19, 
2009) [sic], 74 FR 43204 (August 26, 2009) (SR-ISE-2009-59).
    \4\ See Securities Exchange Act Release No. 61459 (January 19, 
2010), 75 FR 6248 (February 8, 2010) (SR-ISE-2010-07).
    \5\ The Commission previously approved the trading of options on 
AUX, BPX, CDD, EUI, YUK and SFC. See Securities Exchange Act Release 
No. 55575 (April 3, 2007), 72 FR 17963 (April 10, 2007) (SR-ISE-
2006-59).
    \6\ See Securities Exchange Act Release No. 63639 (January 4, 
2011), 76 FR 1488 (January 10, 2011) (SR-ISE-2010-121).
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    Options on AUX, BPX, CDD, EUI, YUK and SFC began trading on the 
Exchange on April 17, 2007. Until now, the market maker currently 
appointed to these FX options has been trading these products without 
the benefit of the privileges afforded by the incentive plan. The 
Exchange notes that competition between exchanges that trade like 
products, in this case, the World Currency Options traded on NASDAQ OMX 
PHLX, Inc., [sic] has intensified. In order to promote the continued 
growth and trading in these products, the Exchange now proposes to add 
AUX, BPX, CDD, EUI, YUK and SFC to the incentive plan, effective March 
1, 2011.
    Participants in the incentive plan are known on the Exchange's 
Schedule of Fees as Early Adopter Market Makers. Under the incentive 
plan, the Exchange waives the applicable transaction fees for both the 
Early Adopter FXPMM \7\

[[Page 12779]]

and all Early Adopter FXCMMs \8\ that make a market in AUX, BPX, CDD, 
EUI, YUK and SFC for as long as the incentive plan is in effect. 
Further, pursuant to a revenue sharing agreement entered into between 
an Early Adopter Market Maker and ISE, the Exchange pays the Early 
Adopter FXPMM forty percent (40%) of the transaction fees collected on 
any customer trade in AUX, BPX, CDD, EUI, YUK and SFC and pays up to 
ten (10) Early Adopter FXCMMs that participate in the incentive plan 
twenty percent (20%) of the transaction fees collected for trades 
between a customer and that FXCMM. Market makers that do not 
participate in the incentive plan are charged regular transaction fees 
for trades in these products.
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    \7\ A FXPMM is a primary market maker selected by the Exchange 
that trades and quotes in FX Options only. See ISE Rule 2213.
    \8\ A FXCMM is a competitive market maker selected by the 
Exchange that trades and quotes in FX Options only. See ISE Rule 
2213.
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    The Exchange currently charges an execution fee of $0.40 per 
contract for all Public Customer Orders \9\ in options on AUX, BPX, 
CDD, EUI, YUK and SFC.\10\ The amount of the execution fee for all Firm 
Proprietary orders for options on AUX, BPX, CDD, EUI, YUK and SFC is 
$0.20 per contract and the execution fee for all non-Early Adopter ISE 
Market Makers in options on AUX, BPX, CDD, EUI, YUK and SFC is equal to 
the execution fee currently charged by the Exchange for ISE Market 
Maker orders in equity options.\11\ Finally, the amount of the 
execution fee for all non-ISE Market Maker orders for options on AUX, 
BPX, CDD, EUI, YUK and SFC is $0.45 per contract.\12\ The Exchange does 
not charge a Payment for Order Flow fee for these products.
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    \9\ Public Customer Order is defined in Exchange Rule 100(a)(39) 
as an order for the account of a Public Customer. Public Customer is 
defined in Exchange Rule 100(a)(38) as a person or entity that is 
not a broker or dealer in securities.
    \10\ These fees are will be [sic] charged only to Exchange 
members.
    \11\ 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.
    \12\ The amount of the execution fee for non-ISE Market Maker 
transactions executed in the Exchange's Facilitation and 
Solicitation Mechanisms and for Orders entered into the Price 
Improvement Mechanism by the member initiating the price improvement 
order is $0.20 per contract.
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    The Exchange also proposes to waive transaction charges for all 
Early Adopter Market Makers in AUX, BPX, CDD, EUI, YUK and SFC in order 
to further encourage trading in these products. The Exchange believes 
that the revenue generated from customer, firm proprietary and non-ISE 
market maker transaction charges and increased order flow will offset 
the transaction fees that would otherwise be applied to market makers 
in AUX, BPX, CDD, EUI, YUK and SFC, thereby allowing the Exchange to 
recoup those fees while increasing order flow and generating increased 
revenues.
    The Exchange believes the proposed rule change will further the 
Exchange's goal of promoting trading of its FX options through 
competitive pricing.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\13\ in general, and 
furthers the objectives of Section 6(b)(4),\14\ 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 believes that extending the incentive plan 
to options on AUX, BPX, CDD, EUI, YUK and SFC will generate additional 
order flow in these products to the Exchange.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(4).
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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)(A)(ii) of the Act.\15\ 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.
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    \15\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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 proposal 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 No. SR-ISE-2011-11 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 No. SR-ISE-2011-11. 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 changes 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 
a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at the principal office of 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 No. SR-ISE-2011-11 and should be 
submitted on or before March 29, 2011.

[[Page 12780]]

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-5186 Filed 3-7-11; 8:45 am]
BILLING CODE 8011-01-P