Document ID: SEC-2013-1870-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2013-10-31T04:00Z

[Federal Register Volume 78, Number 211 (Thursday, October 31, 2013)]
[Notices]
[Pages 65400-65402]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-25830]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70757; File No. SR-ISE-2013-53]

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

October 25, 2013.
    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 October 17, 2013, the International Securities Exchange, LLC 
(the ``Exchange'' or ``ISE'') filed with the Securities and Exchange 
Commission (the ``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 its network 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

[[Page 65401]]

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 this proposed rule change is to amend the Exchange's 
network fees. Specifically, the Exchange proposes to adopt a network 
fee for a new 40 Gigabit (Gb) low latency Ethernet connectivity option. 
The Exchange currently offers three Ethernet connection options, a 1 Gb 
connection at a cost of $500 per month, a 10 Gb connection at a cost of 
$4,000 per month, and a 10 Gb low latency connection at a cost of 
$7,000 per month.
    In keeping with changes in technology, the Exchange now proposes to 
provide an enhanced bandwidth option to enable a more efficient 
connection to the Exchange. The growth in the size of consolidated and 
proprietary data feeds has resulted in demand for higher bandwidth. As 
the number of feeds available and the size of the feeds increases, the 
bandwidth required for market data feeds steadily rises. Through the 
use of new, advanced hardware, the proposed new connectivity option 
will provide increased bandwidth and improved latency, and will thereby 
satisfy demand for more efficient, lower latency connections to the 
Exchange's trading system.
    The Exchange proposes to charge $12,500 per month for this 
connection. ISE has expended significant amount of resources in 
developing this infrastructure and the proposed fees will allow the 
Exchange to recoup its investment. The Exchange's new network 
connectivity option will provide Members the option to select the 
bandwidth that is appropriate for their current needs. This new 
connectivity option is voluntary and, therefore, the Exchange will 
retain the existing connectivity options for those Members who choose 
not to utilize the new network connection.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Securities Exchange Act of 1934 
(``Act''),\3\ in general, and with Section 6(b)(4) of the Act,\4\ in 
particular, in that it provides for the equitable allocation of 
reasonable dues, fees and other charges among Exchange members and 
other persons using its facilities.
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    \3\ 15 U.S.C. 78f.
    \4\ 15 U.S.C. 78f(b)(4).
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    The Exchange's new low latency 40 Gb Ethernet network connection 
will provide Members the ability to increase data transmission and 
reduce latency, thereby enhancing their operations. The Exchange 
believes the proposed fees for this new connection to the Exchange are 
reasonable because the fees charged will allow the Exchange to cover 
the hardware, installation, testing and connection costs to maintain 
and manage the enhanced connection. The proposed fees will allow the 
Exchange to recoup costs associated with providing the low latency 40 
Gb connection while aiding Members in making their network connectivity 
more efficient, and reducing the potential for data spikes and data 
gapping issues that result from the transmission of the growing size of 
the consolidated and proprietary market data feeds. Moreover, the 
Exchange believes that the proposed fees are reasonable in that they 
are lower than the fees charged by other trading venues for similar 
connectivity services.\5\
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    \5\ For example, NYSE Arca Options charges $20,000 per month for 
a 40 Gb liquidity center network connection plus a $15,000 per 
connection initial charge. See Securities Exchange Act Release No. 
70286 (Aug. 29, 2013) 78 FR 54710 (Sept. 5, 2013) (SR-NYSEARCA-2013-
82). NASDAQ OMX PHLX, LLC charges $15,000 per month for a 40 Gb 
fiber connection with an installation fee of $1,500. See Securities 
Exchange Act Release No. 66429 (Feb. 21, 2012) 77 FR 11611 (Feb. 27, 
2013) (SR-PHLX-2012-20).
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    The Exchange further believes that the proposed change is 
reasonable because the proposed fees directly relate to the level of 
services provided by the Exchange and, in turn, received by Members 
connecting to the exchange. In this regard, the fees proposed for 40 Gb 
connections are higher than, for example, the fees for 10 Gb 
connections because costs for the initial purchase and ongoing 
maintenance of the 40 Gb connections are generally higher than those of 
the lower-bandwidth connections. However, these costs are not 
anticipated to be four times higher than the existing 10 Gb connection. 
The Exchange therefore notes that while the proposed bandwidth of the 
low latency 40 Gb connection is four times greater than the existing 
low latency 10 Gb connection, the proposed fees for the 40 Gb 
connection are significantly less than four times the fees for the 10 
Gb connection. The Exchange believes that this supports a finding that 
the proposed pricing is reasonable because the Exchange anticipates 
realizing efficiencies as customers adopt higher-bandwidth connections, 
and is in turn reflecting such efficiencies in the pricing for the new 
connectivity option.
    The Exchange also believes the proposed fee for 40 Gb connectivity 
to the Exchange is equitably allocated in that all Members that 
voluntarily select this service option will be charged the same amount 
to maintain and manage the enhanced connection. Moreover, the Exchange 
believes the proposed 40 Gb fee for connectivity to the Exchange is not 
unfairly discriminatory in that all Members will have the option of 
selecting the 40 Gb connection, and there is no differentiation among 
Members with regard to the fees charged for this option.

B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\6\ the Exchange 
believes that the proposed rule change will not impose any burden on 
intermarket or intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. Instead, the 
Exchange believes that the proposed change will enhance competition by 
making a service available to Members and thereby satisfy demand for 
more efficient, lower-latency connections. The proposed low latency 40 
Gb connection would make a service available to Members that require 
the increased bandwidth, but Members that do not require the increased 
bandwidth could continue to request an existing lower-bandwidth 
connection and pay the correspondingly lower fees.
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    \6\ 15 U.S.C. 78f(b)(8).
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    The Exchange notes that it operates in a highly competitive market 
in which Members can readily direct their order flow to competing 
venues if they deem fee levels at a particular venue to be excessive. 
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

[[Page 65402]]

changes reflect this competitive environment.

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) of the Act \7\ and paragraph (f) of Rule 19b-4 \8\ 
thereunder. At any time within 60 days of the filing of the 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 will institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f).
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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 email to rule-comments@sec.gov. Please include 
File Number SR-ISE-2013-53 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-2013-53. 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 the 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 available publicly. All 
submissions should refer to File Number SR-ISE-2013-53 and should be 
submitted on or before November 21, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-25830 Filed 10-30-13; 8:45 am]
BILLING CODE 8011-01-P