Document ID: SEC-2009-1131-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2009-08-11T04:00Z

[Federal Register: August 11, 2009 (Volume 74, Number 153)]
[Notices]               
[Page 40249-40250]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr11au09-128]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60442; File No. SR-ISE-2009-57]

 
Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change Relating To Amending the Direct Edge ECN Fee Schedule

August 5, 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 July 31, 2009, 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, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Direct Edge ECN's (``DECN'') fee 
schedule for ISE Members \3\ to (i) create a new tier, called the Full 
Sweep Tier, to provide a rebate for ISE Members that use ROUT orders 
that meet a volume theshold for amount of liquidity added on EDGX and 
to (ii) adopt new fees and rebates.
---------------------------------------------------------------------------

    \3\ References to ISE Members in this filing refer to DECN 
Subscribers who are ISE Members.
---------------------------------------------------------------------------

    All of the changes described herein are applicable to ISE Members. 
The text of the proposed rule change is available on the Exchange's 
Internet Web site at http://www.ise.com.

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
    DECN, a facility of ISE, operates two trading platforms, EDGX and 
EDGA. On July 1, 2009,\4\ the Exchange adopted a new Ultra Tier Rebate, 
as defined below, whereby ISE Members are provided a $0.0032 rebate per 
share for securities priced at or above $1.00 when ISE Members add 
liquidity on EDGX if the attributed MPID satisfies one of the following 
criteria on a daily basis, measured monthly: (i) Adding 100,000,000 
shares or more on EDGX; or (ii) adding 50,000,000 shares or more of 
liquidity to EDGX, so long as added liquidity on EDGX is at least 
20,000,000 shares greater than the previous calendar month. The rebate 
described above is referred to as an ``Ultra Tier Rebate'' on the DECN 
fee schedule.
---------------------------------------------------------------------------

    \4\ See Securities and Exchange Act Release No. 60232 (July 2, 
2009), 74 FR 33309 (July 10, 2009) (SR-ISE-2009-43).
---------------------------------------------------------------------------

    The Exchange is now proposing to establish an additional tier 
called the Full Sweep Tier, whereby ISE Members are provided a $0.0035 
rebate per share for securities priced at or above $1.00 when ISE 
Members add liquidity on EDGX if the attributed MPID use of the ROUT 
order type adds 50,000,000 shares or more of liquidity to EDGX on a 
daily basis, measured monthly. A ROUT order type that is sent to EDGX 
is an order type that does a full sweep of the EDGX book, before being 
exposed to Enhanced Liquidity Providers (``ELPs'').\5\ This order type 
will then route to away market centers if there is additional 
unexecuted liquidity. This order type is primarily used for agency 
orders, especially retail order flow. The rebate is designed to 
encourage the use of this particular type of liquidity.
---------------------------------------------------------------------------

    \5\ DECN currently operates a program known as the ``Enhanced 
Liquidity Provider'' (``ELP'') program on its two trading platforms, 
EDGX and EDGA, pursuant to which parties entering orders into DECN 
can elect to display their marketable orders to designated liquidity 
providers before the order is routed or cancelled.
---------------------------------------------------------------------------

    The Exchange also proposes to adopt additional fees and rebates. 
First, the Exchange proposes to adopt a fee of $0.0024 per share for 
securities priced at or above $1.00 which add liquidity to LavaFlow ECN 
(``LavaFlow'') and are routed from either EDGX or EDGA. Such a strategy 
is deemed a ROLF routing strategy, which is a destination specific 
routing strategy that will first sweep the EDGA or EDGX order book 
before being delivered to LavaFlow. A conforming amendment will be made 
to the fee schedule to yield an ``M'' flag to account

[[Page 40250]]

for this fee. Conversely, for liquidity that is routed through either 
EDGA or EDGX and removes liquidity from LavaFlow, ISE members will be 
charged $0.0029 per share for securities priced at or above $1.00. Such 
situation will yield a flag of ``U.'' However, if an ISE member posts 
an average of 50,000 shares or more using a ROLF routing strategy, 
yielding flag M, then such ISE member's fee, when removing liquidity 
from LavaFlow, will decrease to $0.0022 per share and yield flag U. 
Finally, the Exchange proposes to rebate $0.0025 per share for 
securities priced at or above $1.00 when ISE members add liquidity on 
EDGX via an EDGA-originated ROUC routing strategy.\6\ Such situation 
will yield liquidity Flag ``P.''
---------------------------------------------------------------------------

    \6\ ROUC designated orders are multi-destination orders that 
sweep the internal order book and ELP destinations before any 
unfilled quantity is routed to low cost destinations.
---------------------------------------------------------------------------

    The fee changes discussed in this filing will become operative on 
August 1, 2009.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\7\ in general, and 
furthers the objectives of Section 6(b)(4),\8\ 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. In particular, adopting the Full Sweep Tier Rebate 
provides pricing incentives to market participants who route orders to 
DECN, allowing DECN to remain competitive. ISE notes that DECN operates 
in a highly competitive market in which market participants can readily 
direct order flow to competing venues if they deem fee levels at a 
particular venue to be excessive. The proposed rule change reflects a 
competitive pricing structure designed to incent market participants to 
direct their order flow to DECN. ISE believes the fees and credits 
remain competitive with those charged by other venues and therefore 
continue to be reasonable and equitably allocated to those members that 
opt to direct orders to DECN rather than competing venues.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f.
    \8\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

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 \9\ and Rule 19b-4(f)(2) \10\ 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.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 19b-4(f)(2).
---------------------------------------------------------------------------

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-2009-57 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-2009-57. 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 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-2009-57 and should be 
submitted on or before September 1, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
---------------------------------------------------------------------------

    \11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-19186 Filed 8-10-09; 8:45 am]

BILLING CODE 8010-01-P