Document ID: SEC-2007-0877-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: International Securities Exchange, LLC
Posted Date: 2007-06-28T04:00Z

[Federal Register: June 28, 2007 (Volume 72, Number 124)]
[Notices]               
[Page 35535-35537]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28jn07-124]                         

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55941; File No. SR-ISE-2007-36]

 
Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule 
Change as Modified by Amendment No. 1 Thereto Relating to API Fees

June 21, 2007.
    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 May 17, 2007, 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 substantially 
prepared by the Exchange. On June 11, 2007, the ISE submitted Amendment 
No. 1 to the proposed rule change.\3\ ISE has designated this proposal 
as one establishing or changing a due, fee, or other charge imposed by 
ISE under Section 19(b)(3)(A)(ii) of the Act \4\ and Rule 19b-4(f)(2) 
thereunder,\5\ which renders the proposal effective upon filing with 
the Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change, as amended, from interested 
persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 makes certain clarifying edits to the 
purpose section of the proposed rule change and the Schedule of Fees 
contained in Exhibit 5.
    \4\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \5\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

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

    The ISE is proposing to adopt a High Throughput User Session/API 
fee for ISE market makers.\6\ The text of the proposed rule change is 
available at the Exchange, the Commission's Public

[[Page 35536]]

Reference Room, and http://www.iseoptions.com.

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

    \6\ See Telephone Conference between Samir Patel, Assistant 
General Counsel, ISE, and Richard Holley III, Special Counsel, 
Division of Market Regulation, Commission, dated June 21, 2007 
(noting that the proposed fee is applicable to ISE market makers).
---------------------------------------------------------------------------

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 Exchange 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 Exchange 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 adopt a High 
Throughput User Session/API fee for members.\7\ ISE currently has three 
categories of authorized logins: (1) Quoting, order entry and listening 
(allowing the user to enter quotes, orders, and perform all other 
miscellaneous functions, such as setting parameters, pulling quotes and 
performing linkage functions (e.g., sending and receiving P and P/A 
orders, laying off orders, etc.)); (2) order entry and listening 
(allowing the user to enter orders and perform all other miscellaneous 
functions, such as setting parameters, pulling quotes and performing 
linkage functions (but not quote)); and (3) listening (allowing the 
user only to query the system and to respond to other broadcasts).
---------------------------------------------------------------------------

    \7\ The ISE Central Exchange System uses an open Application 
Programming Interface (API). ISE Members program to ISE's API in 
order to develop applications that send trading commands and/or 
queries to and receive broadcasts and/or transactions from the 
trading system. The ISE Central Exchange System is the heart of 
ISE's marketplace, processing quotes from market makers, receiving 
orders from Electronic Access Members, tracking activity in the 
underlying markets, executing trades in the matching engine, and 
broadcasting trade details to the participating members.
---------------------------------------------------------------------------

    An ISE market maker currently receives an allocation of 1,000,000 
quotes per day per user. If a firm submits more quotes than those 
allocated, i.e., 1,000,000 quotes per day per user as measured on an 
average in a single month, the firm is charged for additional users 
depending upon the number of quotes submitted.\8\ Each month, the total 
number of quotes submitted by a market maker firm across all bins 
(i.e., the group of options to which the market maker is appointed) is 
divided by the number of trading days, resulting in the average quotes 
per day. This number is then divided by 1,000,000 and rounded up to the 
nearest whole number, resulting in an implied number of users based on 
quotes. Members are invoiced on a monthly basis for the greater of (a) 
the greatest number of users authorized to login into the system, or 
(b) the number of implied users based on quotes.
---------------------------------------------------------------------------

    \8\ See Securities Exchange Act Release No. 53522 (March 20, 
2006), 71 FR 14975 (March 24, 2006) (SR-ISE-2006-09) (providing an 
example of how the fee is assessed).
---------------------------------------------------------------------------

    ISE currently charges $950 per month for each quoting session for 
up to 1,000,000 quotes per day, on average for a month. Members are 
charged an additional user fee of $950 for each incremental usage of up 
to 1,000,000 quotes per day per user.
    There are certain third party vendors used by members to connect to 
the ISE that currently permit only single logins, thus restricting a 
member's activity when utilizing these applications. To address this 
limitation, ISE has created a ``High Throughput User'' that permits an 
ISE Market Maker to quote up to 2,000,000 quotes per day in a month. A 
``High Throughput User'' would be able to enter quotes, orders, and 
perform all other miscellaneous functions, such as setting parameters, 
pulling quotes and performing linkage functions (e.g., sending and 
receiving P and P/A orders, laying off orders, etc.). The Exchange 
proposes to charge ``High Throughput Users'' a fee of $1,900 per month. 
Members will be charged an additional user fee of $1,900 for each 
incremental usage of up to 2,000,000 quotes per day per user.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(4) \9\ 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 
Exchange believes this fee will allow its market making members to 
maximize their quoting ability.
---------------------------------------------------------------------------

    \9\ 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 proposed rule change has become effective pursuant to 
Section 19(b)(3)(A)(ii) of the Act \10\ and Rule 19b-4(f)(2) \11\ 
thereunder because it establishes or changes a due, fee, or other 
charge imposed by the Exchange. 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.\12\
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \11\ 17 CFR 240.19b-4(f)(2).
    \12\ For purposes of calculating the 60-day period within which 
the Commission may summarily abrogate the proposed rule change, the 
Commission considers the period to commence on June 11, 2007, the 
date on which the Exchange filed Amendment No. 1.
---------------------------------------------------------------------------

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 No. SR-ISE-2007-36 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-ISE-2007-36. 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

[[Page 35537]]

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 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 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-2007-36 and should be submitted on 
or before July 19, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-12486 Filed 6-27-07; 8:45 am]

BILLING CODE 8010-01-P