Document ID: SEC-2010-0788-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2010-05-28T04:00Z

[Federal Register: May 28, 2010 (Volume 75, Number 103)]
[Notices]               
[Page 30095-30097]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28my10-147]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62152; File No. SR-ISE-2010-41]

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

May 21, 2010.
    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 5, 2010, 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. 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.

[[Page 30096]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    ISE proposes to amend its Schedule of Fees. Specifically, the 
Exchange proposes to adopt a $0.18 per contract execution fee for 
``professional customers'' who execute orders as a result of taking 
liquidity from ISE's order book.
    ISE rules distinguish between Priority Customer Orders and 
Professional Orders.\3\ A Priority Customer is defined in ISE Rule 
100(a)(37A) as a person or entity that is not a broker or dealer in 
securities, and does not place more than 390 orders in listed options 
per day on average during a calendar month for its own beneficial 
account(s). A Professional Order is defined in ISE Rule 100(a)(37C) as 
an order that is for the account of a person or entity that is not a 
Priority Customer. For purpose of this discussion, ``professional 
customers'' are non-broker/dealer participants who enter at least 390 
orders per day on average during a calendar month for their own 
beneficial account(s). The level of trading activity by professional 
customers more resembles that of market makers and proprietary traders 
on the Exchange than it does of other customers.
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    \3\ See Securities Exchange Act Release No. 59287 (Jan. 23, 
2009), 74 FR 5694 (Jan. 30, 2009).
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    Currently, the primary distinction between the two types of 
customers is that Priority Customers are given priority on the order 
book over professional customers. Professional customers are on parity 
with market makers and broker/dealers. However, professional customers, 
until recently, did not pay transaction fees and currently do so on a 
limited basis. Market makers and broker/dealers on the other hand have 
always paid transaction fees to the Exchange. Specifically, for market 
makers, the Exchange currently 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. Broker/dealer orders currently pay a 
flat execution fee of $0.20 per traded contract.\4\
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    \4\ The Exchange recently adopted a modified maker/taker pricing 
program applicable to a select number of options classes under which 
professional customer orders and broker/dealer orders are treated 
equally. See Securities Exchange Act Release No. 61869 (April 7, 
2010), 75 FR 19449 (April 14, 2010).
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    Earlier this year, the Exchange adopted a $0.20 per contract 
execution fee for professional customers who execute orders as a result 
of posting liquidity to ISE's order book.\5\ This ``maker'' fee applies 
only to professional customer orders, i.e., non-broker/dealer customer 
orders; it does not apply to market maker and broker/dealer orders who 
already pay transaction fees under the Exchange's current fee schedule.
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    \5\ See Securities Exchange Act Release No. 61434 (January 27, 
2010), 75 FR 5826 (February 4, 2010).
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    The Exchange now proposes to adopt a $0.18 per contract execution 
fee for professional customers who execute orders as a result of taking 
liquidity from ISE's order book.\6\ The Exchange currently has a fee 
cap for large-size foreign currency (``FX'') options orders where ISE 
waives the transaction fee on incremental volume above 5,000 contracts 
for single-sided FX options orders of at least 5,000 contracts. This 
fee waiver will also apply to professional customer orders. The 
Exchange believes that the proposed fees for professional customers 
will allow the Exchange to remain competitive with other options 
exchanges who apply fees to professional customers.\7\
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    \6\ Fees charged by the Exchange for professional customer 
orders are always equal to or less than those charged for broker/
dealer orders.
    \7\ The fees proposed herein do not apply to professional 
customer orders in a select number of options classes that are a 
part of the modified maker/taker pricing program recently adopted by 
the Exchange. See supra note 2.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Exchange Act,\8\ in general, 
and furthers the objectives of Section 6(b)(4),\9\ 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, the proposed rule change 
will help equalize fees among market makers, proprietary traders and 
professional customers on the Exchange.
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    \8\ 15 U.S.C. 78f.
    \9\ 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) 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 240.19b-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-2010-41 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-2010-41. 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,\12\ 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

[[Page 30097]]

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 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-2010-41 and should be 
submitted on or before June 18, 2010.
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    \12\ The text of the proposed rule change is available on ISE's 
Web site at http://www.ise.com, on the Commission's Web site at 
http://www.sec.gov, at ISE, and at the Commission's Public Reference 
Room.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-12872 Filed 5-27-10; 8:45 am]
BILLING CODE 8010-01-P