Document ID: SEC-2013-0539-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2013-03-20T04:00Z

[Federal Register Volume 78, Number 54 (Wednesday, March 20, 2013)]
[Notices]
[Pages 17266-17272]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-06394]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69139; File No. SR-ISE-2013-19]

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

March 15, 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 March 1, 2013, the International Securities Exchange, LLC 
(``ISE'' or ``Exchange'') 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 
Exchange. The Commission is publishing this notice to solicit comments 
on the

[[Page 17267]]

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 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.

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

1. Purpose
    The Exchange currently assesses per contract transaction fees and 
provides rebates to market participants that add or remove liquidity 
from the Exchange (``maker/taker fees and rebates'') in 229 options 
classes (the ``Select Symbols'').\3\ The Exchange's maker/taker fees 
and rebates are applicable to regular and complex orders executed in 
the Select Symbols. The Exchange also currently assesses maker/taker 
fees and rebates for complex orders in symbols that are in the Penny 
Pilot program but are not a Select Symbol (``Non-Select Penny Pilot 
Symbols'') \4\ and in all symbols that are not in the Penny Pilot 
Program (``Non-Penny Pilot Symbols'').\5\
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    \3\ Select Symbols are identified by their ticker symbol on the 
Exchange's Schedule of Fees. With this proposed rule change, the 
Exchange will no longer identify Select Symbols by their ticker 
symbol and will, instead, identify Select Symbols as options 
overlying all symbols listed on ISE that are in the Penny Pilot 
Program. The Exchange will also provide a link to ISE's public Web 
site where a current list of ISE-listed symbols that are in the 
Penny Pilot Program is made available.
    \4\ See Exchange Act Release Nos. 65724 (November 10, 2011), 76 
FR 71413 (November 17, 2011) (SR-ISE-2011-72); 66597 (March 14, 
2012), 77 FR 16295 (March 20, 2012) (SR-ISE-2012-17); 66961 (May 10, 
2012), 77 FR 28914 (May 16, 2012) (SR-ISE-2012-38); 67628 (August 9, 
2012), 77 FR 49049 (August 15, 2012) (SR-ISE-2012-71); 68034 
(October 11, 2012), 77 FR 63911 (October 17, 2012) (SR-ISE-2012-85); 
and 68627 (January 11, 2013) 78 FR 3934 (January 17, 2013) (SR-ISE-
2013-01).
    \5\ See Exchange Act Release Nos. 66084 (January 3, 2012), 77 FR 
1103 (January 9, 2012) (SR-ISE-2011-84); 66392 (February 14, 2012), 
77 FR 10016 (February 21, 2012) (SR-ISE-2012-06); 66962 (May 10, 
2012), 77 FR 28917 (May 16, 2012) (SR-ISE-2012-35); 67400 (July 11, 
2012), 77 FR 42036 (July 17, 2012) (SR-ISE-2012-63); 67628 (August 
9, 2012), 77 FR 49049 (August 15, 2012) (SR-ISE-2012-71); 68034 
(October 11, 2012), 77 FR 63911 (October 17, 2012) (SR-ISE-2012-85); 
and 68627 (January 11, 2013) 78 FR 3934 (January 17, 2013) (SR-ISE-
2013-01).
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    The purpose of this proposed rule change is to make three changes 
to the Exchange's Schedule of Fees. First, the Exchange proposes to 
amend the list of Select Symbols. Second, the Exchange proposes to 
amend rebate tiers applicable to Priority Customer \6\ complex orders 
in the Select Symbols that trade with non-Priority Customer complex 
orders in the complex order book. Third, the Exchange proposes to adopt 
a new rebate payable to incremental Priority Customer complex orders 
above the highest tier currently in place. This rebate is applicable to 
Priority Customer complex orders in the Select Symbols, in SPY and in 
the Non-Select Symbols that trade with non-Priority Customer complex 
orders in the complex order book.
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    \6\ A Priority Customer is defined in ISE Rule 100(a)(37A) as a 
person or entity that is not a broker/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).
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1. Select Symbols
    The Exchange proposes to amend the list of Select Symbols. All 
Select Symbols that are currently subject to the Exchange's maker/taker 
fees and rebates are in the Penny Pilot Program. With this proposed 
rule change, the Exchange proposes to add the following 125 symbols 
listed on ISE that are in the Penny Pilot Program but are not currently 
Select Symbols to the list of Select Symbols: Agilent Technologies, 
Inc. (``A''), Abbott Labs (``ABT''), Archer Daniels Midland Co. 
(``ADM''), Autodesk, Inc. (``ADSK''), Agnico Eagle Mines Ltd. 
(``AEM''), Aflac, Inc. (``AFL''), Assured Guaranty LTD. (``AGO''), 
Allstate Corporation (``ALL''), Amedisys, Inc. (``AMED''), Abercrombie 
& Fitch Co. (``ANF''), Apollo Group, Inc. (``APOL''), Activision 
Blizzard, Inc. (``ATVI''), Bed bath [sic] & Beyond, Inc. (``BBBY''), 
Banco Bradesco (``BBD''), BB&T Corp. (``BBT''), Biocryst 
Pharmaceuticals, Inc. (``BCRX''), Baker Hughes, Inc. (``BHI''), BHP 
Billition Ltd. (``BHP''), Bank of New York Mellon Corp. (``BK''), 
Popular, Inc. (``BPOP''), Berkshire Hathaway, Class B (``BRKB''), 
Blackstone Group L.P. (``BX''), Chubb Corp. (``CB''), Century Aluminum 
Co. (``CENX''), Cigna Corp. (``CI''), Ciena Corporation (``CIEN''), CIT 
Group, Inc. (``CIT''), Colgate Palmolive Co. (``CL''), Comerica, Inc. 
(``CMA''), Consol Energy, Inc. (``CNX''), Capital One Financial Corp. 
(``COF''), CVS Caremark Corporation (``CVS''), CEMEX S.A.B. de C.V. 
(``CX''), DR Horton, Inc. (``DHI''), Diamond Offshore Drilling 
(``DO''), Dryships, Inc. (``DRYS''), DIRECTV (``DTV''), Devon Energy 
Corp. (``DVN''), EMC Corp. (``EMC''), EOG Resources, Inc. (``EOG''), 
ITT Educational Services, Inc. (``ESI''), E*Trade Financial Corp. 
(``ETFC''), iShares MSCI Mexico Investable Market (``EWW''), F5 
Networks, Inc. (``FFIV''), Flextronics International Ltd. (``FLEX''), 
Foster Wheeler AG (``FWLT''), Currency Shares Euro (``FXE''), Proshares 
Ultrashort FTSE China 25 (``FXP''), Gold Fields Ltd. (``GFI''), General 
Growth Properties, Inc. (``GGP''), Gilead Science, Inc. (``GILD''), 
Gamestop Corp. (``GME''), HSBC Holdings PLC (``HBC''), Hess Corporation 
(``HES''), Hartford Financial Services Group, Inc. (``HIG''), Hecla 
Mining Company (``HL''), Harley--Davidson, Inc. (``HOG''), ICICI Bank 
Ltd. (``IBN''), international [sic] Paper Co. (``IP''), Intermune, Inc. 
(``ITMN''), Johnson and Johnson (``JNJ''), Nordstrom, Inc. (``JWN''), 
Kinder Morgan, Inc. (``KMI''), Kinder Morgan Energy LP (``KMP''), SPDR 
S&P Regional Banking ETF (``KRE''), LDK Solar Co., Ltd. (``LDK''), Leap 
Wireless International, Inc. (``LEAP''), Lincoln National Corporation 
(``LNC''), Lorillard, Inc. (``LO''), Moody's Corporation (``MCO''), 
Mondelez International (``MDLZ''), Medivation, Inc. (``MDVN''), Mead 
Johnson Nutrition Co. (``MJN''), 3M Company (``MMM''), Mannkind 
Corporation (``MNKD''), Mini Nasdaq 100 Index (``MNX''), Marvell 
Technology Group Ltd. (``MRVL''), ArcelorMittal (``MT''), MGIC 
Investment Corporation (``MTG''), Myland, Inc. (``MYL''), National 
Oilwell varco [sic], Inc. (``NOV''), NetApp, Inc. (``NTAP''), Nucor 
Corp. (``NUE''), NYSE Euronext (``NYX''), Plum Creek Timber Co., Inc. 
REIT (``PCL''), PNC Financial Services, Inc. (``PNC''), Prudential 
Financial, Inc. (``PRU''), Royal Caribbean Cruises Ltd. (``RCL''), 
Raytheon Company (``RTN''), Riverbed Technology (``RVBD''), Origin 
Agritech Ltd. (``SEED''), Proshares Ultrashort Financials (``SKF''), 
SLM Corp. (``SLM''), Southern Company (``SO''), Simon Property Group, 
Inc. (``SPG''), Sunpower Corporation (``SPWR''), Sequenom, Inc. 
(``SQNM''), Proshares Ultrashort Real Estate (``SRS''), STEC Inc. 
(``STEC''), Suntrust Banks, Inc. (``STI''), State Street Corp.

[[Page 17268]]

(``STT''), Suncor Energy, Inc. (``SU''), Southwestern Energy Co. 
(``SWN''), Symantec Corp. (``SYMC''), Target Corp. (``TGT''), Tiffany & 
Co. (``TIF''), Toyota Motor Corp. (``TM''), Time Warner, Inc. 
(``TWX''), Textron, Inc. (``TXT''), Tyco International Ltd. (``TYC''), 
UnitedHealth Group, Inc. (``UNH''), Proshares Ultra Real Estate 
(``URE''), Proshares Ultra Financials (``UYG''), Verisign, Inc. 
(``VRSN''), Whole Foods Market, Inc. (``WFM''), Windstream Corp. 
(``WIN''), Wellpoint, Inc. (``WLP''), Williams Cos., Inc. (``WMB''), 
Walmart Stores, Inc. (``WMT''), XL Group PLC (``XL''), Xilinx, Inc. 
(``XLNX''), Consumer Staples Select Sectro SPDR (``XLP''), SPDR S&P Oil 
& Gas Exploration and Production (``XOP''), Yum Brands, Inc. (``YUM'') 
and Zions Bancorp. (``ZION'') (``Additional Select Symbols'').
    With the addition of the Additional Select Symbols to [sic] Select 
Symbols, the fees currently applicable to regular and complex orders in 
the Select Symbols will now be applied to regular and complex orders in 
the Additional Select Symbols.

A. Regular Order Fees and Rebates

    The Exchange currently applies transaction fees to regular orders 
in the Additional Select Symbols, as follows: \7\
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    \7\ Additional Select Symbols are currently subject to the 
standard transaction fee listed in the table titled Non-Select 
Symbols. See Schedule of Fees, Section I, Regular Order Fees and 
Rebates.
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     For Market Maker \8\ orders, a fee of $0.18 per contract; 
\9\
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    \8\ The term ``Market Makers'' refers to ``Competitive Market 
Makers'' and ``Primary Market Makers'' [sic] collectively. See ISE 
Rule 100(a)(25).
    \9\ The Exchange provides a volume-based discount to fees to ISE 
Market Maker contracts for regular orders in Non-Select Symbols. See 
Schedule of Fees, Section IV, C. ISE Market Maker Discount Tiers.
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     For Market Maker (for orders sent by Electronic Access 
Members), Firm Proprietary/Broker-Dealer and Professional Customer \10\ 
orders, a fee of $0.20 per contract;
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    \10\ A Professional Customer is a person who is not a broker/
dealer and is not a Priority Customer.
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     For Non-ISE Market Maker \11\ orders, a fee of $0.45 per 
contract;
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    \11\ A Non-ISE Market Maker, or Far Away Market Maker 
(``FARMM''), is a market maker as defined in Section 3(a)(38) of the 
Securities Exchange Act of 1934 registered in the same options class 
on another options exchange.
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     For Priority Customer orders, a fee of $0.00 per contract.
    The Exchange currently charges a fee of $0.20 per contract to all 
market participants (except for Market Makers, this fee is currently 
$0.18 per contract,\12\ and for Priority Customers, this fee is $0.00 
per contract) for regular Crossing Orders in the Non-Select Symbols 
(this fee currently applies to the Additional Select Symbols as they 
are a subset of Non-Select Symbols). The Exchange also currently 
charges a fee of $0.20 per contract to all market participants (except 
for Non-ISE Market Makers, this fee is currently $0.45 per contract, 
and for Market Makers, this fee is $0.18 per contract \13\) for regular 
Responses to Crossing Orders in the Non-Select Symbols (this fee 
currently applies to the Additional Select Symbols as they are a subset 
of Non-Select Symbols).
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    \12\ The volume-based discount to fees to ISE Market Maker 
contracts also applies to regular Crossing Orders. See supra, note 7 
[sic].
    \13\ The volume-based discount to fees to ISE Market Maker 
contracts also applies to regular Responses to Crossing Orders. See 
supra, note 7 [sic].
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    With this proposed rule change, the Additional Select Symbols will 
now be subject to the maker/taker fees and rebates applicable to 
regular orders in the Select Symbols.\14\ The Exchange currently 
charges the following maker fees and rebates for Select Symbols: (i) 
For Market Maker, Non-ISE Market Maker, Firm Proprietary/Broker-Dealer 
and Professional Customer orders, $0.10 per contract; (ii) for Priority 
Customer orders, $0.00 per contract; and (iii) for Market Maker Plus 
\15\ orders, a rebate of $0.10 per contract. The Exchange also 
currently charges the following taker fees for Select Symbols: (i) for 
Market Maker and Market Maker Plus orders, $0.32 per contract; (ii) for 
Non-ISE Market Maker orders, $0.36 per contract; (iii) for Firm 
Proprietary/Broker-Dealer and Professional Customer orders, $0.33 per 
contract; and (iv) for Priority Customer orders, $0.25 per contract.
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    \14\ See Schedule of Fees, Section I, Regular Order Fees and 
Rebates.
    \15\ In order to promote and encourage liquidity in the Select 
Symbols, the Exchange currently offers a $0.10 per contract rebate 
to Market Makers if the quotes they sent to the Exchange qualify the 
Market Maker to become a Market Maker Plus. A Market Maker Plus is a 
Market Maker who is on the National Best Bid or National Best Offer 
80% of the time for series trading between $0.03 and $5.00 (for 
options whose underlying stock's previous trading day's last sale 
price was less than or equal to $100) and between $0.10 and $5.00 
(for options whose underlying stock's previous trading day's last 
sale price was greater than $100) in premium in each of the front 
two expiration months and 80% of the time for series trading between 
$0.03 and $5.00 (for options whose underlying stock's previous 
trading day's last sale price was less than or equal to $100) and 
between $0.10 and $5.00 (for options whose underlying stock's 
previous trading day's last sale price was greater than $100) in 
premium for all expiration months in that symbol during the current 
trading month. A Market Maker's single best and single worst overall 
quoting days each month, on a per symbol basis, is excluded in 
calculating whether a Market Maker qualifies for this rebate, if 
doing so will qualify a Market Maker for the rebate.
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    The Exchange currently charges Market Maker, Non-ISE Market Maker, 
Firm Proprietary/Broker-Dealer and Professional Customers a fee of 
$0.20 per contract ($0.00 per contract for Priority Customers) for 
regular Crossing Orders in the Select Symbols, and a fee of $0.40 per 
contract to all market participants for regular Responses to Crossing 
Orders in the Select Symbols. With this proposed rule change, the fee 
for regular Crossing Orders in the Additional Select Symbols will 
remain at $0.20 per contract for most market participants. For Priority 
Customers, this fee will remain at $0.00 per contract, and for Market 
Makers, this fee will increase, from $0.18 per contract \16\ to $0.20 
per contract. With this proposed rule change, the fee for regular 
Responses to Crossing Orders will increase for most market 
participants, from $0.20 per contract to $0.40 per contract (for Market 
Makers, this fee will increase from $0.18 per contract to $0.40 per 
contract), with the exception of Non-ISE Market Makers who will now pay 
a lower fee of $0.40 per contract as opposed to $0.45 per contract.
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    \16\ The volume-based discount to fees to ISE Market Maker 
contracts also applies. See supra, note 7.
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    The Exchange also currently provides a rebate of $0.25 per contract 
for contracts that are submitted to the Price Improvement Mechanism 
that do not trade with their contra order in the Select Symbols, and a 
rebate of $0.15 per contract for contracts that are submitted to the 
Facilitation and Solicited Order Mechanisms that do not trade with 
their contra order in the Select Symbols except when those contracts 
trade against pre-existing orders and quotes on the Exchange's 
orderbook. With this proposed rule change, market participants trading 
in the Additional Select Symbols will now be eligible for rebates that 
were not previously available for this group of symbols. Specifically, 
market participants will now receive a rebate of $0.25 per contract for 
contracts that are submitted to the Price Improvement Mechanism that do 
not trade with their contra order in the Additional Select Symbols. 
Further, market participants will now also receive a rebate of $0.15 
per contract for contracts that are submitted to the Facilitation and 
Solicited Order Mechanisms that do not trade with their contra order in 
the Additional Select Symbols except when those contracts trade against 
pre-existing orders and quotes on the Exchange's orderbook.
    Further, the Exchange currently charges Primary Market Makers 
(PMMs) a transaction fee of $0.18 per contract \17\

[[Page 17269]]

in the Additional Select Symbols when they trade report a Priority 
Customer or Professional Customer order in accordance with their 
obligation to provide away market price protection. PMMs in Select 
Symbols do not receive a maker rebate nor pay a taker fee when trade 
reporting.\18\ With this proposed rule change, PMMs in the Additional 
Select Symbols will also not receive a maker rebate nor pay a taker fee 
when trade reporting.
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    \17\ The volume-based discount to fees to ISE Market Maker 
contracts also applies. See supra, note 7.
    \18\ See Schedule of Fees, Section I, Regular Order Fees and 
Rebates, footnote 9.
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    The Exchange also currently provides a $0.20 per contract fee 
credit to PMMs for execution of Priority Customer orders in the Non-
Select Symbols--for classes in which it serves as a PMM--that send an 
Intermarket Sweep Order to other exchanges. This credit is applied 
regardless of the transaction fee charged by a destination market. For 
PMMs in the Select Symbols, this credit is equal to the fee charged by 
the destination market. With this proposed rule change, PMMs in the 
Additional Select Symbols will now be provided with a credit that is 
equal to the fee charged by the destination market.
    Additionally, the Exchange currently provides a $0.20 per contract 
credit for responses to flash orders in the Non-Select Symbols when 
trading against Professional Customers. For Select Symbols, the per 
contract fee credit for responses to flash orders is (i) $0.10 per 
contract when trading against Priority Customers; (ii) $0.12 per 
contract when trading against Preferenced Priority Customers; and (iii) 
$0.10 per contract when trading against Professional Customers. Market 
participants trading in the Additional Select Symbols will now be 
provided the rebate at levels that are currently in place for Select 
Symbols, as described above.
    Finally, the Exchange currently charges a payment for order flow 
(PFOF) fee of $0.25 per contract, applicable to Market Makers when 
trading against Priority Customer orders in the Additional Select 
Symbols. The Exchange does not charge a PFOF fee for trading in the 
Select Symbols. Therefore, with this proposed rule change, the Exchange 
will no longer charge a PFOF fee for trading in the Additional Select 
Symbols.

B. Complex Order Fees and Rebates

    With this proposed rule change, the maker fee for complex orders in 
the Additional Select Symbols will remain unchanged because the 
Exchange currently charges the same maker fee for complex orders in the 
Select Symbols, in the Penny Pilot Symbols and in the Non-Penny Pilot 
Symbols.\19\ Specifically, for Select Symbols, Penny Pilot Symbols and 
Non-Penny Pilot Symbols, the Exchange currently charges a complex order 
maker fee of: (i) $0.10 per contract for Market Maker, Firm 
Proprietary/Broker-Dealer and Professional Customer orders; (ii) $0.20 
per contract for Non-ISE Market Maker orders; and (iii) $0.00 per 
contract for Priority Customer orders.
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    \19\ The Additional Select Symbols are currently subject to the 
fee listed in the column titled Maker Fee for Select Symbols and 
Penny Pilot Symbols. See Schedule of Fees, Section II, Complex Order 
Fees and Rebates.
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    With this proposed rule change, the maker fee for complex orders in 
the Additional Select Symbols when trading against Priority Customers 
will remain unchanged because the Exchange currently charges the same 
maker fee for complex orders in the Select Symbols (excluding SPY) when 
trading against Priority Customers and in the Non-Select Penny Pilot 
Symbols when trading against Priority Customers.\20\ Specifically, for 
complex orders in the Select Symbols (excluding SPY) when trading 
against Priority Customer and for complex orders in the Non-Select 
Penny Pilot Symbols when trading against Priority Customers, the 
Exchange currently charges a maker fee of: (i) $0.39 per contract for 
Market Maker orders; (ii) $0.40 per contract for Non-ISE Market Maker, 
Firm Proprietary/Broker-Dealer and Professional Customer orders; and 
(iii) $0.00 per contract for Priority Customer orders.
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    \20\ The Additional Select Symbols are currently subject to the 
fee listed in the column titled Maker Fee for Non-Select Penny Pilot 
Symbols when trading against Priority Customer. See Schedule of 
Fees, Section II, Complex Order Fees and Rebates.
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    Since the Exchange is proposing to move all the ISE-listed Penny 
Pilot Program symbols to its list of Select Symbols, there is no longer 
a need to separately identify these two groups of symbols on the 
Schedule of Fees. Therefore, the Exchange proposes to rename certain 
columns applicable to Maker Fees in Section II (Complex Order Fees and 
Rebates). Specifically, the Exchange proposes to rename the column 
titled `Maker Fee for Select Symbols and Penny Pilot Symbols' as `Maker 
Fee for Select Symbols.' The Exchange also proposes to rename the 
column titled `Maker Fee for Non-Penny Pilot Symbols' to `Maker Fee for 
Non-Select Symbols.' And finally, the Exchange proposes to rename the 
column titled `Maker Fee for non-Penny Pilot Symbols when trading 
against Priority Customer' to `Maker Fee for Non-Select Symbols when 
trading against Priority Customer.' The Exchange also proposes to 
delete the column titled `Maker Fee for Non-Select Penny Pilot Symbols 
when trading against Priority Customer' because these symbols are now 
represented in the column for maker fees for Select Symbols.
    With this proposed rule change, the taker fee for complex orders in 
the Additional Select Symbols will remain unchanged because the 
Exchange currently charges the same taker fee for complex orders in the 
Select Symbols (excluding SPY) and in the Non-Select Penny Pilot 
Symbols.\21\ Specifically, for complex orders in the Select Symbols 
(excluding SPY) and in the Non-Select Penny Pilot Symbols, the Exchange 
currently charges a taker fee of: (i) $0.39 per contract for Market 
Maker orders; (ii) $0.40 per contract for Non-ISE Market Maker, Firm 
Proprietary/Broker-Dealer and Professional Customer orders; and (iii) 
$0.00 per contract for Priority Customer orders.
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    \21\ The Additional Select Symbols are currently subject to the 
fee listed in the column titled Taker Fee for Non-Select Penny Pilot 
Symbols. See Schedule of Fees, Section II, Complex Order Fees and 
Rebates.
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    With this proposed rule change, the Fee for Crossing Orders when 
trading complex orders in the Additional Select Symbols will remain 
unchanged because the Exchange currently charges $0.20 per contract 
(for largest leg only) for complex Crossing Orders in all symbols, 
except for Priority Customers who are currently charged $0.00 per 
contract.
    With this proposed rule change, the Fee for Responses to Crossing 
Orders when trading complex orders in the Additional Select Symbols 
will remain unchanged because the Exchange currently charges $0.40 per 
contract for Responses to Crossing Orders when trading complex orders 
in the Select Symbols and in the Penny Pilot Symbols.\22\
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    \22\ The Additional Select Symbols are currently subject to the 
fee listed in the column titled Fee for Responses to Crossing Orders 
for Select Symbols and Penny Pilot Symbols. See Schedule of Fees, 
Section II, Complex Order Fees and Rebates.
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    Additionally, the Exchange currently provides Market Makers with a 
discount when trading against Priority Customer orders that are 
preferenced to them. This discount is applicable when Market Makers add 
or remove liquidity in the Select Symbols, in SPY, in the Non-Select 
Penny Pilot Symbols and in the Non-Penny Pilot Symbols. The Additional 
Select Symbols are currently a part of the Non-Select Penny Pilot 
Symbols and therefore this discount will continue to apply to the 
Additional

[[Page 17270]]

Select Symbols when they become Select Symbols.
    Since the Exchange is proposing to move all the ISE-listed Penny 
Pilot Program symbols to its list of Select Symbols, there is no longer 
a need to separately identify these two groups of symbols on the 
Schedule of Fees. Therefore, the Exchange proposes to rename certain 
columns applicable to Taker Fees in Section II (Complex Order Fees and 
Rebates). Specifically, the Exchange proposes to rename the column 
titled `Taker Fee for non-Penny Pilot Symbols' as `Taker Fee for Non-
Select Symbols.' The Exchange also proposes to rename the column titled 
`Fee for Responses to Crossing Orders for Select Symbols and Penny 
Pilot Symbols' to `Fee for Responses to Crossing Orders for Select 
Symbols.' And finally, the Exchange proposes to rename the column 
titled `Fee for Responses to Crossing Orders for non-Penny Pilot 
Symbols' to `Fee for Responses to Crossing Orders for Non-Select 
Symbols.' The Exchange also proposes to delete the column titled `Taker 
Fee for Non-Select Penny Pilot Symbols' because these symbols are now 
represented in the column for taker fees for Select Symbols.
    Further, the Exchange proposes to re-define Select Symbols in the 
Preface of the Schedule of Fees as options overlying all symbols listed 
on the ISE that are in the Penny Pilot Program and providing a link to 
a page on the Exchange's Web site where a current list of ISE-listed 
symbols that are in the Penny Pilot Program is made available. 
Additionally, with this proposed rule change, all ISE-listed symbols 
that are in the Penny Pilot Program will now be subject to the 
Exchange's maker/taker fees and rebates and the PFOF fee will no longer 
apply to these symbols. The Exchange, therefore, proposes to amend the 
PFOF fee for Penny Pilot Symbols in Section IV. D. by removing that fee 
from the Schedule of Fees altogether.
2. Rebates for Priority Customer Complex Orders
    The Exchange currently provides volume-based tiered rebates for 
Priority Customer complex orders in the Select Symbols (excluding SPY), 
in SPY, in the Non-Select Penny Pilot Symbols and in the Non-Penny 
Pilot Symbols when these orders trade with non-Priority Customer orders 
in the complex order book.
    For the Additional Select Symbols,\23\ the Exchange currently 
provides a base rebate of $0.33 per contract, per leg, for Priority 
Customer complex orders when these orders trade with non-Priority 
Customer complex orders in the complex order book. Additionally, 
Members who achieve a certain level of average daily volume (ADV) of 
executed Priority Customer complex order contracts across all symbols 
during a calendar month are provided a rebate of $0.35 per contract, 
per leg, in these symbols, if a Member achieves an ADV of 40,000 
Priority Customer complex order contracts; $0.37 per contract, per leg, 
in these symbols, if a Member achieves an ADV of 75,000 Priority 
Customer complex order contracts; $0.38 per contract, per leg, in these 
symbols, if a Member achieves an ADV of 125,000 Priority Customer 
complex order contracts; and $0.39 per contract, per leg, in these 
symbols, if a Member achieves an ADV of 225,000 Priority Customer 
complex order contracts. The highest rebate amount achieved by the 
Member for the current calendar month applies retroactively to all 
Priority Customer complex order contracts that trade with non-Priority 
Customer complex orders in the complex order book executed by the 
Member during such calendar month.
---------------------------------------------------------------------------

    \23\ The Additional Select Symbols are currently subject to the 
rebate listed in the column titled Rebate for non-Select Penny Pilot 
Symbols. See Schedule of Fees, Section II, Complex Order Fees and 
Rebates.
---------------------------------------------------------------------------

    For Select Symbols (excluding SPY), the Exchange currently provides 
a base rebate of $0.34 per contract, per leg, for Priority Customer 
complex orders when these orders trade with non-Priority Customer 
complex orders in the complex order book. Additionally, Members who 
achieve a certain level of average daily volume (ADV) of executed 
Priority Customer complex order contracts across all symbols during a 
calendar month are provided a rebate of $0.37 per contract, per leg, in 
these symbols, if a Member achieves an ADV of 40,000 Priority Customer 
complex order contracts; $0.38 per contract, per leg, in these symbols, 
if a Member achieves an ADV of 75,000 Priority Customer complex order 
contracts; $0.39 per contract, per leg, in these symbols, if a Member 
achieves an ADV of 125,000 Priority Customer complex order contracts; 
and $0.40 per contract, per leg, in these symbols, if a Member achieves 
an ADV of 225,000 Priority Customer complex order contracts. The 
highest rebate amount achieved by the Member for the current calendar 
month applies retroactively to all Priority Customer complex order 
contracts that trade with non-Priority Customer complex orders in the 
complex order book executed by the Member during such calendar month.
    The Exchange now proposes to lower the rebate payable for the first 
three tiers for Select Symbols (excluding SPY). Specifically, the 
Exchange proposes to lower the base rebate from $0.34 per contract to 
$0.33 per contract; lower the rebate payable for reaching an ADV of 
40,000 Priority Customer complex order contracts from $0.37 per 
contract to $0.35 per contract; and lower the rebate payable for 
reaching an ADV of 75,000 Priority Customer complex order contracts 
from $0.38 per contract to $0.37 per contract. The Exchange is not 
proposing any change to the remaining tiers. With this proposed rule 
change, the Exchange seeks to standardize the rebate payable for 
Priority Customer complex orders that trade with non-Priority Customer 
complex orders in the complex order book in the Select Symbols and in 
the Additional Select Symbols.
    With the proposed change noted in the preceding paragraph, the 
rebate levels payable for Priority Customer complex orders in the 
Additional Select Symbols will, in some cases, remain the same (i.e., 
the base rebate, the rebate level for reaching an ADV of 40,000 
Priority Customer complex order contracts and the rebate level for 
reaching an ADV of 75,000 Priority Customer complex order contracts). 
The rebate levels payable for Priority Customer complex orders in the 
Additional Select Symbols for the highest two tiers will, however, 
increase (i.e., the rebate level for reaching an ADV of 125,000 
Priority Customer complex order contracts will increase from $0.38 per 
contract to $0.39 per contract and the rebate level for reaching an ADV 
of 225,000 Priority Customer complex order contracts will increase from 
$0.39 per contract to $0.40 per contract) because the rebate levels 
payable for Priority Customer complex orders in the Select Symbols for 
those two tiers are higher than the rebate levels currently payable for 
Priority Customer complex orders in Non-Select Penny Pilot Symbols.
    Again, as noted above, the Exchange is proposing to move all the 
ISE-listed Penny Pilot Program symbols to its list of Select Symbols. 
As a result, there is no longer a need to separately identify these two 
groups of symbols on the Schedule of Fees. Therefore, the Exchange 
proposes to rename certain columns applicable to Rebates in Section II 
(Complex Order Fees and Rebates). Specifically, the Exchange proposes 
to rename the column titled `Rebate for non-Select non-Penny Pilot 
Symbols' as `Rebate for Non-Select Symbols.' The Exchange also proposes 
to rename the column titled `PIM Break-

[[Page 17271]]

up Rebate for Select Symbols and Penny Pilot Symbols' as `PIM Break-up 
Rebate for Select Symbols.' And finally, the Exchange proposes to 
rename the column titled `Facilitation and Solicitation Break-up Rebate 
for Select Symbols and Penny Pilot Symbols' as `Facilitation and 
Solicitation Break-up Rebate for Select Symbols.' The Exchange also 
proposes to delete the column titled `Rebate for non-Select Penny Pilot 
Symbols' because these symbols are now represented in the column for 
rebates for Select Symbols.
3. New Rebate for Incremental Priority Customer Complex Orders
    As noted above, the Exchange currently provides volume-based tiered 
rebates for Priority Customer complex orders in the Select Symbols 
(excluding SPY), in SPY, in the Non-Select Penny Pilot Symbols and in 
the Non-Penny Pilot Symbols when these orders trade with non-Priority 
Customer orders in the complex order book. In order to enhance the 
Exchange's competitive position and to incentivize Members to increase 
the amount of Priority Customer complex orders in these symbols that 
they send to the Exchange, the Exchange now proposes to adopt an 
additional rebate of $0.01 per contract payable for incremental 
Priority Customer complex order volume above the highest tier. In other 
words, if Member ABCD achieves an ADV of 230,000 Priority Customer 
complex order contracts during March, then in addition to receiving the 
highest rebate level of $0.40 per contract because Member ABCD met the 
highest tier volume threshold, Member ABCD will also receive an 
additional $0.01 per contract for the additional eligible ADV of 5,000 
Priority Customer complex order contracts it traded above the highest 
threshold of 225,000 Priority Customer complex order contracts. This 
proposed new incremental rebate of $0.01 per contract will apply to 
Priority Customer complex orders in the Select Symbols, in SPY and in 
the Non-Select Symbols when these orders trade with non-Priority 
Customer orders in the complex order book.
    With this proposed rule change, the Exchange expects to attract 
additional order flow of regular and complex orders in the Additional 
Select Symbols. The Exchange's maker/taker fees and rebates are 
competitively priced and have been effective in attracting order flow 
of regular and complex orders in the Select Symbols.
    With this proposed rule change, the taker fees and Response to 
Crossing Order fees charged to all market participants for regular 
orders in the Additional Select Symbols will increase, except for Non-
ISE Market Makers whose fee [sic] will decrease, while the maker fees 
for regular orders in the Additional Select Symbols will decrease, 
except for Priority Customer maker fees, which will remain the same at 
$0.00 per contract. Market Makers will now also be eligible for the 
Market Maker Plus rebate, which was previously not applicable to the 
Additional Select Symbols. This proposed rule change does not proposed 
[sic] any change to the maker and taker fees for complex orders in the 
Additional Select Symbols as those fees remain unchanged. And as noted 
above, the base rebate level and the rebate levels for tiers 1 and 2 
will remain unchanged for Priority Customer complex order [sic] in the 
Additional Select Symbols while the rebate levels payable for Priority 
Customer complex orders in the Additional Select Symbols for the two 
highest tiers will increase compared to the current rebate levels for 
this group of symbols.
2. Basis
    The Exchange believes that its proposal to amend its Schedule of 
Fees is consistent with Section 6(b) of the Act \24\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \25\ in 
particular, in that it is an equitable allocation of reasonable fees 
and other charges among Exchange members and other persons using its 
facilities.
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    \24\ 15 U.S.C. 78f(b).
    \25\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that it is reasonable to add the Additional 
Select Symbols to the current list of Select Symbols. The Exchange 
believes that applying the fees and rebates applicable to Select 
Symbols to the Additional Select Symbols will attract additional order 
flow to the Exchange. Select Symbol pricing has proven beneficial for 
the Exchange and its participants and the Exchange believes that moving 
the Additional Select Symbols to Select Symbols pricing would enhance 
liquidity and participation in those symbols.
    The Exchange believes that it is equitable and not unfairly 
discriminatory to amend its list of Select Symbols to add the 
Additional Select Symbols because the fees and rebates for Select 
Symbols would apply uniformly to all categories of participants in the 
same manner. All market participants who trade options in the Select 
Symbols would be uniformly subject to the fees and rebates applicable 
to those symbols.
    The Exchange believes the proposed rule change is reasonable and 
equitable because it generally lowers the maker fees applicable to 
market participants and believes that the lower maker fees will attract 
additional maker liquidity and size to the Exchange in the Additional 
Select Symbols. Additionally, while this proposed rule change proposes 
to increase the taker fees applicable to market participants, the 
Exchange believes the benefits of better market quality will outweigh 
the taker fee increases based on the Exchange's experience with trading 
in the Select Symbols. Further, the Exchange believes this proposed 
rule change is reasonable and equitable because it will result in 
market participants receiving higher rebates when they achieve the 
volume threshold for the two highest tiers of Priority Customer complex 
orders ADV for orders [sic] trade with non-Priority Customer complex 
orders in the complex order book as the current rebate payable for 
these orders in Select Symbols is higher than the current rebate 
payable for these orders in Additional Select Symbols.
    The Exchange believes that it is reasonable and equitable to 
provide rebates for Priority Customer complex orders when these orders 
trade with Non-Priority Customer complex orders in the complex order 
book because paying a rebate would continue to attract additional order 
flow to the Exchange and create liquidity in the symbols that are 
subject to the rebate, which the Exchange believes ultimately will 
benefit all market participants who trade on ISE. The Exchange already 
provides these rebates, and is now proposing to adopt a unique rebate 
for incremental volume to encourage Members who trade a lot on ISE to 
trade more. With this proposed rule change, Market Makers will also now 
be eligible to receive the Market Maker Plus rebate which was not 
previously applicable to the Additional Select Symbols. The Exchange 
believes that the proposed rebates are competitive with rebates 
provided by other exchanges and are therefore reasonable and equitably 
allocated to those members that direct orders to the Exchange rather 
than to a competing exchange.
    The Exchange believes that it is reasonable and equitable to 
provide a discount to Market Makers on preferenced orders as an 
incentive for them to quote in the complex order book. ISE notes that 
with this proposed rule change, the Exchange will continue to maintain 
the differential that was previously in place for the Additional Select 
Symbols.
    The Exchange believes that the proposed changes are non-

[[Page 17272]]

discriminatory because the proposal simply moves the Additional Select 
Symbols from one category of fees into another category thereby 
applying fees currently in effect. Further, the Exchange believes that 
it is equitable and not unfairly discriminatory to amend its list of 
Select Symbols to add the Additional Select Symbols to the Select 
Symbols because the fees applicable to the Select Symbols would apply 
uniformly to all categories of participants in the same manner. All 
market participants who trade the Select Symbols would be uniformly 
subject to the fees and rebates applicable to those symbols.

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

    ISE does not believe that the proposed rule change will impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. This rule change, which 
proposes to move a group of symbols to an existing category of symbols, 
does not impose any burden on competition. With this proposed rule 
change, the Additional Select Symbols will be subject to fees and 
rebates that are already in place on the Exchange and therefore, do not 
impose any additional burden on competition that is not necessary or 
appropriate in furthering the purposes of the Act. The Exchange 
believes that the proposed changes promote competition, as they are 
designed to allow the Exchange to better compete for order flow and 
improve the Exchange's competitive position.

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 \26\ and subparagraph (f)(2) of Rule 19b-4 
thereunder,\27\ because it establishes a due, fee, or other charge 
imposed by ISE.
---------------------------------------------------------------------------

    \26\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \27\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    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.

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-2013-19 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-2013-19. 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 such 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-2013-19 and should be 
submitted on or before April 10, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
---------------------------------------------------------------------------

    \28\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-06394 Filed 3-19-13; 8:45 am]
BILLING CODE 8011-01-P