Document ID: SEC-2012-0835-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2012-05-25T04:00Z

[Federal Register Volume 77, Number 102 (Friday, May 25, 2012)]
[Notices]
[Pages 31411-31413]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-12722]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67035; File No. SR-ISE-2012-37]

Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change to Terminate a Pilot Program Related to an Incentive Plan for 
Certain Foreign Currency Options Traded on the Exchange and To Make a 
Technical Change to the Schedule of Fees

May 21, 2012.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is 
hereby given that on May 8, 2012, 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 and II below, which Items have been 
prepared by the Exchange. 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 terminate a pilot program related to an 
incentive plan for certain Foreign Currency (``FX'') options traded on 
the Exchange and to make a technical change to 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 proposes to terminate a pilot program related to an 
incentive plan for certain FX options traded on the Exchange and to 
make a technical change to its Schedule of Fees. First, the Exchange 
currently trades a number of FX options, including options on the New 
Zealand dollar (``NZD''), the Mexican peso (``PZO''), the Swedish krona 
(``SKA''), the Brazilian real (``BRB''), the Australian dollar 
(``AUX''), the British pound (``BPX''), the Canadian dollar (``CDD''), 
the euro (``EUI''), the Japanese yen (``YUK'') and the Swiss franc 
(``SFC'').\3\ On August 3, 2009, the Exchange adopted an incentive plan 
applicable to market makers in NZD, PZO and SKA,\4\ and on January 19, 
2010, added BRB to the

[[Page 31412]]

incentive plan,\5\ and on March 1, 2011, added AUX, BPX, CDD, EUI, YUK 
and SFC to the incentive plan.\6\
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    \3\ The Commission previously approved the trading of options on 
NZD, PZO, SKA, BRB, AUX, BPX, CDD, EUI, YUK and SFC. See Securities 
Exchange Act Release No. 55575 (April 3, 2007), 72 FR 17963 (April 
10, 2007) (SR-ISE-2006-59).
    \4\ See Securities Exchange Act Release No. 60536 (August 19, 
2009), 74 FR 43204 (August 26, 2009) (SR-ISE-2009-59).
    \5\ See Securities Exchange Act Release No. 61459 (February 1, 
2010), 75 FR 6248 (February 8, 2010) (SR-ISE-2010-07).
    \6\ See Securities Exchange Act Release No. 64012 (March 2, 
2011), 76 FR 12778 (March 8, 2011) (SR-ISE-2011-11).
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    The Exchange adopted the incentive plan to promote trading in NZD, 
PZO SKA, BRB, AUX, BPX, CDD, EUI, YUK and SFC (``Incentive Plan 
Symbols''). Pursuant to the incentive plan, the Exchange waives the 
transaction fees for the Early Adopter \7\ FXPMM \8\ and all Early 
Adopter FXCMMs \9\ that make a market in the Incentive Plan Symbols for 
as long as the incentive plan is in effect. Further, pursuant to a 
revenue sharing agreement entered into between an Early Adopter Market 
Maker and ISE, the Exchange pays the Early Adopter FXPMM forty percent 
(40%) of the transaction fees collected on any customer trade in the 
Incentive Plan Symbols and pays up to ten (10) Early Adopter FXCMMs 
twenty percent (20%) of the transaction fees collected for trades 
between a customer and that FXCMM in the Incentive Plan Symbols.
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    \7\ Participants in the incentive plan are known on the 
Exchange's Schedule of Fees as Early Adopter Market Makers.
    \8\ A FXPMM is a primary market maker selected by the Exchange 
that trades and quotes in FX Options only. See ISE Rule 2213.
    \9\ A FXCMM is a competitive market maker selected by the 
Exchange that trades and quotes in FX Options only. See ISE Rule 
2213.
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    Market makers interested in the [sic] participating in the 
incentive plan are required to enroll by a certain date. Since the 
inception of the incentive plan, the Exchange has continuously extended 
the date by which market makers may join the incentive plan,\10\ with 
the most recent extension expiring on March 30, 2012.\11\ The Exchange 
notes that the incentive plan has not achieved its intended objective 
of attracting more market makers and therefore, the Exchange has 
decided to no longer extend the date by which market makers may join 
the incentive plan. With this proposed rule change, the Exchange is 
essentially closing the window for market makers to join the incentive 
plan. The Exchange notes that while market makers will no longer be 
able to enroll in the incentive plan, those market makers that enrolled 
in the incentive plan on or before March 30, 2012 will continue to 
participate in the incentive plan. The Exchange proposes to reflect 
this change on its Schedule of Fees by amending the text that reflects 
the incentive plan.
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    \10\ See Securities Exchange Act Release Nos. 60810 (October 9, 
2009), 74 FR 53527 (October 19, 2009) (SR-ISE-2009-80), 61334 
(January 12, 2010), 75 FR 2913 (January 19, 2010) (SR-ISE-2009-115), 
61851 (April 6, 2010), 75 FR 18565 (April 12, 2010) (SR-ISE-2010-
27), 62503 (July 15, 2010), 75 FR 42812 (July 22, 2010) (SR-ISE-
2010-71), 36045 (October 5, 2010), 75 FR 62900 (October 13, 2010) 
(SR-ISE-2010-100), 63639 (January 4, 2011), 76 FR 1488 (January 10, 
2011) (SR-ISE-2010-121), 64202 (April 6, 2011), 76 FR 20431 (April 
12, 2011) (SR-ISE-2011-16), 64861 (July 12, 2011), 76 FR 42145 (July 
18, 2011) (SR-ISE-2011-38); and 65530 (October 11, 2011), 76 FR 
64136 (October 17, 2011) (SR-ISE-2011-66).
    \11\ See Securities Exchange Act Release No. 66103 (January 5, 
2012), 77 FR 1757 (January 11, 2012) (SR-ISE-2011-85).
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    Second, the Exchange recently filed a proposed rule change to amend 
an existing fee cap program and a related service fee (``Fee Cap 
Filing'').\12\ In the Fee Cap Filing, the Exchange deleted what was 
previously footnote 2 on page 17 of the Schedule of Fees and renumbered 
what was previously footnote 3 to be footnote 2. The previous footnote 
3, which is now footnote 2, references a discount available to 
subscribers of the Exchange's various market data products. In the Fee 
Cap Filing, the Exchange failed to renumber footnote 3 in the body of 
the Schedule of Fees as footnote 2. The Exchange proposes to make that 
change with this filing.
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    \12\ See Securities Exchange Act Release No. 66793 (April 12, 
2012), 77 FR 23313 (April 18, 2012) (SR-ISE-2012-27).
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2. Statutory Basis
    The Exchange believes that its proposal to clarify its Schedule of 
Fees is consistent with Section 6(b) of the Securities and Exchange Act 
of 1934 (the ``Exchange Act'') \13\ in general, and furthers the 
objectives of Section 6(b)(4) of the Exchange Act \14\ in particular, 
in that it is an equitable allocation of reasonable dues, fees and 
other charges among Exchange members and other persons using its 
facilities. In particular, the Exchange believes that because the 
incentive plan has not achieved its intended objective of attracting 
more market makers, it is reasonable for ISE to no longer permit market 
makers to enroll in the incentive plan. The Exchange believes the 
proposed rule change is also reasonable because it corrects a 
footnoting error and thereby provides greater transparency to the 
Exchange's Schedule of Fees. The Exchange notes that the proposed rule 
change is also equitably allocated and not unfairly discriminatory in 
that it treats similarly situated market participants in the same 
manner, i.e., all Exchange market makers are now excluded from 
enrolling in the incentive plan.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 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 Exchange 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)(A)(ii) of the Exchange Act.\15\ 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 Exchange Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.
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    \15\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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 Exchange 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-2012-37 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-2012-37. This file 
number should be included on the subject line if email is used. To help 
the

[[Page 31413]]

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-2012-37 and should be 
submitted on or before June 15, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-12722 Filed 5-24-12; 8:45 am]
BILLING CODE 8011-01-P