Document ID: SEC-2012-1625-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2012-10-05T04:00Z

[Federal Register Volume 77, Number 194 (Friday, October 5, 2012)]
[Notices]
[Pages 61036-61037]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-24577]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67956; File No. SR-ISE-2012-78]

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

October 1, 2012.
    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 September 25, 2012, 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 the 
Substance of the Proposed Rule Change

    The ISE is proposing to amend its Schedule of Fees to note that 
responses to Non-Customer Flash Orders exposed to members are not 
charged a fee nor provided a credit. 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
    Under the intermarket linkage rules, the ISE cannot execute orders 
at a price that is inferior to the national best bid or offer 
(``NBBO''), nor can the Exchange place an order on its book that would 
cause the ISE best bid or offer to lock or cross another exchange's 
quote.\3\ How the Exchange handles orders in these circumstances 
depends on whether they are Public Customer Orders (i.e., orders for 
the account of a person that is not a broker-dealer) \4\ or Non-
Customer Orders (i.e., orders for the account of a broker-dealer).\5\
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    \3\ See ISE Rules 1901 and 1902.
    \4\ See ISE Rule 100(a)(39).
    \5\ See ISE Rule 100(a)(28).
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    Currently, when ISE is not at the NBBO, Public Customer Order are 
exposed to all ISE members to give them an opportunity to match the 
NBBO \6\ (``Flash Orders \7\'') before a Primary Market Maker (``PMM'') 
sends the order to another exchange for execution. The Exchange 
recently amended its rules to expose Non-Customer Orders in such 
circumstance before rejecting them, similar to the process used to 
expose Public Customer Orders before those orders are sent for 
execution pursuant to intermarket linkage rules.\8\
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    \6\ See Securities Exchange Act Release Nos. 57812 (May 12, 
2008), 73 FR 28846 (May 19, 2008) (SR-ISE-2008-50); 58038 (June 26, 
2008), 73 FR 38261 (June July 3, 2008) (SR-ISE-2008-50).
    \7\ The term Flash Order is currently defined in the Preface of 
the Exchange's Schedule of Fees as a Priority or Professional 
Customer order that is exposed at the National Best Bid or Offer by 
the Exchange to all members for execution, as provided under 
Supplementary Material .02 to ISE Rule 803.
    \8\ See Securities Exchange Act Release No. 67606 (August 7, 
2012), 77 FR 48180 (August 13, 2012) (SR-ISE-2012-69). The Exchange 
anticipates implementing this functionality in October 2012.
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    For Public Customer Flash Orders, the Exchange currently charges a 
regular execution fee for orders that are flashed in Non-Select Symbols 
and a taker fee for orders that are flashed in all other symbols.\9\ 
The Exchange also currently provides a credit for responses that trade 
against a flashed order.\10\
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    \9\ See ISE Schedule of Fees, Section I, Regular Order Fees and 
Rebates.
    \10\ See ISE Schedule of Fees, Section G, Credit for Responses 
to Flash Orders.
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    For Non-Customer Flash Orders, the Exchange will also charge a 
regular execution fee or a taker fee, as applicable, for the order that 
is flashed to Exchange Members. However, for responses that trade 
against Non-Customer Flash Orders, the Exchange will not provide a 
credit nor charge an

[[Page 61037]]

execution fee. The purpose of this proposed rule change is to adopt 
rule text on the Exchange's Schedule of Fees to note that responses to 
Non-Customer Flash Orders will not be charged a fee or provided a 
credit.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Schedule of 
Fees is consistent with Section 6(b) of the Securities and Exchange Act 
of 1934 (the ``Exchange Act'') \11\ in general, and furthers the 
objectives of Section 6(b)(4) of the Act \12\ 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. The 
Exchange believes that the proposed rule change which seeks to adopt 
clarifying text regarding the application of fees and credits for 
responses to certain flashed orders is both reasonable and equitable 
because members would benefit from clear guidance provided on the 
Exchange's fee schedule. Further, the Exchange does not believe it 
needs to provide an incentive to attract Non-Customer orders to the 
Exchange and therefore, has determined not to provide a credit for 
responses to Non-Customer Flash Orders. The Exchange provides a credit 
for responses to Customer Flash Orders as an incentive to attract 
Customer orders to the Exchange. The Exchange believes the proposed 
rule change is also reasonable because it makes clarifying changes to 
the Preface of the Schedule of Fees by amending the definition of Flash 
Orders to also include all orders, and to Section G of the Schedule of 
Fees thereby providing greater transparency to the Exchange's fees and 
rebates.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 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)(A)(ii) of the Act.\13\ 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.
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    \13\ 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 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-2012-78 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-2012-78. 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 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 offices of 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-2012-78, and should be submitted on or before 
October 26, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-24577 Filed 10-4-12; 8:45 am]
BILLING CODE 8011-01-P