Document ID: SEC-2012-1920-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2012-11-21T05:00Z

[Federal Register Volume 77, Number 225 (Wednesday, November 21, 2012)]
[Notices]
[Pages 69905-69908]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-28260]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68240; File No. SR-ISE-2012-88]

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

November 15, 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 November 6, 2012, the International Securities Exchange, LLC 
(the ``ISE'' or the ``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 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.

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 93 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\ The Exchange also currently 
assesses maker/taker fees and rebates for certain regular orders in 62 
option classes (``Special Non-Select Penny Pilot Symbols'').\6\
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    \3\ Options classes subject to maker/taker fees and rebates are 
identified by their ticker symbol on the Exchange's Schedule of 
Fees.
    \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); and 67628 
(August 9, 2012), 77 FR 49049 (August 15, 2012) (SR-ISE-2012-71).
    \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) and 67628 
(August 9, 2012), 77 FR 49049 (August 15, 2012) (SR-ISE-2012-71).
    \6\ The Special Non-Select Penny Pilot Symbols are identified by 
their ticker symbol on the Exchange's Schedule of Fees. See Exchange 
Act Release Nos. 67201 (June 14, 2012), 77 FR 37082 (June 20, 2012) 
(SR-ISE-2012-49) and 67627 (August 9, 2012), 77 FR 49046 (August 15, 
2012) (SR-ISE-2012-70).
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    The Exchange currently applies maker and taker fees and rebates to 
regular orders in the Special Non-Select Penny Pilot Symbols. 
Specifically, the Exchange applies the following maker fees and rebates 
for orders that trade against Priority and Non-Priority Customer 
orders:
     For Market Maker,\7\ Firm Proprietary/Broker-Dealer and 
Professional Customer \8\ orders, a maker fee of $0.35 per contract;
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    \7\ The term ``Market Makers'' refers to ``Competitive Market 
Makers'' and ``Primary Market Makers'' collectively. See ISE Rule 
100(a)(25).
    \8\ 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 \9\ orders, a maker fee of $0.40 
per contract;
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    \9\ 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 \10\ orders, a maker rebate of $0.25 
per contract.
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    \10\ 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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    Additionally, the Exchange applies the following taker fees and 
rebates for orders that trade against Non-Priority Customer orders:
     For Market Maker orders, a taker fee of $0.20 per 
contract;
     For Non-ISE Market Maker orders, a taker fee of $0.35 per 
contract;
     For Firm Proprietary/Broker-Dealer and Professional 
Customer orders, a taker fee of $0.25 per contract;
     For Priority Customer orders, a taker rebate of $0.32 per 
contract.
    The Exchange also currently applies the following taker fees for 
orders that trade against Priority Customer orders:
     For Market Maker orders, a taker fee of $0.32 per 
contract;
     For Non-ISE Market Maker orders, a taker fee of $0.40 per 
contract;
     For Firm Proprietary/Broker-Dealer and Professional 
Customer orders, a taker fee of $0.35 per contract;
     For Priority Customer orders, a taker fee of $0.00 per 
contract.
    Additionally, the Exchange provides Market Makers with a two-cent 
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 Special Non- Select Penny Pilot Symbols. The 
Exchange also currently charges a fee of $0.20 per contract to all 
market participants [sic] for Crossing Orders in the Special Non-Select 
Penny

[[Page 69906]]

Pilot Symbols, and a fee of $0.40 per contract to all market 
participants for Responses to Crossing Orders in the Special Non-Select 
Penny Pilot Symbols. Finally, 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, 
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 except when those contracts trade against pre-
existing orders and quotes on the Exchange's orderbooks.
    The purpose of this proposed rule change is to remove the Special 
Non-Select Penny Pilot Symbols category from the Schedule of Fees in 
its entirety and to move the Special Non-Select Penny Pilot Symbols 
into the Select Symbols category, such that the fees applicable to the 
Select Symbols will now be applied to the 62 options classes that had 
been categorized as Special Non-Select Penny Pilot Symbols. The 
Exchange is proposing this change in order to attract additional order 
flow to the Exchange.
    Specifically, the Exchange proposes to remove the following sixty-
five (65) symbols from the list of Special Non-Select Penny Pilot 
Symbols and add sixty-two (62) of them to the list of Select Symbols: 
\11\ ACI, AGNC, AMLN, AMZN, ANR, APA, ARNA, ATPG, AUY, BAX, BTU, CLF, 
COP, CRM, CVX, DAL, DD, DE, DIS, DOW, EBAY, FDX, GLW, GM, GMCR, GS, HD, 
HGSI, JCP, JOY, KBH, KGC, LULU, MA, MBI, MCP, MDT, MMR, MOS, MRK, NKE, 
PEP, QQQ, S, SD, SDS, SHLD, SINA, SIRI, SLW, SSO, TZA, UNP, UPS, USB, 
UTX, VLO, WAG, WDC, WLT, WYNN, XHB, XLK, XLU and ZNGA.\12\ 
Additionally, the Exchange is proposing to delete all references to 
Special Non-Select Penny Pilot Symbols and its accompanying notes as 
this category will no longer exist.
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    \11\ Due to corporate actions, AMLN, ATPG and HGSI are no longer 
traded and thus are being removed from the Schedule of Fees.
    \12\ [sic]
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    With this proposed rule change, the 62 symbols noted above will now 
be subject to the fees and rebates for Select Symbols. The Exchange 
currently charges the following maker fees and rebates for Select 
Symbols: for Market Maker, Non-ISE Market Maker, Firm Proprietary/
Broker-Dealer and Professional Customer orders, $0.10 per contract; for 
Priority Customer orders, $0.00 per contract and for Market Maker Plus 
orders, a rebate of $0.10 per contract. The Exchange also currently 
charges the following taker fees for Select Symbols: For Market Maker 
and Market Maker Plus \13\ orders, $0.32 per contract; for Non-ISE 
Market Maker orders, $0.36 per contract; for Firm Proprietary/Broker-
Dealer and Professional Customer orders, $0.33 per contract; and for 
Priority Customer orders, $0.25 per contract.
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    \13\ 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 
Crossing Orders in the Select Symbols, and a fee of $0.40 per contract 
to all market participants for Responses to Crossing Orders in the 
Select Symbols. Finally, 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, 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 except when those contracts trade against pre-
existing orders and quotes on the Exchange's orderbooks.
    With this proposed rule change, non-Priority Customer market 
participants will generally pay lower taker fees as the taker fees 
charged for Special Non-Select Penny Pilot Symbols were marginally 
higher that the taker fees charged by the Exchange for Select Symbols. 
Specifically, the taker fee for Select Symbols is lower in most cases 
than the taker fee the Exchange charged market participants when 
trading against Priority Customers in the Special Non-Select Penny 
Pilot Symbols. The Exchange notes, however, that the taker fees for 
Select Symbols are nominally higher than the taker fees charged by the 
Exchange to market participants when trading against Non-Priority 
Customers. Further, with this proposed rule change, the taker fee 
charged to Priority Customer orders will also increase as the taker fee 
for Priority Customer orders in the Select Symbols is $0.25 per 
contract while Priority Customer orders in the Special Non-Penny Pilot 
Symbols received a rebate for both making and taking liquidity. 
Priority Customer orders that add liquidity will not pay a fee or 
receive a rebate consistent with the fees and rebates applicable to 
Select Symbols.
    With this proposed rule change, non-Priority Customers will also 
pay a lower maker fee as the maker fee charged for Special Non-Select 
Penny Pilot Symbols were higher than the maker fees charged by the 
Exchange for Select Symbols. The Exchange notes, however, that while 
Priority Customer orders in the Special Non-Select Penny Pilot Symbols 
received a rebate when trading against other Priority Customer orders 
and Non-Priority Customers, this rebate will no longer be payable. With 
this proposed rule change, Priority Customer orders in the symbols that 
are subject to this proposed rule change will not be charged a maker 
fee.
    Also, with this proposed rule change, the fee for Crossing Orders 
and Responses to Crossing Orders will remain at $0.20 per contract 
($0.00 per contract for Priority Customers) and $0.40 per contract, 
respectively. Further, the rebate for contracts that are submitted to 
the Price Improvement Mechanism that do not trade with their contra 
order will also remain at $0.25 per contract as will the rebate for 
contracts that are submitted to the Facilitation and Solicited Order 
Mechanisms that do not trade with their contra order except when those 
contracts trade against pre-existing orders and quotes on the 
Exchange's orderbooks. That rebate will also remain at $0.15 per 
contract.
    Further, the Exchange currently provides a $0.20 per contract fee 
credit to Primary Market Makers (PMM) for execution of Priority 
Customer orders in the Special Non-Select Penny Pilot 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 Select Symbols, 
this credit is equal to the fee charged by a destination market and the 
symbols that are subject to this proposed rule change will now be 
provided with a credit that that is equal to the fee charged by a 
destination market.

[[Page 69907]]

    The Exchange also currently provides a $0.20 per contract credit 
for responses to flash orders in the Special Non-Select Penny Pilot 
Symbols when trading against Professional Customers. For Select 
Symbols, the per contract fee credit for responses to flash orders is 
$0.10 per contract when trading Priority Customers, $0.12 per contract 
when trading against Preferenced Priority Customers and $0.10 per 
contract when trading against Professional Customers. The symbols that 
are subject to this proposed rule change will now be provided the 
rebate at levels that are currently in place for Select Symbols, as 
described above.
    Since the rate changes to the Schedule of Fees pursuant to this 
proposal will be effective upon filing, for the transactions occurring 
in November 2012 prior to the effective date of this filing members 
will be assessed the rates in effect immediately prior to those 
proposed by this filing. For transactions occurring in November 2012 on 
and after the effective date of this filing, members will be assessed 
the rates proposed by this filing.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Schedule of 
Fees is consistent with Section 6(b) of the Act \14\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \15\ 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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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that it is reasonable to remove the Special 
Non-Select Penny Pilot Symbols from its Schedule of Fees and add those 
symbols to the list of Select Symbols to increase order flow to the 
Exchange. Select Symbol pricing has proven beneficial for the Exchange 
and its participants and the Exchange believes that moving these 
symbols to Select Symbols pricing would enhance liquidity and 
participation in the 62 symbols. Additionally, removing the Special 
Non-Select Penny Pilot Symbols and adding those names to Select Symbols 
would standardize ISE fees.
    With this proposed rule change, non-Priority Customer market 
participants will generally pay lower taker fees as the taker fees 
charged for Special Non-Select Penny Pilot Symbols were marginally 
higher that the taker fees charged by the Exchange for Select Symbols. 
Specifically, the taker fee for Select Symbols is lower in most cases 
than the taker fee the Exchange charged market participants when 
trading against Priority Customers in the Special Non-Select Penny 
Pilot Symbols. The Exchange notes, however, that the taker fees for 
Select Symbols are nominally higher than the taker fees charged by the 
Exchange to market participants when trading against Non-Priority 
Customers. Further, with this proposed rule change, the taker fee 
charged to Priority Customer orders will also increase as the taker fee 
for Priority Customer orders in the Select Symbols is $0.25 per 
contract while Priority Customer orders in the Special Non-Penny Pilot 
Symbols received a rebate for both making and taking liquidity. 
Priority Customer orders that add liquidity will not pay a fee or 
receive a rebate consistent with the fees and rebates applicable to 
Select Symbols.
    With this proposed rule change, non-Priority Customers will also 
pay a lower maker fee as the maker fee charged for Special Non-Select 
Penny Pilot Symbols were higher than the maker fees charged by the 
Exchange for Select Symbols. The Exchange notes, however, that while 
Priority Customer orders in the Special Non-Select Penny Pilot Symbols 
received a rebate when trading against other Priority Customer orders 
and Non-Priority Customers, this rebate will no longer be payable. With 
this proposed rule change, Priority Customer orders in the symbols that 
are subject to this proposed rule change will not be charged a maker 
fee.
    With this proposed rule change, market participants will generally 
pay lower taker fees and lower maker fees while the fees for Crossing 
Orders and Responses to Crossing Orders will remain the same. Further, 
with this proposed rule change, the break-up rebates for contracts 
submitted to the Facilitation Mechanism, Solicited Order Mechanism and 
Price Improvement Mechanism will also remain unchanged. With this 
proposed rule change, the Exchange will no longer pay certain rebates 
that were previously applicable as the Exchange believes incenting 
market participants with rebates is no longer necessary to attract 
order flow in the symbols that are subject to this proposed rule 
change.
    The Exchange believes that the proposed changes are non-
discriminatory because the proposal simply collapses a category of fees 
into an existing category thereby applying fees currently in effect to 
these additional symbols. Further, the Exchange believes that it is 
equitable and not unfairly discriminatory to amend its list of Select 
Symbols to add the Special Non-Select Penny Pilot 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.
    The Exchange believes it remains an attractive venue for market 
participants to trade as its fees remain competitive with those charged 
by other exchanges for similar trading strategies. The Exchange 
operates in a highly competitive market in which market participants 
can readily direct order flow to another exchange if they deem fee 
levels at a particular exchange to be excessive. With this proposed fee 
change, the Exchange believes it remains an attractive venue for market 
participants to trade at favorable prices.

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.\16\ 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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    \16\ 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.

[[Page 69908]]

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-2012-88 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-2012-88. 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 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-2012-88 and should be 
submitted on or before December 12, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-28260 Filed 11-20-12; 8:45 am]
BILLING CODE 8011-01-P