Document ID: SEC-2015-0878-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes:International Securities Exchange, LLC
Posted Date: 2015-05-21T04:00Z

[Federal Register Volume 80, Number 98 (Thursday, May 21, 2015)]
[Notices]
[Pages 29358-29359]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-12283]

[[Page 29358]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74975; File No. SR-ISE-2015-17]

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

May 15, 2015.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on May 1, 2015, the International Securities Exchange, LLC (the 
``Exchange'' or the ``ISE'') filed with the Securities and Exchange 
Commission the proposed rule change, as described in Items I, II, and 
III below, which items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The ISE proposes to amend the Schedule of Fees to introduce tiered 
Market Maker Plus rebates based on the time quoting at the national 
best bid or offer (``NBBO'') in specified series. 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
    In order to promote and encourage liquidity in Select Symbols,\3\ 
the Exchange currently offers Market Makers \4\ that meet the quoting 
requirements for Market Maker Plus \5\ enhanced rebates for adding 
liquidity in those symbols. In particular, Market Makers that qualify 
for Market Maker Plus are currently provided a maker rebate of $0.20 
per contract in Select Symbols instead of the $0.10 per contract maker 
fee that applies to orders from other Market Makers in those 
symbols.\6\ The Exchange now proposes to introduce three tiers of 
Market Maker Plus rebates based on time quoting at the NBBO. As 
proposed, a Market Maker will qualify for a ``Tier 1'' Market Maker 
Plus rebate of $0.10 per contract if the Market Maker is on the NBBO at 
least 80% but lower than 85% of the time for series trading between 
$0.03 and $3.00 (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 $3.00 (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. If the Market Maker is instead on the NBBO at 
least 85% but lower than 95% of the time for applicable series 
described above, that Market Maker will qualify for a ``Tier 2'' Market 
Maker Plus rebate of $0.18 per contract. Finally, a Market Maker that 
is on the NBBO at least 95% of the time, will qualify for a ``Tier 3'' 
Market Maker Plus rebate of $0.22 per contract.
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    \3\ ``Select Symbols'' are options overlying all symbols listed 
on the ISE that are in the Penny Pilot Program.
    \4\ The term ``Market Makers'' refers to ``Competitive Market 
Makers'' and ``Primary Market Makers'' collectively. See ISE Rule 
100(a)(25).
    \5\ A Market Maker Plus is a Market Maker that is on the 
National Best Bid or National Best Offer at least 80% of the time 
for series trading between $0.03 and $3.00 (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 $3.00 (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. A Market Maker's single best and single worst quoting days 
each month based on the front two expiration months, on a per symbol 
basis, are excluded in calculating whether a Market Maker qualifies 
for this rebate, if doing so will qualify a Market Maker for the 
rebate.
    \6\ A $0.10 per contract fee applies when trading against 
Priority Customer complex orders that leg into the regular order 
book. There will be no fee charged or rebate provided when trading 
against non-Priority Customer complex orders that leg into the 
regular order book.
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    In addition, the Exchange notes that Market Makers that qualify for 
Market Maker Plus and execute a total affiliated Priority Customer 
average daily volume (``ADV'') \7\ of 200,000 contracts or more are 
currently provided an increased Market Maker Plus rebate of $0.22 per 
contract. The Exchange now proposes to eliminate this enhanced rebate 
based on affiliated Priority Customer volume.
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    \7\ Priority Customer ADV includes all volume in all symbols and 
order types. All eligible volume from affiliated Members will be 
aggregated in determining total affiliated Priority Customer ADV, 
provided there is at least 75% common ownership beween the Members 
as reflected on each Member's Form BD, Schedule A.
    For purposes of determining Priority Customer ADV, any day that 
the regular order book is not open for the entire trading day may be 
excluded from such calculation; provided that the Exchange will only 
remove the day for members that would have a lower ADV with the day 
included.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\8\ in general, and Section 
6(b)(4) of the Act,\9\ in particular, in that it is designed to provide 
for the equitable allocation of reasonable dues, fees, and other 
charges among its members and other persons using its facilities.
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    \8\ 15 U.S.C. 78f.
    \9\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that it is reasonable and equitable to offer 
tiered Market Maker Plus rebates as these rebates would reward members 
based on maintaining tight markets in series that they quote on ISE. 
The Exchange believes that maintaining tight markets benefits all 
market participants that trade on ISE, and has therefore determined to 
reflect this more fully in the rebates offered. With this proposal, 
Market Makers that qualify for Market Maker Plus will receive rebates 
that reflect the liquidity that they provide at the NBBO. The Exchange 
notes that it already provides a Market Maker Plus rebate for Market 
Makers that quote at the NBBO. The proposed rule change merely allows 
the Exchange to further incentivize Market Makers by reserving the very 
best rebates for Market Makers that maintain quotes that are at the 
NBBO the vast majority of the time. In this regard, the Exchange notes 
that Market Makers that are on the lower end of the current Market 
Maker Plus requirement will receive lower rebates than they do today, 
while Market Makers that routinely quote at the NBBO will receive 
higher rebates than currently offered. The Exchange does not believe 
that this is unfairly

[[Page 29359]]

discriminatory as all Market Makers are eligible to receive the higher 
tier Market Maker Plus rebates based on the percentage of time that 
they maintain quotes at the NBBO. Furthermore, the Exchange does not 
believe that it is unfairly discriminatory to offer these rebates only 
to Market Makers as Market Makers, and, in particular, those Market 
Makers that achieve Market Maker Plus status, are subject to additional 
requirements and obligations (such as quoting requirements) that other 
market participants are not.
    The Exchange further believes that it is reasonable, equitable, and 
not unfairly discriminatory to eliminate the higher Market Maker Plus 
rebate currently provided to Market Makers that qualify for Market 
Maker Plus and execute a total affiliated Priority Customer ADV of 
200,000 contracts or more as this incentive is no longer needed. Market 
Makers that wish to receive higher rebates may continue to do so by 
qualifying for the new highest tier of Market Maker Plus rebate offered 
to Market Makers that are on the NBBO in applicable series at least 95% 
of the time. The Exchange believes that this will be a more effective 
incentive for Market Makers to actively participate in the Market Maker 
Plus program as it is based on the quality of markets quoted and not 
tied to affiliated member volume.

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

    In accordance with Section 6(b)(8) of the Act,\10\ the Exchange 
does not believe that the proposed rule change will impose any burden 
on intermarket or intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The Exchange 
believes that the proposed Market Maker Plus rebates provide a valuable 
incentive for Market Makers to maintain tight markets on ISE and will 
thereby help the Exchange maintain its competitive standing. The 
Exchange operates in a highly competitive market in which market 
participants can readily direct their order flow to competing venues. 
In such an environment, the Exchange must continually review, and 
consider adjusting, its fees and rebates to remain competitive with 
other exchanges. For the reasons described above, the Exchange believes 
that the proposed fee changes reflect this competitive environment.
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    \10\ 15 U.S.C. 78f(b)(8).
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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 \11\ and subparagraph (f)(2) of Rule 19b-4 
thereunder,\12\ because it establishes a due, fee, or other charge 
imposed by ISE.
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    \11\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \12\ 17 CFR 240.19b-4(f)(2).
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    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 proposal 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 No. SR-ISE-2015-17 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549.

All submissions should refer to File No. SR-ISE-2015-17. 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 changes 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 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 No. SR-ISE-2015-17 and should be 
submitted on or before June 11, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-12283 Filed 5-20-15; 8:45 am]
BILLING CODE 8011-01-P