Document ID: SEC-2013-1094-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2013-06-19T04:00Z

[Federal Register Volume 78, Number 118 (Wednesday, June 19, 2013)]
[Notices]
[Pages 36812-36815]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-14607]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69757; File No. SR-ISE-2013-36]

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

June 13, 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 June 3, 2013, 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 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 purpose of this proposed rule change is to amend certain fees 
for regular orders in Non-Select Symbols \3\ and in FX Options traded 
on the Exchange. The fee changes discussed below apply to both standard 
options and mini options traded on ISE. The Exchange's Schedule of Fees 
has separate tables for fees applicable to standard options and mini 
options. The Exchange notes that while the discussion below relates to 
fees for standard options, the fees for mini options, which are not 
discussed below, are and shall continue to be \1/10\th of the fees for 
standard options.\4\
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    \3\ Non-Select Symbols are options overlying all symbols that 
are not in the Penny Pilot Program.
    \4\ See Securities Exchange Act Release No. 69270 (April 2, 
2013), 78 FR 20988 (April 8, 2013) (SR-ISE-2013-28).
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    For regular orders in Non-Select Symbols, the Exchange currently 
charges an execution fee of: i) $0.18 per

[[Page 36813]]

contract for Market Maker \5\ orders; ii) $0.20 per contract for Market 
Maker orders (for orders sent by Electronic Access Members); iii) $0.30 
per contract for Firm Proprietary/Broker-Dealer and Professional 
Customer \6\ orders; iv) $0.45 per contract for Non-ISE Market Maker 
\7\ orders; and v) $0.00 per contract for Priority Customer \8\ orders 
(for Singly Listed Symbols, this fee is $0.20 per contract). The 
Exchange now proposes to lower the execution fee for regular Firm 
Proprietary/Broker-Dealer and Professional Customer orders, from $0.30 
per contract to $0.20 per contract, when these market participants 
provide liquidity in the Non-Select Symbols. The Exchange is not 
proposing any change to the execution fee for other market 
participants.
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    \5\ The term ``Market Makers'' refers to ``Competitive Market 
Makers'' and ``Primary Market Makers'' collectively. See ISE Rule 
100(a)(25).
    \6\ A Professional Customer is a person who is not a broker/
dealer and is not a Priority Customer.
    \7\ 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.
    \8\ 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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    For regular orders in FX Options, the Exchange currently charges an 
execution fee of: (i) $0.18 per contract for Market Maker and Priority 
Customer orders; (ii) $0.20 per contract for Market Maker orders (for 
orders sent by Electronic Access Members); (iii) $0.30 per contract for 
Firm Proprietary/Broker-Dealer and Professional Customer orders; (iv) 
$0.45 per contract for Non-ISE Market Maker orders; (v) $0.40 per 
contract for Priority Customer orders in Early Adopter FX Option 
Symbols; and (vi) $0.00 per contract for Early Adopter Market Maker 
orders. The Exchange now proposes to lower the execution fee for 
regular Firm Proprietary/Broker-Dealer and Professional Customer 
orders, from $0.30 per contract to $0.20 per contract, when these 
market participants provide liquidity in FX Options. The Exchange is 
not proposing any change to the execution fee for other market 
participants.
    Finally, the Exchange proposes to remove a reference to a number of 
index options that previously traded on ISE pursuant to a license 
agreement and that have now been delisted by the Exchange. 
Specifically, ISE is removing reference to the following index options 
in Section VI. B. of the Schedule of Fees: the Russell 2000[supreg] 
Index (``RUT''), the Russell 1000[supreg] Index (``RUI''), the Mini 
Russell 2000[supreg] Index (``RMN''), the Morgan Stanley Retail Index 
(``MVR''), the Morgan Stanley High Tech Index (``MSH''), the KBW 
Mortgage Finance Index ``(MFX''), the S&P[supreg] MidCap 400 Index 
(``MID''), and the S&P[supreg] SmallCap 600 Index (``SML'').
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 ``Act'') \9\ in general, and furthers the objectives of 
Section 6(b)(4) of the Act \10\ 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.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that its proposal to assess a $0.20 per 
contract fee for regular Firm Proprietary/Broker-Dealer and regular 
Professional Customer orders in Non-Select Symbols and in FX Options 
when they provide liquidity is reasonable and equitably allocated 
because the fee is within the range of fees assessed by other exchanges 
employing similar pricing schemes. For example, NASDAQ Options Market 
(``NOM'') currently charges a fee of $0.45 per contract for similar 
orders in non-Penny Pilot options that provide liquidity in its regular 
order book,\11\ while NASDAQ OMX PHLX LLC (``PHLX'') charges $0.60 per 
contract for its foreign currency options regardless of whether the 
order provides liquidity or takes liquidity.\12\ The proposed fee is 
also reasonable and equitably allocated because it is identical to the 
fee currently charged by the Exchange for regular Crossing Orders in 
Non-Select Symbols and in FX Options.\13\ With this proposed rule 
change, regular Firm Proprietary/Broker-Dealer and regular Professional 
Customer orders will be charged the same fee when they provide 
liquidity as regular Market Maker (for orders sent by Electronic Access 
Members) orders and regular Priority Customer orders (for Singly Listed 
Symbols) are charged when they provide liquidity in Non-Select Symbols 
and in FX Options. The Exchange further notes that regular Firm 
Proprietary/Broker-Dealer and Professional Customer orders will now pay 
a lower fee than the fee currently charged to these orders, which the 
Exchange believes will serve as in incentive for market participants to 
direct this order flow to ISE rather than to a competing exchange.
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    \11\ See NOM fee schedule at http://nasdaq.cchwallstreet.com/NASDAQTools/PlatformViewer.asp?selectednode=chp_1_1_15&manual=%2Fnasdaq%2Fmain%2Fnasdaq-optionsrules%2F.
    \12\ See PHLX Fee Schedule at http://nasdaqomxphlx.cchwallstreet.com/NASDAQOMXPHLXTools/PlatformViewer.asp?selectednode=chp%5F1%5F4%5F1&manual=%2Fnasdaqomxphlx%2Fphlx%2Fphlx%2Drulesbrd%2F.
    \13\ See ISE Schedule of Fees, Section I, Regular Order Fees and 
Rebates for Standard Options, and Section V, FX Options Fees and 
Rebates.
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    The Exchange believes its proposal to decrease the execution fee 
for regular Firm Proprietary/Broker-Dealer and regular Professional 
Customer orders in Non-Select Symbols and in FX Options when they 
provide liquidity is not unfairly discriminatory because the lower fee 
would apply uniformly to all regular Firm Proprietary/Broker-Dealer and 
Professional Customer orders in the same manner.
    The Exchange has determined to charge fees for regular orders in 
mini options at a rate that is \1/10\th the rate of fees the Exchange 
currently provides for trading in standard options. The Exchange 
believes it is reasonable and equitable and not unfairly discriminatory 
to assess lower fees to provide market participants an incentive to 
trade mini options on the Exchange. The Exchange believes the proposed 
fees are reasonable and equitable in light of the fact that mini 
options have a smaller exercise and assignment value, specifically \1/
10\th that of a standard option contract, and, as such, levying fees 
that are \1/10\th of what market participants pay today.
    The Exchange believes that the price differentiation between the 
various market participants is justified. As for Priority Customers, 
for the most part, the Exchange does not charge Priority Customers a 
fee (Priority Customers have traditionally traded options on the 
Exchange without a fee) and to the extent they pay a transaction fee, 
those fees are lower than or the same as fees charged to other market 
participants. The Exchange believes charging lower fees, or no fees, to 
Priority Customer orders attracts that order flow to the Exchange and 
thereby creates liquidity to the benefit of all market participants who 
trade on the Exchange. With respect to fees to Non-ISE Market Maker 
orders, the Exchange believes that charging Non-ISE Market Maker orders 
a higher rate than the fee charged to Market Maker, Firm Proprietary/
Broker-Dealer and Professional Customer regular orders is appropriate 
and not unfairly discriminatory because Non-ISE Market Makers are not 
subject to many of the non-transaction based fees that these other 
categories of membership are subject to, e.g., membership fees, access 
fees, API/

[[Page 36814]]

Session fees, market data fees, etc. Therefore, the Exchange believes 
it is appropriate and not unfairly discriminatory to assess a higher 
transaction fee to Non-ISE Market Makers because the Exchange incurs 
costs associated with these types of orders that are not recovered by 
non-transaction based fees paid by members. With respect to fees for 
Market Maker orders, the Exchange believes that the price 
differentiation between the various market participants is appropriate 
and not unfairly discriminatory because Market Makers have different 
requirements and obligations to the Exchange that the other market 
participants do not (such as quoting requirements and paying 
membership-related non-transaction fees). The Exchange believes that it 
is equitable and not unfairly discriminatory to assess a higher fee to 
market participants that do not have such requirements and obligations 
that Exchange Market Makers do.
    Moreover, the Exchange believes that the proposed fees are fair, 
equitable and not unfairly discriminatory because the proposed fees are 
consistent with price differentiation that exists today at other 
options exchanges. Additionally, the Exchange believes it remains an 
attractive venue for market participants to direct their order flow in 
the symbols that are subject to this proposed rule change as its fees 
are 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. For the reasons noted above, the Exchange believes that the 
proposed fees are fair, equitable and not unfairly discriminatory.
    Finally, the Exchange's proposal to remove references to RUT, RUI, 
RMN, MVR, MSH, MFX, MID, and SML in Section VI.B. of the Schedule of 
Fees is reasonable, equitable and not unfairly discriminatory because 
the Exchange has delisted these products and these products no longer 
trade on the Exchange. The reference to a license surcharge on the 
Exchange's Schedule of Fees for these products is therefore 
unnecessary.

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. The Exchange believes the 
proposed fee change does not impose a burden on competition because the 
proposed fee is consistent with fees charged by other exchanges. The 
proposed fee change for regular orders in Non-Select Symbols, which the 
Exchange believes is lower than fees charged by its competitors for 
similar orders, will encourage competition and attract additional order 
flow in these symbols to ISE. The Exchange believes that the proposed 
fee change for regular orders in FX Options will not impose any 
unnecessary burden on competition because even though these options are 
solely listed on ISE, the Exchange operates in a highly competitive 
market, comprised of eleven exchanges, any of which can determine to 
trade similar products. At least one other exchange currently trades 
foreign currency options.\14\ While PHLX World Currency Options[supreg] 
are not fungible with FX Options, they provide investors with a choice 
to trade in a competing product.
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    \14\ See PHLX World Currency Options[supreg] at http://www.nasdaqtrader.com/Micro.aspx?id=PHLXFOREXOptions.
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    The Exchange also believes the proposed fee for regular orders in 
Non-Select Symbols and in FX Options does not impose a burden on 
competition because it sets the same rate and therefore, will apply 
uniformly to all regular Firm Proprietary/Broker-Dealer and 
Professional Customer orders in Non-Select Symbols and in FX Options 
traded on the Exchange.
    The Exchange notes that it 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 change reflects this 
competitive environment.

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 \15\ and subparagraph (f)(2) of Rule 19b-4 
thereunder,\16\ because it establishes a due, fee, or other charge 
imposed by ISE.
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    \15\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \16\ 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 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-2013-36 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-2013-36. 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 20549-1090, on official business days 
between the hours of

[[Page 36815]]

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-2013-36, and should be 
submitted on or before July 10, 2013.

    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. 2013-14607 Filed 6-18-13; 8:45 am]
BILLING CODE 8011-01-P