Document ID: SEC-2010-0201-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations;Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2010-02-08T05:00Z

[Federal Register: February 8, 2010 (Volume 75, Number 25)]
[Notices]               
[Page 6248-6249]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08fe10-103]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61459; File No. SR-ISE-2010-07]

 
Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change Relating to Foreign Currency Options

February 1, 2010.
    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 January 19, 2010, 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, 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 incentive plan for market makers 
in a newly listed foreign currency option and to establish fees for 
transactions in the newly listed foreign currency option. The text of 
the proposed rule change is available on the Exchange's Web site 
(http://www.ise.com), on the Commission's Web site at http://
www.sec.gov, 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 the Exchange's 
incentive plan for market makers on a newly listed foreign currency 
option, specifically, the Brazilian real (``BRB'') \3\ and to establish 
fees for transactions in options on BRB. Options on BRB began trading 
on the Exchange on January 19, 2010. As such, this proposed fee change 
will be operative and effective on January 19, 2010.
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    \3\ The Commission previously approved the trading of options on 
BRB. See Securities Exchange Act Release No. 55575 (April 3, 2007), 
72 FR 17963 (April 10, 2007) (SR-ISE-2006-59).
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    In order to promote trading in options on BRB, the Exchange 
proposes to add BRB to the incentive plan the Exchange currently has in 
place for market makers in options on the New Zealand dollar (``NZD''), 
the Mexican peso (``PZO'') and the Swedish krona (``SKA'').\4\ Market 
makers will be able to enter into the incentive plan until March 31, 
2010.\5\ Participants in the incentive plan are known on the Exchange's 
Schedule of Fees as Early Adopter Market Makers. Under the incentive 
plan, the Exchange will waive the applicable transaction fees for both 
the Early Adopter FXPMM \6\ and all Early Adopter FXCMMs \7\ that make 
a market in BRB 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 will pay the Early 
Adopter FXPMM forty percent (40%) of the transaction fees collected on 
any customer trade in BRB and will pay up to ten (10) Early Adopter 
FXCMMs that participate in the incentive plan twenty percent (20%) of 
the transaction fees collected for trades between a customer and that 
FXCMM. Market makers that do not participate in the incentive plan, 
i.e., market makers that begin to quote and trade in BRB after March 
31, 2010, will be charged regular transaction fees for trades in this 
product.
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    \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. 61334 (January 12, 
2010) (SR-ISE-2009-115).
    \6\ A FXPMM is a primary market maker selected by the Exchange 
that trades and quotes in FX Options only. See ISE Rule 2213.
    \7\ 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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    The Exchange is proposing to adopt an execution fee of $0.40 per 
contract for all Public Customer Orders \8\ in options on BRB.\9\ The 
amount of the execution fee for all Firm Proprietary orders for options 
on BRB will be $0.20 per contract and the execution fee for all non-
Early Adopter ISE Market Makers in options on BRB shall be equal to the 
execution fee currently charged by the Exchange for ISE Market Maker 
orders in equity options.\10\ Finally, the amount of the execution fee 
for all non-ISE Market Maker orders for options on BRB shall be $0.45 
per contract.\11\ The

[[Page 6249]]

Exchange will not charge a Payment for Order Flow fee for this product.
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    \8\ Public Customer Order is defined in Exchange Rule 100(a)(39) 
as an order for the account of a Public Customer. Public Customer is 
defined in Exchange Rule 100(a)(38) as a person or entity that is 
not a broker or dealer in securities.
    \9\ These fees will be charged only to Exchange members. Under a 
pilot program that is set to expire on July 31, 2010, these fees 
will also be charged to Linkage Principal Orders (``Linkage P 
Orders'') and Linkage Principal Acting as Agent Orders (``Linkage P/
A Orders''). The amount of the execution fee charged by the Exchange 
for Linkage P Orders and Linkage P/A Orders is $0.27 per contract 
side and $0.18 per contract side, respectively. See Securities 
Exchange Act Release No. 60175 (June 25, 2009), 74 FR 32026 (July 6, 
2009) (SR-ISE-2009-36).
    \10\ The Exchange applies a sliding scale, between $0.01 and 
$0.18 per contract side, based on the number of contracts an ISE 
market maker trades in a month.
    \11\ The amount of the execution fee for non-ISE Market Maker 
transactions executed in the Exchange's Facilitation and 
Solicitation Mechanisms and for Orders entered into the Price 
Improvement Mechanism by the member initiating the price improvement 
order is $0.20 per contract.
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    The Exchange also proposes to waive transaction charges for all 
Early Adopter Market Makers in BRB in order to further encourage 
trading in this product. The Exchange believes that the revenue 
generated from customer, firm proprietary and non-ISE market maker 
transaction charges and increased order flow would offset the 
transaction fees that would otherwise be applied to market makers in 
BRB, thereby allowing the Exchange to recoup those fees while 
increasing order flow and generating increased revenues.
    The Exchange believes the proposed rule change will further the 
Exchange's goal of introducing new products to the marketplace that are 
competitively priced.
    Finally, as a housekeeping matter, the Exchange proposes to make a 
non-substantive clarifying change to its Schedule of Fees. 
Specifically, the Exchange proposes to insert the words ``options on'' 
in certain existing fee line items to clarify that the subject fee is 
applicable to options transactions.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\12\ in general, and 
furthers the objectives of Section 6(b)(4),\13\ 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. The Exchange believes that the incentive plan will 
generate additional order flow to the Exchange by creating incentives 
to trade options on BRB as well as defray operational costs for Early 
Adopter Market Makers.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 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) of the Act \14\ and Rule 19b-4(f)(2) \15\ thereunder. At any 
time within 60 days of the filing of such proposed rule change, the 
Commission may summarily abrogate 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.
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(2).
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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 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 e-mail to rule-comments@sec.gov. Please include 
File No. SR-ISE-2010-07 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 No. SR-ISE-2010-07. This file 
number should be included on the subject line if e-mail 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 inspection and 
copying in the Commission's Public Reference Room, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at the principal office 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 No. SR-ISE-2010-07 and should be 
submitted on or before March 1, 2010.

    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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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-2588 Filed 2-5-10; 8:45 am]
BILLING CODE 8011-01-P