Document ID: SEC-2011-1203-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2011-08-16T04:00Z

[Federal Register Volume 76, Number 158 (Tuesday, August 16, 2011)]
[Notices]
[Pages 50783-50784]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-20733]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65087; File No. SR-ISE-2011-47]

Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change To Adopt Tier-Based Rebates for Qualified Contingent Cross 
Orders and Solicitation Orders

August 10, 2011.
    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 July 27, 2011, 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 and II 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 adopt tier-based rebates for Qualified 
Contingent Cross (QCC) orders and Solicitation orders. 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 adopt rebates to 
encourage members to submit greater numbers of QCC orders and 
Solicitation orders to the Exchange. With this proposed rule change, 
once a Member reaches a certain volume threshold in QCC orders and/or 
Solicitation orders during a month, the Exchange will provide a rebate 
to that Member for all of its QCC and Solicitation traded contracts for 
that month. The proposed rebate will be paid to the Member entering a 
qualifying order, i.e., a QCC order and/or a Solicitation order. 
Specifically, the Exchange proposes to adopt the following thresholds 
and corresponding per contract rebate:

------------------------------------------------------------------------
                                                              Rebate per
                 Originating contract sides                    contract
------------------------------------------------------------------------
0-1,999,999................................................        $0.00
2,000,000-3,499,999........................................         0.03
3,500,000-3,999,999........................................         0.05
4,000,000+.................................................         0.07
------------------------------------------------------------------------

    The proposed rebate shall apply to QCC orders and Solicitation 
orders in all symbols traded on the Exchange. Additionally, the 
proposed threshold levels are based on the originating side so if, for 
example, a Member submits a Solicitation order for 1,000 contracts, all 
1,000 contracts shall be counted to reach the established threshold 
even if the order is broken up and executed with multiple counter 
parties.
    Further, the Exchange currently assesses per contract transaction 
charges and credits to market participants that add or remove liquidity 
from the Exchange (``maker/taker fees'') in a select number of options 
classes (the ``Select Symbols'').\3\ For Solicitation orders in the 
Select Symbols, the Exchange currently provides a rebate of $0.15 to 
contracts that do not trade with the contra order in the Solicited 
Order Mechanism. The Exchange does not propose any change to that 
rebate and that rebate will continue to apply.
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    \3\ Options classes subject to maker/taker fees are identified 
by their ticker symbol on the Exchange's Schedule of Fees.
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    The Exchange has designated this proposal to be effective on August 
1, 2011.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Schedule of 
Fees is consistent with Section 6(b) of the

[[Page 50784]]

Act \4\ in general, and furthers the objectives of Section 6(b)(4) of 
the Act \5\ in particular, in that it is an equitable allocation of 
reasonable dues, fees and other charges among Exchange members. The 
Exchange believes that the proposed fee changes will generally allow 
the Exchange and its Members to better compete for order flow and thus 
enhance competition. More specifically, the Exchange believes that its 
proposal to adopt volume-based rebates is reasonable as it will 
encourage Members to direct their QCC and Solicitation orders to the 
Exchange instead of to a competing exchange. The Exchange notes that it 
has previously adopted other incentive programs to promote and 
encourage growth in specific business areas. For example, the Exchange 
has lower fees (or no fees) for customer orders; \6\ and tiered pricing 
that reduces rates for market makers based on the level of business 
they bring to the Exchange.\7\ This proposed rule change targets yet 
another segment in which the Exchange seeks to garnish greater order 
flow. The Exchange also believes that adopting the proposed rebates is 
reasonable because it is designed to give Members who trade a lot on 
the Exchange a benefit by way of a lower transaction fee. As noted 
above, once a Member reaches the established threshold, all of the 
trading activity in the specified order type by that Member will be 
subject to the proposed rebate.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(4).
    \6\ For example, the customer fee is $0.00 per contract for 
products other than Singly Listed Indexes, Singly Listed ETFs and FX 
Options. For Singly Listed Options, Singly Listed ETFs and FX 
Options, the customer fee is $0.18 per contract. The Exchange also 
currently has an incentive plan in place for certain specific FX 
Options which has its own pricing. See ISE Schedule of Fees.
    \7\ The Exchange currently has a sliding scale fee structure 
that ranges from $0.01 per contract to $0.18 per contract depending 
on the level of volume a Member trades on the Exchange in a month.
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    The Exchange also believes the proposal to adopt the rebates is 
equitable because it would uniformly apply to all Members engaged in 
QCC and Solicitation trading in all option classes traded on the 
Exchange.

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.\8\ 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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    \8\ 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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-ISE-2011-47 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-2011-47. 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 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 website 
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 a.m. and 3 p.m. Copies of such 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-
2011-47, and should be submitted on or before September 6, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-20733 Filed 8-15-11; 8:45 am]
BILLING CODE 8011-01-P