Document ID: SEC-2009-1740-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2009-12-09T05:00Z

[Federal Register: December 9, 2009 (Volume 74, Number 235)]
[Notices]               
[Page 65195-65197]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09de09-118]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61101; File No. SR-ISE-2009-99]

 
Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change Relating to Amending the Direct Edge ECN Fee Schedule

December 2, 2009.
    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 30, 2009, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Direct Edge ECN's (``DECN'') fee 
schedule for ISE Members \3\ to (i) amend its fee schedule to reflect 
pass through charges of other market centers and (ii) make technical 
changes to the fee schedule. All of the changes described herein are 
applicable to ISE Members.
---------------------------------------------------------------------------

    \3\ References to ISE Members in this filing refer to DECN 
Subscribers who are ISE Members.
---------------------------------------------------------------------------

    All of the changes described herein are applicable to ISE Members. 
The text of the proposed rule change is available on the Exchange's 
Internet Web site at http://www.ise.com.

[[Page 65196]]

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
    DECN, a facility of ISE, operates two trading platforms, EDGX and 
EDGA. On October 1, 2009,\4\ the Exchange added new fee categories for 
the INET order type. When a member routes to Nasdaq using the INET 
order type and removes liquidity on Tapes A or C, the member incurs a 
fee of $0.0030 on either EDGA or EDGX. Such situation yields Flag 
``L''. The INET order type sweeps the EDGA or EDGX book, and routes the 
remainder to Nasdaq. If the order is marketable, it removes liquidity 
from the EDGA or EDGX book, as applicable, first. If the order is non-
marketable, the order posts on Nasdaq. With regards to a Member's use 
of the INET order type for Tapes A or C securities, Members routing an 
ADV: (i) Less than 5,000,000 shares are currently charged $0.0030 per 
share, as described in the schedule; (ii) equal to or greater than 
5,000,000 shares but less than 20,000,000 shares are currently charged 
$0.0027 per share; (iii) equal to or greater than 20,000,000 shares but 
less than 30,000,001 shares are currently charged $0.0026 per share; 
and (iv) equal to or greater than 30,000,001 shares are currently 
charged $0.0025 per share. The rates, in all cases, are calculated for 
shares removed from Nasdaq. The Exchange believes that these tier-based 
rates incent Members to sweep the EDGA or EDGX book first and then 
offer a discounted rate to Nasdaq's rates if the remainder of the order 
is routed to Nasdaq. These discounted rates arise in part from reduced 
administrative costs associated with certain volume levels.
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 60769 (October 2, 
2009), 74 FR 51903 (October 8, 2009) (SR-ISE-2009-68).
---------------------------------------------------------------------------

    The Exchange proposes to amend these fees in order to reflect 
changes to the actual transaction fees assessed by away markets. 
Specifically, the Exchange is proposing to amend its fee schedule to 
reflect changes to Nasdaq's best removal tier rate. For example, on 
November 1, 2009, the best removal tier rate increased on Nasdaq from 
$0.0027 per share executed to $0.0028 per share executed for Tape A & C 
securities.\5\ The Exchange now proposes to amend its fee schedule so 
that when Nasdaq's best removal tier rate changes, EDGA and EDGX's fees 
change as well, in lock step. The new language is proposed to read as 
follows:
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 60959 (November 6, 
2009), 74 FR 58672 (November 13, 2009)(SR-NASDAQ-2009-096).
---------------------------------------------------------------------------

    Subscribers routing an average daily volume (``ADV''): (i) Less 
than 5,000,000 shares will be charged $0.0030 per share, as described 
in the schedule; (ii) equal to or greater than 5,000,000 shares but 
less than 20,000,000 shares will be charged Nasdaq's best removal tier 
rate per share; (iii) equal to or greater than 20,000,000 shares but 
less than 30,000,001 shares will be charged Nasdaq's best removal tier 
rate--$0.0001 per share; and (iv) equal to or greater than 30,000,001 
shares will be charged Nasdaq's best removal tier rate--$0.0002 per 
share. The rates, in all cases, are calculated for shares removed from 
Nasdaq. (emphasis added)
    For the month of December this would equate to $0.0028 per share 
for (ii), above, $0.0027 per share for (iii), above, and $0.0026 per 
share for (iv), as described above.
    In addition, the Exchange proposes to make technical changes to the 
fee schedule. Effective November 1, 2009,\6\ the Exchange amended the 
meaning of several flags. In particular, the N and W flags are no 
longer used to reflect activity outside of regular market hours. The 
Exchange adopted flags 3-7 to reflect pre- and post-market activity. 
Therefore, the Exchange proposes to correct a reference in footnote 1 
to the fee schedule to reflect this change. The new language is 
proposed to read as follows: In addition, subscribers can also qualify 
for a rebate of $0.0032 per share for all liquidity posted on EDGX if 
they add or route at least 10,000,000 shares of average daily volume 
prior to 9:30 a.m. or after 4 p.m. (includes all flags except 6) AND 
add a minimum of 75,000,000 shares of average daily volume on EDGX in 
total, including during both market hours and pre and post-trading 
hours. (emphasis added) The changes discussed in this filing will 
become operative on December 1, 2009.
---------------------------------------------------------------------------

    \6\ See Securities Exchange Act Release No. 60914 (November 2, 
2009), 74 FR 57726 (November 9, 2009)(SR-ISE-2009-88).
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\7\ in general, and 
furthers the objectives of Section 6(b)(4),\8\ 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. In particular, providing tier-based rates for Members 
provide pricing incentives to market participants that route orders to 
DECN, allowing DECN to remain competitive. This tier-based rate arises 
in part from reduced administrative costs associated with certain 
volume levels. ISE notes that DECN operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive. The proposed rule change reflects a competitive pricing 
structure designed to incent market participants to direct their order 
flow to DECN. ISE believes the fees and credits remain competitive with 
those charged by other venues and therefore continue to be reasonable 
and equitably allocated to those members that opt to direct orders to 
DECN rather than competing venues. Additionally, ISE believes that the 
proposed rates are equitable in that they apply uniformly to all 
Members.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f.
    \8\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

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 \9\ and Rule 19b-4(f)(2) \10\ thereunder. At any 
time within 60 days

[[Page 65197]]

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.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 19b-4(f)(2).
---------------------------------------------------------------------------

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-2009-99 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-2009-99. 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 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 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 Number SR-ISE-2009-99 and should be 
submitted on or before December 30, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
---------------------------------------------------------------------------

    \11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-29241 Filed 12-8-09; 8:45 am]

BILLING CODE 8011-01-P