Document ID: SEC-2012-0983-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2012-06-20T04:00Z

[Federal Register Volume 77, Number 119 (Wednesday, June 20, 2012)]
[Notices]
[Pages 37082-37086]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-15054]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67201; File No. SR-ISE-2012-49]

Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change To Amend Fees for Certain Regular Orders Executed on the 
Exchange

June 14, 2012.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is 
hereby given that on June 1, 2012, the International Securities 
Exchange, LLC (the ``ISE'' or the ``Exchange'') 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 fees for certain regular orders 
executed on the Exchange. 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 fees charged 
by the Exchange for certain regular orders in 25 securities traded on 
the Exchange (``Special Non-Select Penny Pilot Symbols'').\3\ For 
trading in the Special Non-Select Penny Pilot Symbols, the Exchange 
currently charges $0.20 per contract for Firm Proprietary orders and 
Customer (Professional) \4\ orders, and $0.45 per contract for Non-ISE 
Market Maker \5\ orders. ISE Market Maker orders \6\ in these symbols 
are subject to a sliding scale, ranging from $0.01 per contract to 
$0.18 per contract, depending on the amount of overall volume traded by 
a Market Maker during a month. Market Makers also currently pay a 
payment for order flow

[[Page 37083]]

(``PFOF'') fee of $0.25 per contract when trading against Priority 
Customers.\7\ Priority Customer orders are not charged for trading in 
the Special Non-Select Penny Pilot Symbols. The Exchange also currently 
charges the fees noted above for responses to special orders in the 
Special Non-Select Penny Pilot Symbols. The Exchange also currently 
charges the fees noted above for crossing orders, i.e., orders executed 
in the Exchange's Facilitation Mechanism,\8\ Solicited Order 
Mechanism,\9\ Block Order Mechanism and Price Improvement 
Mechanism,\10\ and for Qualified Contingent Cross orders, in the 
Special Non-Select Penny Pilot Symbols, except for Non-ISE Market Maker 
orders, for which the Exchange currently charges $0.20 per contract.
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    \3\ The Special Non-Select Penny Pilot Symbols are Peabody 
Energy Corp. (``BTU''), Cliffs Natural Resources Inc. (``CLF''), 
Salesforce.com Inc. (``CRM''), ChevronTexaco Corporation (``CVX''), 
Deere & Company (``DE''), eBay Inc. (``EBAY''), FedEx Corp. 
(``FDX''), Corning Incorporated (``GLW''), General Motors Co. 
(``GM''), Green Mountain Coffee Roasters Inc. (``GMCR''), The 
Goldman Sachs Group Inc. (``GS''), The Home Depot Inc. (``HD''), 
Lululemon Athletica Inc. (``LULU''), Molycorp Inc. (``MCP''), 
McMoRan Exploration Co. (``MMR''), Mosaic Company (``MOS''), Merck & 
Co. Inc. (``MRK''), Sears Holding Corporation (``SHLD''), Sina Corp. 
(``SINA''), Silver Wheaton Corp. (``SLW''), United Parcel Service 
Inc. (``UPS''), U.S. Bancorp (``USB''), Wynn Resorts Limited 
(``WYNN''), streetTracks Homebuilders Fund (``XHB'') and Technology 
Select Sector SPDR Fund (``XLK''). The Special Non-Select Penny 
Pilot Symbols are identified by their ticker symbol on the 
Exchange's Schedule of Fees.
    \4\ A Customer (Professional) is a person who is not a broker/
dealer and is not a Priority Customer.
    \5\ 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, as amended (``Exchange Act''), 
registered in the same options class on another options exchange.
    \6\ The term ``Market Makers'' refers to ``Competitive Market 
Makers'' and ``Primary Market Makers'' collectively. See ISE Rule 
100(a)(25).
    \7\ 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).
    \8\ See Exchange Act Release No. 61869 (April 7, 2010), 75 FR 
19449 (April 14, 2010) (SR-ISE-2010-25).
    \9\ See Exchange Act Release No. 63283 (November 9, 2010), 75 FR 
70059 (November 16, 2010) (SR-ISE-2010-106).
    \10\ See Exchange Act Release No. 62048 (May 6, 2010), 75 FR 
26830 (May 12, 2010) (SR-ISE-2010-43). The Exchange subsequently 
increased this rebate to $0.25 per contract. See Exchange Act 
Release No. 63283 (November 9, 2010), 75 FR 70059 (November 16, 
2010) (SR-ISE-2010-106).
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    The Exchange currently assesses per contract transaction fees and 
provides rebates to market participants that add or remove liquidity 
from the Exchange (``maker/taker fees and rebates'') in a number of 
options classes (the ``Select Symbols'').\11\ The Exchange's maker/
taker fees and rebates are applicable to regular and complex orders 
executed in the Select Symbols. The Exchange also currently assesses 
maker/taker fees and rebates for complex orders in symbols that are in 
the Penny Pilot program but are not a Select Symbol (``Non-Select Penny 
Pilot Symbols'') \12\ and for complex orders in all symbols that are 
not in the Penny Pilot Program (``Non-Penny Pilot Symbols'').\13\ As 
noted above, maker/taker fees and rebates applicable on the above 
symbols are assessed on the following order-type categories: ISE Market 
Maker, Market Maker Plus,\14\ Firm Proprietary, Customer 
(Professional), Non-ISE Market Maker, and Priority Customer.
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    \11\ Options classes subject to maker/taker fees are identified 
by their ticker symbol on the Exchange's Schedule of Fees.
    \12\ See Exchange Act Release No. 65724 (November 10, 2011), 76 
FR 71413 (November 17, 2011) (SR-ISE-2011-72).
    \13\ See Exchange Act Release Nos. 66084 (January 3, 2012), 77 
FR 1103 (January 9, 2012) (SR-ISE-2011-84); 66392 (February 14, 
2012), 77 FR 10016 (February 21, 2012) (SR-ISE-2012-06); and 66961 
(May 10, 2012), 77 FR 28914 (May 16, 2012) (SR-ISE-2012-38).
    \14\ A Market Maker Plus is an ISE Market Maker who is on the 
National Best Bid or National Best Offer 80% of the time for series 
trading between $0.03 and $5.00 (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 $5.00 (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 and 80% of the time for series trading between $0.03 and 
$5.00 (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 $5.00 (for options whose underlying stock's previous trading 
day's last sale price was greater than $100) in premium across all 
expiration months in order to receive the rebate. The Exchange 
determines whether a Market Maker qualifies as a Market Maker Plus 
at the end of each month by looking back at each Market Maker's 
quoting statistics during that month. A Market Maker's single best 
and single worst overall quoting days each month, on a per symbol 
basis, are excluded in calculating whether a Market Maker qualifies 
for this rebate, if doing so qualifies a Market Maker for the 
rebate. If at the end of the month, a Market Maker meets the 
Exchange's stated criteria, the Exchange rebates $0.10 per contract 
for transactions executed by that Market Maker during that month. 
The Exchange provides Market Makers a report on a daily basis with 
quoting statistics so that Market Makers can determine whether or 
not they are meeting the Exchange's stated criteria.
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    The Exchange now proposes to adopt maker/taker fees and rebates to 
regular orders in the Special Non-Select Penny Pilot Symbols. 
Specifically, the Exchange proposes to adopt the following fees and 
rebates for orders that trade against Non-Priority Customer orders:
     For Market Maker orders, a maker fee of $0.35 per contract 
and a taker fee of $0.20 per contract;
     For Non-ISE Market Maker orders, a maker fee of $0.40 per 
contract and a taker fee of $0.35 per contract;
     For Firm Proprietary and Customer (Professional) orders, a 
maker fee of $0.35 per contract and a taker fee of $0.25 per contract;
     For Priority Customer orders, a maker rebate of $0.25 per 
contract and a taker rebate of $0.32 per contract.
    Additionally, the Exchange proposes to adopt the following fees and 
rebates for orders that trade against Priority Customer orders:
     For Market Maker orders, a maker fee of $0.35 per contract 
and a taker fee of $0.30 per contract;
     For Non-ISE Market Maker orders, a maker and taker fee of 
$0.40 per contract;
     For Firm Proprietary and Customer (Professional) orders, a 
maker fee of $0.35 per contract and a taker fee of $0.30 per contract;
     For Priority Customer orders, a maker rebate of $0.25 per 
contract and a taker fee of $0.00 per contract.
    For crossing regular orders in the Special Non-Select Penny Pilot 
Symbols, the Exchange proposes to continue charging a fee of $0.20 per 
contract. The Exchange currently does not charge Priority Customers for 
crossing orders executed in the Special Non-Select Penny Pilot Symbols 
and proposes to continue not charging Priority Customers for crossing 
orders executed in the Special Non-Select Penny Pilot Symbols.
    For responses to special orders in the Special Non-Select Penny 
Pilot Symbols,\15\ the Exchange proposes to adopt a fee of $0.40 per 
contract for Market Maker, Non-ISE Market Maker, Firm Proprietary and 
Customer (Professional) and Priority Customer orders.
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    \15\ A response to a special order is any contra-side interest 
submitted after the commencement of an auction in the Exchange's 
Facilitation Mechanism, Solicited Order Mechanism, Block Order 
Mechanism and Price Improvement Mechanism. This fee applies to 
Market Maker, Non-ISE Market Maker, Firm Proprietary and Customer 
(Professional) interest.
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    The Exchange currently provides ISE Market Makers with a two cent 
discount when trading against Priority Customer orders that are 
preferenced to them in the complex order book.\16\ The Exchange 
proposes to extend this discount for preferenced regular orders in the 
Special Non-Select Penny Pilot Symbols. Accordingly, ISE Market Makers 
who take liquidity when trading against Priority Customer orders that 
are preferenced to them in the Special Non-Select Penny Pilot Symbols 
will be charged $0.28 per contract and ISE Market Makers who make 
liquidity when trading against Priority Customer orders that are 
preferenced to them in the Special Non-Select Penny Pilot Symbols will 
be charged $0.33 per contract.
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    \16\ Pursuant to SR-ISE-2011-81, the Exchange provides this fee 
discount when ISE Market Makers add or remove liquidity. See 
Exchange Act Release No. 65958 (December 15, 2011) 76 FR 79236 
(December 21, 2011) (SR-ISE-2011-81).
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    Additionally, to incentivize members to trade in the Exchange's 
various auction mechanisms, the Exchange currently provides a per 
contract rebate to those contracts that do not trade with the contra 
order in the Exchange's Facilitation Mechanism and Solicited Order 
Mechanism, except when they trade against pre-existing orders and 
quotes, and to those contracts that do not trade with the contra order 
in the Price Improvement Mechanism. For the Facilitation and Solicited 
Order Mechanisms, the rebate is currently $0.15 per contract. For the 
Price Improvement Mechanism, the rebate is currently $0.25 per 
contract. The

[[Page 37084]]

Exchange proposes to extend this rebate incentive for regular orders in 
the Special Non-Select Penny Pilot Symbols by adopting a per contract 
rebate at the current levels to those contracts in the Special Non-
Select Penny Pilot Symbols that do not trade with the contra order in 
the Exchange's Facilitation Mechanism and Solicited Order Mechanism 
except when they trade against pre-existing orders and quotes and in 
the Price Improvement Mechanism.
    Currently, Primary Market Makers (PMMs) are required to provide 
away market price protection for marketable public customer orders when 
the ISE market is not at the NBBO in accordance with their obligations 
under ISE rules and the Intermarket Linkage Plan.\17\ Accordingly, when 
PMMs are performing this intermarket price protection function, the 
Exchange currently charges PMMs a fee ranging from $0.01 per contract 
to $0.18 per contract for PMM trade reports. Since the PMM is 
performing its linkage obligations when it executes (i.e., ``trade 
reports'') such public customer orders, it is neither a taker nor maker 
of liquidity as those terms are used within the framework of the ISE's 
maker/taker pricing model. Accordingly, the Exchange proposes to not 
charge any fees or provide any rebates for PMM trade reports for 
executions in the Special Non-Select Penny Pilot Symbols. The Exchange 
currently does not charge a trade report fee to PMMs in symbols that 
are subject to maker/taker fees and rebates.
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    \17\ The Intermarket Linkage Plan prohibits an exchange from 
allowing the automatic execution of public customer orders at a 
price that is inferior to the best prices being publically displayed 
by another exchange. Under ISE Rule 803(c)(2), it is the 
responsibility of the PMM to either execute an order at a price that 
matches or betters the NBBO, or obtain such better prices on behalf 
of the public customer.
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    With the proposed migration of regular orders in the Special Non-
Select Penny Pilot Symbols to maker/taker and rebate pricing, the 
Exchange proposes to no longer charge a PFOF fee in the Special Non-
Select Penny Pilot Symbols. The cancellation fee, however, which only 
applies to Priority Customer orders, will continue to apply.
    As the Exchange is proposing to adopt a new table for this proposed 
fee change, the Exchange notes that:
     Fees for regular orders in the Special Non-Select Penny 
Pilot Symbols executed in the Exchange's Facilitation, Solicited Order, 
Price Improvement and Block Order Mechanisms are for contracts that are 
part of the originating or contra order.
     As noted above, PFOF fees will not be collected in the 
Special Non-Select Penny Pilot Symbols.
     As noted above, the cancellation fee, which only applies 
to Priority Customer orders, will continue to apply to the Special Non-
Select Penny Pilot Symbols.
     The Exchange currently has a fee cap, with certain 
exclusions, applicable to crossing transactions executed in a member's 
proprietary account. The cap also applies to transactions for the 
account of entities affiliated with a member. The Exchange also has a 
service fee applicable to all QCC and non-QCC transactions that are 
eligible for the fee cap.\18\ This fee cap will continue to apply to 
executions of regular orders in the Special Non-Select Penny Pilot 
Symbols.
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    \18\ See Securities Exchange Act Release Nos. 64270 (April 8, 
2011), 76 FR 20754 (April 13, 2011) (SR-ISE-2011-13); and 66793 
(April 12, 2012), 77 FR 23313 (April 18, 2012) (SR-ISE-2012-27).
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     The Exchange currently has tiered rebates to encourage 
members to submit greater numbers of QCC orders and Solicitation orders 
to the Exchange. Once a member reaches a certain volume threshold in 
QCC orders and/or Solicitation orders during a month, the Exchange 
provides a rebate to that member for all of its QCC and Solicitation 
traded contracts for that month.\19\ These tiered rebates will continue 
to apply to contracts traded in the Special Non-Select Penny Pilot 
Symbols.
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    \19\ See Securities Exchange Act Release Nos. 65087 (August 10, 
2011), 76 FR 50783 (August 16, 2011) (SR-ISE-2011-47); 65583 
(October 18, 2011), 76 FR 65555 (October 21, 2011) (SR-ISE-2011-68); 
65705 (November 8, 2011), 76 FR 70789 (November 15, 2011) (SR-ISE-
2011-70); 65898 (December 6, 2011), 76 FR 77279 (December 12, 2011) 
(SR-ISE-2011-78); 66169 (January 17, 2012), 77 FR 3295 (January 23, 
2012) (SR-ISE-2012-01); and 66790 (April 12, 2012), 77 FR 23312 
(April 18, 2012) (SR-ISE-2012-25).
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     The Exchange currently has a $0.20 per contract fee for 
Market Maker orders sent to the Exchange by EAMs in the Special Non-
Select Penny Pilot Symbols.\20\ Market Maker orders in the Special Non-
Select Penny Pilot Symbols sent to the Exchange by Electronic Access 
Members will be assessed a fee of $0.35 per contract for making 
liquidity when trading against Non-Priority Customer and Priority 
Customer interest, $0.20 per contract for taking liquidity when trading 
against Non-Priority Customer interest, $0.30 per contract for taking 
liquidity when trading against Priority Customer orders, $0.20 per 
contract for crossing orders and $0.40 per contract for responses to 
special orders.
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    \20\ See Securities Exchange Act Release No. 60817 (October 13, 
2009), 74 FR 54111 (October 21, 2009).
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     The Exchange currently provides a $0.20 per contract fee 
credit for executions in the Special Non-Select Penny Pilot Symbols 
resulting from responses to Customer (Professional) orders that are 
``flashed'' by the Exchange to its Members. This fee credit shall 
continue to apply.
     The Exchange currently provides a $0.20 per contract fee 
credit to Primary Market Makers (PMM) for execution of Priority 
Customer orders--for classes in which it serves as a PMM--that send an 
Intermarket Sweep Order to other exchanges. This fee credit shall 
continue to apply.
     The Exchange currently has a $0.45 per contract fee for 
execution of Customer (Professional) orders in the Special Non-Select 
Penny Pilot Symbols that are routed to one or more exchanges in 
connection with the Options Order Protection and Locked/Crossed Market 
Plan. This fee shall continue to apply.
     The Exchange currently provides PMMs a fee credit equal to 
the fee charged by a destination market, but not more than $0.45 per 
contract for executing Professional (Customer) orders in the Special 
Non-Select Penny Pilot Symbols. This fee credit shall continue to 
apply.
    With this proposed rule change, all non-customer orders will be 
assessed similar fees, thus eliminating the gap that currently exists, 
largely due to PFOF fees, between Market Makers and non-Market Makers 
when trading today. The proposed fees are consistent with the fees and 
rates of payment for order flow commonly applied to symbols that are 
part of the Penny Pilot program. The Exchange's maker/taker fees and 
rebates for complex orders have proven to be an effective method of 
attracting order flow to the Exchange. The Exchange believes that 
extending its maker/taker fees and rebates to regular orders in the 
Special Non-Select Penny Pilot Symbols will strengthen its market share 
in these products. The Exchange believes this proposed rule change will 
also serve to enhance its competitive position and enable it to attract 
additional volume in these symbols.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Schedule of 
Fees is consistent with Section 6(b) of the Exchange Act \21\ in 
general, and furthers the objectives of Section 6(b)(4) of the Exchange 
Act \22\ in particular, in that it is an equitable allocation of 
reasonable

[[Page 37085]]

dues, fees and other charges among Exchange members and other persons 
using its facilities. The impact of the proposal upon the net fees paid 
by a particular market participant will depend on a number of 
variables, most important of which will be its propensity to add or 
remove liquidity in the Special Non-Select Penny Pilot Symbols.
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    \21\ 15 U.S.C. 78f(b).
    \22\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes it is reasonable and equitable to charge a 
maker fee of $0.35 per contract for regular Market Maker, Firm 
Proprietary and Customer (Professional) orders that trade against 
Priority Customer and Non-Priority Customer interest in the Special 
Non-Select Penny Pilot Symbols and $0.40 per contract for regular Non-
ISE Market Maker orders that trade against Priority Customer and Non-
Priority Customer interest in the Special Non-Select Penny Pilot 
Symbols. The Exchange notes the proposed fees are comparable to fees 
currently in place at other exchange for Penny Pilot Symbols.\23\
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    \23\ See NASDAQ OMX PHLX LLC Pricing Schedule at http://nasdaqomxtrader.com/content/marketregulation/membership/phlx/feesched.pdf.
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    The Exchange believes it is reasonable and equitable to charge a 
taker fee of $0.20 per contract for regular Market Maker orders, $0.25 
per contract for regular Firm Proprietary and Customer (Professional) 
orders, and $0.35 per contract for regular Non-ISE Market Maker orders 
in the Special Non-Select Penny Pilot Symbols that trade against Non-
Priority Customer interest. The Exchange also believes it is reasonable 
and equitable to charge a taker fee of $0.30 per contract for regular 
Market Maker, Firm Proprietary and Customer (Professional) orders and 
$0.40 per contract for regular Non-ISE Market Maker orders in the 
Special Non-Select Penny Pilot Symbols that trade against Priority 
Customer interest. Again, the Exchange notes the proposed fees are 
comparable to fees currently in place at other exchanges.\24\
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    \24\ Id.
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    The Exchange further notes that the proposed $0.35 per contract 
maker fee for Market Maker, Firm Proprietary and Customer 
(Professional) orders in the Special Non-Select Penny Pilot Symbols 
remains lower than that charged by the Boston Options Exchange 
(``BOX''). For a similar order, BOX charges both a transaction fee, 
which ranges anywhere from $0.20 per contract to $0.40 per contract, 
and a fee of $0.22 per contract for adding liquidity in these classes, 
for an `all-in' rate of as high as $0.62 per contract.\25\
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    \25\ See BOX Fee Schedule.
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    The Exchange believes it is reasonable and equitable to charge ISE 
Market Maker, Non-ISE Market Maker, Firm Proprietary and Customer 
(Professional) orders a fee of $0.40 per contract when such members are 
responding to special orders in the Special Non-Select Penny Pilot 
Symbols because these fees are identical to the fees the Exchange 
currently charges for responses to special orders in the Select 
Symbols.\26\
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    \26\ See ISE Schedule of Fees, Rebates and Fees for Adding and 
Removing Liquidity in Select Symbols and Complex Order Maker/Taker 
fees for symbols that are in the Penny Pilot Program, footnote 8.
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    In particular, the Exchange believes the proposed fees are 
reasonable and equitably allocated because they are within the range of 
fees assessed by other exchanges employing similar pricing schemes. In 
addition, the Exchange believes that charging Non-ISE Market Maker 
orders a higher rate than the fee charged to ISE Market Maker, Firm 
Proprietary and Customer (Professional) 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/
Session fees, market data fees, etc. Therefore, it is appropriate and 
not unfairly discriminatory to assess a higher transaction fee on 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.
    The Exchange further believes it is reasonable and equitable for 
the Exchange to charge a fee of $0.20 per contract for regular orders 
in the Special Non-Select Penny Pilot Symbols executed in the 
Exchange's various auctions and for Qualified Contingent Cross orders 
because these fees are identical to the fees the Exchange currently 
charges for similar orders in the symbols that are subject to the 
Exchange's maker/taker fees.
    The Exchange believes that it is reasonable and equitable to 
provide rebates for regular Priority Customer orders in the Special 
Non-Select Penny Pilot Symbols because paying a rebate would attract 
additional order flow to the Exchange and create additional liquidity 
in these symbols, which the Exchange believes ultimately will benefit 
all market participants who trade on ISE. The Exchange already has a 
number of similar rebate programs in place. The Exchange believes that 
the proposed rebates are competitive with rebates provided by other 
exchanges and are therefore reasonable and equitably allocated to those 
members that direct orders to the Exchange rather than to a competing 
exchange.
    The Exchange believes it is reasonable and equitable to provide a 
two cent discount to ISE Market Makers on preferenced orders as an 
incentive for them to quote more aggressively in the Special Non-Select 
Penny Pilot Symbols and thereby create more trading opportunities on 
the Exchange. ISE currently provides Market Makers a similar two cent 
discount for preferenced complex orders in the Select Symbols, Non-
Select Penny Pilot Symbols and Non-Penny Pilot Symbols and is now 
proposing to extend the same discount for preferenced regular orders in 
the Special Non-Select Penny Pilot Symbols. ISE notes that with this 
proposed fee change, the Exchange will maintain the two cent 
differential that is currently in place for preferenced complex orders 
in the group of symbols noted above.
    The Exchange believes that adopting maker/taker fees and rebates 
for regular orders in the Special Non-Select Penny Pilot Symbols will 
attract additional business in these symbols to the Exchange. The 
Exchange further believes that the proposed fees are not unfairly 
discriminatory because the fee structure is consistent with fee 
structures that exist today at other options exchanges. Additionally, 
the Exchange believes that the proposed fees are fair, equitable and 
not unfairly discriminatory because they are consistent with price 
differentiation that exists today at other option exchanges. The 
Exchange believes it remains an attractive venue for market 
participants to trade as its fees remain 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. With this proposed fee 
change, the Exchange believes it remains an attractive venue for market 
participants to trade at favorable prices.

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 Exchange Act.

[[Page 37086]]

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 Exchange Act.\27\ 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 Exchange 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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    \27\ 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 Exchange 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-2012-49 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-2012-49. 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, 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 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-2012-49 and should be 
submitted on or before July 11, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
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    \28\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-15054 Filed 6-19-12; 8:45 am]
BILLING CODE 8011-01-P