Document ID: SEC-2010-0407-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2010-03-18T04:00Z

[Federal Register: March 18, 2010 (Volume 75, Number 52)]
[Notices]               
[Page 13175-13176]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18mr10-112]                         

[[Page 13175]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61693; File No. SR-ISE-2010-16]

 
Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change Relating to Payment for Order Flow Fees

March 11, 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 March 1, 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 Exchange has designated this proposal as 
one establishing or changing a due, fee, or other charge imposed by ISE 
under Section 19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2) 
thereunder,\4\ which renders the proposal effective upon filing with 
the Commission. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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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 payment for order flow program. 
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 Exchange currently has a payment-for-order-flow (``PFOF'') 
program that helps its market makers establish PFOF arrangements with 
an Electronic Access Member (``EAM'') in exchange for that EAM 
preferencing some or all of its order flow to that market maker. This 
program is funded through a fee paid by Exchange market makers for each 
customer contract they execute, and is administered by both Primary 
Market Makers (``PMM'') \5\ and Competitive Market Makers (``CMM''),\6\ 
depending on who the order is preferenced to. PFOF fees collected by 
the Exchange that are not distributed are rebated back to the market 
makers.
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    \5\ See Exchange Act Release No. 43833 (January 10, 2001), 66 FR 
7822 (January 25, 2001).
    \6\ See Exchange Act Release No. 53127 (January 13, 2006), 71 FR 
3582 (January 23, 2006).
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    The Exchange currently charges a PFOF fee of $0.65 per contract for 
all options classes that are not in the penny pilot program. For penny 
pilot classes, the Exchange charges a PFOF fee of $0.25 per contract. 
For competitive reasons, the Exchange now proposes to eliminate the 
PFOF fee in all options classes executed on the Exchange by persons who 
are not broker/dealers and who are not Priority Customers.
2. Statutory Basis
    The basis under the Securities Exchange Act of 1934 (the ``Exchange 
Act'') for this proposed rule change is the requirement under Section 
6(b)(4) that an exchange have an equitable allocation of reasonable 
dues, fees and other charges among its members and other persons using 
its facilities. In particular, the Exchange believes that eliminating 
certain PFOF fees will enhance competition.

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 \7\ and Rule 19b-4(f)(2) \8\ 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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    \7\ 15 U.S.C. 78s(b)(3)(A). [sic]
    \8\ 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 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-2010-16 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-2010-16. 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 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

[[Page 13176]]

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.\9\ 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-2010-16 and should be 
submitted on or before April 8, 2010.
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    \9\ The text of the proposed rule change is available on the 
Commission's Web site at http://www.sec.gov.
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    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).

Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-5915 Filed 3-17-10; 8:45 am]
BILLING CODE 8011-01-P