Document ID: SEC-2010-0239-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2010-02-10T05:00Z

[Federal Register: February 10, 2010 (Volume 75, Number 27)]
[Notices]               
[Page 6760-6762]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10fe10-141]                         

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61490; File No. SR-ISE-2010-10]

 
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

February 4, 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 29, 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.
---------------------------------------------------------------------------

    \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 amend its fee schedule by (i) re-
introducing a rebate; (ii) adding a fee for stocks priced less than $1 
that remove liquidity on EDGA; (iii) eliminating certain tables on the 
fee schedule and (iv) making typographical and clarifying 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.

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.

Re-Introduction of Ultra Tier Rebate

    In SR-ISE-2009-68,\4\ the Exchange amended the criteria for meeting 
the Ultra Tier by allowing ISE Members to receive a $0.0032 rebate per 
share for securities priced at or above $1.00 when ISE Members add 
liquidity on EDGX if the attributed MPID posts 1% of the total 
consolidated volume (``TCV'') in average daily volume (``ADV''). TCV is 
defined as volume reported by all exchanges and trade reporting 
facilities to the consolidated transaction reporting plans for Tape A, 
B, and C securities. For competitive reasons, the Exchange is now 
seeking to re-introduce an Ultra Tier rebate of $0.0031 per share.
---------------------------------------------------------------------------

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

    The Ultra Tier rebate ($0.0031 per share), which is a higher rebate 
than the next best rebate ($0.0029 per share) for adding liquidity on 
EDGX, is also more difficult to reach, as a higher volume threshold is 
required based on recent TCV figures. For example, 1% of the average 
TCV for January 2010 (8.9 billion) was approximately 89 million shares. 
This threshold far exceeds the criteria (no minimum share volume 
requirement) to meet the next best rebate of $0.0029 per share. In 
addition, the higher rebate also results in part from lower 
administrative costs associated with higher volume.

[[Page 6761]]

Additional Changes to the Fee Schedule

    Effective January 1, 2010,\5\ DECN adjusted its pricing model to be 
more consistent with other exchanges (even though DECN is not an 
exchange),\6\ by de-linking the pricing structures of DECN to eliminate 
pricing offers that are contingent on activity across both platforms. 
Secondly, the Exchange simplified its fee schedule in order to provide 
Members with greater consistency and transparency during the period 
that the EDGA and EDGX Exchanges are preparing to launch, when volume 
will be transitioning from DECN to the EDGA and EDGX Exchanges 
(assuming their respective Form 1 applications are approved by the 
Commission). The Exchange believes that these same goals are also 
advanced for the most part in this filing, which proposes technical and 
clarifying changes to DECN's fee schedule.
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 61289 (January 5, 
2010), 75 FR 1674 (January 12, 2010) (SR-ISE-2009-108).
    \6\ On May 7, 2009, each of EDGA Exchange, Inc. and EDGX 
Exchange, Inc. (the ``EDGA and EDGX Exchanges'') filed their 
respective Form 1 applications to register as a national securities 
exchange (``Form 1'') pursuant to Section 6 of the Securities 
Exchange Act of 1934. On July 30, 2009, the Exchanges filed 
Amendment No. 1 to the Form 1 Application. On September 17, 2009, 
the Form 1 was published in the Federal Register for notice and 
comment. See Securities Exchange Act Release No. 60651 (September 
11, 2009), 74 FR 47827 (September 17, 2009).
---------------------------------------------------------------------------

    To effectuate the foregoing, the Exchange deleted certain charges 
in footnote 1 of the fee schedule, including one whereby ISE Members 
were charged $0.0002 per share to add liquidity on EDGA unless the 
attributed MPID added a minimum average daily share volume, measured 
monthly, of at least 50,000,000 shares on EDGA. Prior to January 1, 
2010, any attributed MPID meeting the aforementioned minimum was not 
charged to add liquidity on EDGA. Since this charge was deleted from 
footnote 1, the Exchange proposes to delete the corresponding footnote 
1 from flags B, V, Y, 3, and 4 from the EDGA column as this footnote no 
longer applies.
    In order to further simplify its fee schedule for Members, the 
Exchange proposes to delete the table on the fee schedule entitled 
``Fees per Share for Special Order Types'' as the Exchange believes 
that the information on this schedule is repetitive of the information 
in the ``liquidity flags and associated fees'' table below it. As a 
result of this proposed deletion, the Exchange proposes to relocate 
footnote numbers 4 and 5. Footnote 4 is proposed to be re-located to 
``Flag E'' and added to ``Flag 5'' to clarify it. Footnote 5 is 
proposed to be relocated to ``Flag O.'' These are the corresponding 
areas where these references belong.
    The Exchange proposes to re-word the first sentence in footnote 1 
to clarify that adding can include placing hidden orders.
    In addition, the Exchange proposes to add a fee to its schedule to 
provide that stocks priced less than $1 will be charged 0.20% of the 
dollar value if they do not meet the minimum average daily share volume 
of 50,000 shares on EDGA to qualify for the removal rate. A conforming 
footnote 1 is proposed to be added in the first table on the fee 
schedule (next to the word ``Free'') for removing liquidity in stocks 
less than $1.00 on EDGA.
    In SR-ISE-2009-108,\7\ for securities priced less than $1, the 
Exchange changed the fee for adding liquidity on EDGX from free to a 
rebate of 0.15% of the dollar value of the transaction. The Exchange 
proposes to correct a typographical error on its current schedule by 
adding parenthesis around the ``0.15% of dollar value'' to clarify that 
this is a rebate, and not a charge, for adding liquidity on EDGX in 
securities priced less than $1.
---------------------------------------------------------------------------

    \7\ See Securities Exchange Act Release No. 61289 (January 5, 
2010), 75 FR 1674 (January 12, 2010).
---------------------------------------------------------------------------

    For Flag P, the Exchange proposes to correct a typographical error 
on the schedule by inverting the columns that are currently displayed. 
For EDGX, flag P should read ``N/A'' and for EDGA it should read a 
rebate of $0.0025 per share (i.e., (0.0025)).
    The Exchange proposes to clarify Footnote 3. The second sentence of 
this footnote states that the ``rebate for adding liquidity on the NYSE 
of $0.0010 per share.'' This information is already conveyed in Flag F 
and is proposed to be deleted in order to simplify and clarify the fee 
schedule. The first sentence of footnote 3 is also proposed to be 
deleted as it is repetitive of the amended third sentence in footnote 3 
(``stocks prices below $1.00 on the NYSE are charged $0.0018 per share 
when removing liquidity.'') As a result, on Flag J, footnote 3 is 
proposed to be deleted as the reference no longer applies. However, 
footnote 3 is proposed to be relocated to Flag D in order to further 
clarify it.
    The changes discussed in this filing will become operative on 
February 1, 2010.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\8\ in general, and 
furthers the objectives of Section 6(b)(4),\9\ in particular, as 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, simplifying the rate structure for Members 
provides pricing incentives to market participants that route orders to 
DECN, allowing DECN to remain competitive. 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. The proposed re-introduction of an 
Ultra Tier rebate also provides an incentive to Members who add 
significant order flow to EDGX. Finally, the Exchange believes that the 
proposed rates are equitable in that they apply uniformly to all 
Members and provide higher rebates for higher volume thresholds, 
resulting from lower administrative costs. 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. 
The ISE also believes that the proposed rates are equitable in that 
they apply uniformly to all Members. Finally, to adjust DECN's pricing 
model to be more consistent with other exchanges (even though DECN is 
not an exchange), the Exchange desires to simplify part of its fee 
schedule in order to provide Members with greater consistency and 
transparency during the period that the EDGA and EDGX Exchanges are 
preparing to launch, when volume will be transitioning from DECN to 
EDGA/EDGX Exchanges (assuming their respective Form 1 applications are 
approved by the Commission).
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f.
    \9\ 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

[[Page 6762]]

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 \10\ and Rule 19b-4(f)(2) \11\ 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.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 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-2010-10 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-2010-10. 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,\12\ 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 
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-
2010-10 and should be submitted on or before March 3, 2010.
---------------------------------------------------------------------------

    \12\ The text of the proposed rule change is available on ISE's 
Web site at http://www.ise.com, on the Commission's Web site at 
http://www.sec.gov, at ISE, and at the Commission's Public Reference 
Room.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-2956 Filed 2-9-10; 8:45 am]
BILLING CODE 8011-01-P