Document ID: SEC-2015-0987-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations;Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2015-06-15T04:00Z

[Federal Register Volume 80, Number 114 (Monday, June 15, 2015)]
[Notices]
[Pages 34186-34188]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-14480]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75131; File No. SR-ISE-2015-20]

Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change To Amend the Schedule of Fees

June 9, 2015.
    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 June 1,

[[Page 34187]]

2015, the International Securities Exchange, LLC (the ``Exchange'' or 
the ``ISE'') filed with the Securities and Exchange 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 proposes to amend the Schedule of Fees to increase the 
maker fee charged to Market Maker and Non-ISE Market Maker orders in 
Select Symbols when trading against Priority Customer complex orders 
that leg in from the complex order book. 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 the proposed rule change is to increase the maker 
fee charged to Market Maker \3\ and Non-ISE Market Maker \4\ orders in 
Select Symbols \5\ when trading against Priority Customer \6\ complex 
orders that leg in from the complex order book. Market Maker orders 
(other than Market Maker Plus orders) \7\ and Non-ISE Market Maker 
orders currently pay a maker fee of $0.10 per contract for regular 
orders in Select Symbols. This $0.10 per contract fee similarly applies 
to all Market Maker orders (including Market Maker Plus orders) and 
Non-ISE Market Maker orders when trading against Priority Customer 
complex orders that leg in from the complex order book pursuant to Rule 
715(k). At the same time, the Exchange charges a taker fee to Priority 
Customer orders entered in the regular order book but provides a rebate 
to Priority Customer orders entered in the complex order book. The 
complex order rebates paid to Priority Customer orders, which apply 
regardless of whether those orders are executed on the complex order 
book or leg in to the regular order book, range from $0.30 per contract 
for the lowest tier to $0.46 per contract for the highest. To better 
align the fees charged for executing trades with the rebates paid out 
by ISE, the Exchange proposes to increase the maker fee for Market 
Maker (including Market Maker Plus) and Non-ISE Market Maker orders to 
$0.30 per contract when trading against Priority Customer orders that 
leg in from the complex order book.
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    \3\ The term ``Market Makers'' refers to ``Competitive Market 
Makers'' and ``Primary Market Makers'' collectively. See Rule 
100(a)(25).
    \4\ A ``Non-ISE Market Maker'' is a market maker as defined in 
Section 3(a)(38) of the Securities Exchange Act of 1934, as amended, 
registered in the same options class on another options exchange.
    \5\ ``Select Symbols'' are options overlying all symbols listed 
on the ISE that are in the Penny Pilot Program.
    \6\ A ``Priority Customer'' is 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), as defined in ISE Rule 100(a)(37A).
    \7\ A Market Maker Plus is a Market Maker who is on the National 
Best Bid or National Best Offer a specified percentage of the time 
for series trading between $0.03 and $3.00 (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 $3.00 (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. The specified percentage is at least 80% but lower than 85% 
of the time for Tier 1, at least 85% but lower than 95% of the time 
for Tier 2, and at least 95% of the time for Tier 3. A Market 
Maker's single best and single worst quoting days each month based 
on the front two expiration months, on a per symbol basis, will be 
excluded in calculating whether a Market Maker qualifies for this 
rebate, if doing so will qualify a Market Maker for the rebate.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\8\ in general, and Section 
6(b)(4) of the Act,\9\ 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.
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    \8\ 15 U.S.C. 78f.
    \9\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that the proposed fee change is reasonable 
and equitable as it aligns the fees associated with trading against 
legged-in Priority Customer orders with the rebates paid out by ISE. As 
explained above, the Exchange offers significant rebates to Priority 
Customer complex orders. This, combined with the low maker fees charged 
to regular orders, results a negative rate per contract when Priority 
Customer complex orders leg in to the regular order book. To reduce 
these negative economics, the Exchange believes that it is appropriate 
to increase the fees charged to Market Maker and Non-ISE Market Maker 
orders that trade against Priority Customer complex orders that leg in 
from the complex order book. In this regard, the Exchange notes that 
the proposed maker fees are equivalent to the rebate provided to 
Priority Customer complex orders that qualify for the lowest tier of 
rebate, and will therefore help offset those rebates. The proposed fees 
are also within the range of fees charged by other options exchanges, 
including, for example, BOX Options Exchange LLC (``BOX''), which 
charges a fee of $0.51 per contract for Market Maker orders in penny 
pilot classes when trading against a Public Customer. The Exchange 
notes that it is only proposing to increase the applicable maker fees 
for Market Maker and Non-ISE Market Maker orders, and not for Firm 
Proprietary \10\/Broker-Dealer \11\ or Professional Customer \12\ 
orders. The Exchange believes that this is not unfairly discriminatory 
as Market Makers and Non-ISE Market Makers are responsible for the 
majority of trading volume that executes against Priority Customer 
orders that leg in from the complex order book and are sophisticated 
enough to account for the higher fees that would be charged when 
trading against such orders.
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    \10\ A ``Firm Proprietary'' order is an order submitted by a 
member for its own proprietary account.
    \11\ A ``Broker-Dealer'' order is an order submitted by a member 
for a broker-dealer account that is not its own proprietary account.
    \12\ A ``Professional Customer'' is a person or entity that is 
not a broker/dealer and is not a Priority Customer.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\13\ the Exchange 
does not believe that the proposed rule change will impose any burden 
on intermarket or intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The proposed 
fees are designed to reduce the negative economics associated with 
orders that leg in from the complex order book, and are not intended to 
have any competitive impact. While the

[[Page 34188]]

proposed fee increase only applies to Market Maker and Non-ISE Market 
Maker orders, the Exchange does not believe that this will have any 
significant competitive impact as the proposed fees remain modest and 
are well within the range of fees charged by other options exchanges. 
The Exchange operates in a highly competitive market in which market 
participants can readily direct their order flow to competing venues. 
In such an environment, the Exchange must continually review, and 
consider adjusting, its fees and rebates to remain competitive with 
other exchanges. For the reasons described above, the Exchange believes 
that the proposed fee changes reflect this competitive environment.
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    \13\ 15 U.S.C. 78f(b)(8).
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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 \14\ and subparagraph (f)(2) of Rule 19b-4 
thereunder,\15\ because it establishes a due, fee, or other charge 
imposed by ISE.
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    \14\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \15\ 17 CFR 240.19b-4(f)(2).
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    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.

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 email to rule-comments@sec.gov. Please include 
File Number SR-ISE-2015-20 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549.

All submissions should refer to File Number SR-ISE-2015-20. 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 
10:00 a.m. and 3:00 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-2015-20 and should be 
submitted on or before July 6, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-14480 Filed 6-12-15; 8:45 am]
 BILLING CODE 8011-01-P