Document ID: SEC-2009-1584-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Order Granting Accelerated Approval to a Proposed Rule Change Relating to the Amounts That Direct Edge ECN, in Its Capacity as an Introducing Broker for Non-ISE Members, Passes Through to Such Non-ISE Members
Posted Date: 2009-11-09T05:00Z

[Federal Register: November 9, 2009 (Volume 74, Number 215)]
[Notices]               
[Page 57728-57730]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09no09-98]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60913; File No. SR-ISE-2009-89]

 
Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Order Granting Accelerated Approval to a 
Proposed Rule Change Relating to the Amounts That Direct Edge ECN, in 
Its Capacity as an Introducing Broker for Non-ISE Members, Passes 
Through to Such Non-ISE Members

November 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 October 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 and II below, which Items have been prepared by 
ISE. The Commission is publishing this notice to solicit comments on 
the proposed rule change from interested persons, and is approving the 
proposal on an accelerated basis.
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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 Exchange proposes to modify the amounts that Direct Edge ECN 
(``DECN''), in its capacity as an introducing broker for non-ISE 
Members, passes through to such non-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 III 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.

[[Page 57729]]

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 30, 2009, the ISE filed for immediate effectiveness a 
proposed rule change to: (i) Amend DECN's fee schedule for ISE Members 
\3\ to adopt new fees and rebates and associated flags; \4\ (ii) amend 
the criteria for meeting the Ultra Tier; \5\ (iii) amend the 
applicability of the Super Tier rebate to Tape B securities; \6\ and 
(iv) make typographical changes to the fee schedule.\7\ The fee changes 
made pursuant to SR-ISE-2009-88 became operative on November 1, 2009.
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    \3\ References to ISE Members in this filing refer to DECN 
Subscribers who are ISE Members.
    \4\ In SR-ISE-2009-88, the Exchange adopted additional fees and 
rebates to remain competitive with other market centers. First, the 
Exchange amended the fees on EDGA for adding and removing liquidity 
for securities priced $1 and over. Effective November 1, 2009, the 
Exchange rebates $0.0002 per share for removing liquidity on EDGA if 
the attributed MPID adds or routes a minimum average daily share 
volume, measured monthly, of 50,000 shares on either EDGX, EDGA, or 
EDGX and EDGA combined. As today, any attributed MPID not meeting 
the aforementioned minimum is charged $0.0030 per share for removing 
liquidity from EDGA. In addition, the Exchange charges $0.0002 per 
share for adding liquidity on EDGA unless the attributed MPID adds a 
minimum average daily share volume, measured monthly, of at least 
50,000,000 shares on EDGA. If members meet or exceed such volume 
threshold, they are not charged to add liquidity on EDGA.
    In addition, in SR-ISE-2009-88, the Exchange made conforming 
changes to the flags associated with these above-described fees. 
Flags associated with adding liquidity on EDGA were updated to 
reflect the $0.0002 charge. These flags include B, V, and Y. The 
fees associated with Flags 3 and 4, discussed in more detail below, 
are also consistent with this fee structure. Flags associated with 
removing liquidity on EDGA were updated to reflect the $0.0002 
rebate. These flags include N and W. Flag 6, discussed in more 
detail below, is also consistent with this fee structure.
    Furthermore, in SR-ISE-2009-88, the Exchange amended the fee on 
EDGX for adding liquidity on Tape B for securities priced $1 and 
over. The Exchange rebates $0.0025 per share (the same as currently 
exists for Tapes A & C). A conforming change was made to Flag B, 
which indicates liquidity added to EDGX's book.
    Finally, the Exchange amended the fees on both EDGX and EDGA for 
securities priced less than $1. For such securities, the Exchange 
amended the fees for routing to be 0.30% of the total dollar value 
of the transaction instead of 0.29% of the dollar value of the 
transaction.
    The Exchange believes that the above-described fee changes 
enable DECN to compete effectively with other market centers.
    \5\ On July 1, 2009, the Exchange adopted a new Ultra Tier 
Rebate whereby ISE Members are provided 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 satisfies one of the 
following criteria on a daily basis, measured monthly: (i) Adding 
100,000,000 shares or more on EDGX; or (ii) adding 50,000,000 shares 
or more of liquidity on EDGX, so long as added liquidity on EDGX is 
at least 20,000,000 shares greater than the previous calendar month. 
The rebate described above is referred to as an ``Ultra Tier 
Rebate'' on the DECN fee schedule. See Securities Exchange Act 
Release No. 60232 (July 2, 2009), 74 FR 33309 (July 10, 2009) (SR-
ISE-2009-43).
    Per SR-ISE-2009-68, the Exchange amended the criteria for 
meeting the Ultra Tier if ISE Members (i) 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 N and W) 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. 
See Securities Exchange Act Release No. 60769 (October 2, 2009), 74 
FR 51903 (October 8, 2009) (SR-ISE-2009-68).
    In SR-ISE-2009-88, the Exchange also added an additional way to 
qualify for the Ultra Tier. Members can also qualify for a $0.0032 
rebate per share for all liquidity posted on EDGX if the attributed 
MPID on a daily basis, measured monthly, adds a minimum of 
50,000,000 shares per day to EDGX so long as the added liquidity on 
EDGX is at least 50,000,000 shares greater than the previous 
calendar month.
    The Exchange believes that this additional way to meet the Ultra 
Tier (a tier-based rate) incents Members to interact with order flow 
on DECN. This discount rate arises in part from reduced 
administrative costs associated with certain volume levels.
    In SR-ISE-2009-88, the Exchange added liquidity flags to reflect 
adding and removing liquidity during pre- and post-trading hours. 
When members add liquidity on Tapes A & C during the pre- and post-
trading hours, they are rebated $0.0025 per share on EDGX and are 
charged $0.0002 per share on EDGA and this situation yields Flag 3. 
When members add liquidity during the pre- and post-trading hours on 
Tape B, they are rebated $0.0025 per share on EDGX and charged 
$0.0002 per share on EDGA and this situation yields Flag 4. When 
members cross with themselves (internalization) during the pre- and 
post-trading hours, they are charged $0.000025 per share on EDGX and 
are not charged on EDGA. This situation yields flag 5. When members 
remove liquidity from any Tape during the pre- and post-trading 
hours, they are charged $0.0028 per share on EDGX and are rebated 
$0.0002 on EDGA. This situation yields flag 6. Finally, for members 
whose orders are routed from EDGA or EDGX during the pre- and post-
trading hours, they are charged $0.0030 per share. This situation 
yields flag 7. In addition, the rebate of $0.0002 for removing 
liquidity on EDGA and charge of $0.0002 for adding liquidity on EDGA 
is described in more detail below. The Exchange believes that this 
fee structure will enable it to compete effectively with other 
market centers that have recently introduced such pricing.
    \6\ Additionally, in SR-ISE-2009-88, the Exchange modified the 
Super Tier rebate to include transactions in Tape B securities as 
well. Previously, the Super Tier only applied to Tapes A & C. As a 
result of the amendment, Members who execute transactions in Tape B 
securities also qualify for the Super Tier and are provided a 
$0.0030 rebate per share for liquidity added on EDGX if the 
attributed MPID satisfies any of the following three criteria on a 
daily basis, measured monthly: (i) Adding 40,000,000 shares or more 
on either EDGX, EDGA, or EDGX and EDGA combined; (ii) adding 
20,000,000 shares or more on either EDGX, EDGA, or EDGX and EDGA 
combined and routing 20,000,000 shares or more through EDGA; or 
(iii) adding 10,000,000 shares or more of liquidity to EDGX, so long 
as added liquidity on EDGX is at least 5,000,000 shares greater than 
the previous calendar month.
    \7\ In SR-ISE-2009-88, the Exchange made typographical changes 
to the fee schedule to clarify that Flags M, V, and Y are rebates 
for adding liquidity. For Flag M, parentheses were added to indicate 
that $0.0024 rebate per share is both on EDGA and EDGX. For Flags V 
and Y, parentheses were added to indicate that the $0.0025 rebate 
per share is on EDGX.
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    In its capacity as a member of ISE, DECN currently serves as an 
introducing broker for the non-ISE Member subscribers of DECN to access 
EDGX and EDGA. DECN, as an ISE Member and introducing broker, receives 
rebates and is assessed charges from DECN for transactions it executes 
on EDGX or EDGA in its capacity as introducing broker for non-ISE 
Members. Since the amounts of such rebates and charges were changed 
pursuant to SR-ISE-2009-88, DECN wishes to make corresponding changes 
to the amounts it passes through to non-ISE Member subscribers of DECN 
for which it acts as introducing broker. As a result, the per share 
amounts that non-ISE Member subscribers receive and are charged will be 
the same as the amounts that ISE Members receive and are charged.
    ISE is seeking accelerated approval of this proposed rule change, 
as well an effective date of November 1, 2009. ISE represents that this 
proposal will ensure that both ISE Members and non-ISE Members (by 
virtue of the pass-through described above) will in effect receive and 
be charged equivalent amounts and that the imposition of such amounts 
will begin on the same November 1, 2009 start date.
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, 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, this proposal will ensure that dues, 
fees and other charges imposed on ISE Members are equitably allocated 
to both ISE Members and non-ISE Members (by virtue of the pass-through 
described above).
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    \8\ 15 U.S.C. 78f.
    \9\ 15 U.S.C. 78f(b)(4).
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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.

[[Page 57730]]

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. 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 No. SR-ISE-2009-89 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-2009-89. 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 Commissions 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 such 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-2009-89 and should be submitted on 
or before November 30, 2009.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange.\10\ 
Specifically, the Commission finds that the proposed rule change is 
consistent with Section 6(b)(4) \11\ of the Act, which requires that 
the rules of a national securities exchange provide for the equitable 
allocation of reasonable dues, fees, and other charges among members 
and issuers and other persons using its facilities.
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    \10\ In approving this proposal, the Commission has considered 
its impact on efficiency, competition, and capital formation. 15 
U.S.C. 78c(f).
    \11\ 15 U.S.C. 78f(b)(4).
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    As described more fully above, ISE recently amended DECN's fee 
schedule for ISE Members to, among other things, adopt new fees, 
rebates and associated flags for adding and removing liquidity during 
pre and post hours trading, add an additional method to qualify for the 
Ultra Tier rebate, modify the Super Tier rebate to include transactions 
in Tape B securities, adopt a charge for adding liquidity on EDGA 
unless certain volume thresholds are met, revise the fees for adding 
liquidity on EDGX and EDGA and made conforming changes to the flags 
associated with these rebates and fees.\12\ The fee changes made 
pursuant to the Member Fee Filing became operative on November 1, 2009. 
DECN receives rebates and is charged fees for transactions it executes 
on EGDX or EDGA in its capacity as an introducing broker for its non-
ISE member subscribers.
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    \12\ See File No. SR-ISE-2009-88 (the ``Member Fee Filing'').
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    The current proposal, which will apply retroactively to November 1, 
2009, will allow DECN to pass through the revised rebates and fees to 
the non-ISE member subscribers for which it acts an introducing broker. 
The Commission finds that the proposal is consistent with the Act 
because it will provide rebates and charge fees to non-ISE member 
subscribers that are equivalent to those established for ISE member 
subscribers in the Member Fee Filing.\13\
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    \13\ Id.
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    ISE has requested that the Commission find good cause for approving 
the proposed rule change prior to the thirtieth day after publication 
of notice of filing thereof in the Federal Register. As discussed 
above, the proposal will allow DECN to pass through to non-ISE member 
subscribers the revised rebate and fees established for ISE member 
subscribers in the Member Fee Filing, resulting in equivalent rebates 
and fees for ISE member and non-member subscribers. In addition, 
because the proposal will apply the revised rebates and fees 
retroactively to November 1, 2009, the revised rebates and fees will 
have the same effective date, thereby promoting consistency in the 
DECN's fee schedule. Accordingly, the Commission finds good cause, 
pursuant to Section 19(b)(2) of the Act, for approving the proposed 
rule change prior to the thirtieth day after the date of publication of 
notice of filing thereof in the Federal Register.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\14\ that the proposed rule change (SR-ISE-2009-89) be, and hereby 
is, approved on an accelerated basis.
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    \14\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-26879 Filed 11-6-09; 8:45 am]

BILLING CODE 8011-01-P