Document ID: SEC-2013-0777-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2013-04-24T04:00Z

[Federal Register Volume 78, Number 79 (Wednesday, April 24, 2013)]
[Notices]
[Pages 24271-24273]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-09653]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69393; File No. SR-ISE-2013-32]

Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change To Amend the Market Maker Plus Rebate Program

April 18, 2013.
    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 April 10, 2013, 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 Market Maker Plus rebate 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    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 all symbols 
that are in the Penny Pilot program (the ``Select Symbols''). The fee 
change discussed below applies to both standard options and mini 
options traded on the Exchange. The Exchange's Schedule of Fees has 
separate tables for fees and rebates applicable to standard options and 
mini options. The Exchange notes that while the discussion below 
relates to fees and rebates for standard options, the fees and rebates 
for mini options, which are not discussed below, are and shall continue 
to be 1/10th of the fees and rebates for standard options.\3\
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    \3\ See SR-ISE-2013-28 (not yet published) [sic].
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    The Exchange's maker/taker fees and rebates apply to the following 
categories of market participants: (i) Market Maker; \4\ (ii) Market 
Maker Plus; (iii)

[[Page 24272]]

Non-ISE Market Maker; \5\ (iv) Firm Proprietary/Broker-Dealer; (v) 
Professional Customer; \6\ and (vi) Priority Customer.\7\ In order to 
promote and encourage liquidity in the Select Symbols, the Exchange 
currently offers a $0.10 per contract rebate to Market Makers if the 
quotes they send to the Exchange qualify the Market Maker to become a 
Market Maker Plus. The purpose of this proposed rule change is to amend 
the Exchange's Market Maker Plus rebate incentive.
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    \4\ The term ``Market Makers'' refers to ``Competitive Market 
Makers'' and ``Primary Market Makers'' collectively. See ISE Rule 
100(a)(25).
    \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 registered in the same options class 
on another options exchange.
    \6\ A Professional Customer is a person who is not a broker/
dealer and is not a Priority Customer.
    \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).
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    A Market Maker Plus is a 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 for all expiration 
months in that symbol during the current trading month. A Market 
Maker's single best and single worst overall quoting days each month, 
on a per symbol basis, is excluded in calculating whether a Market 
Maker qualifies for this rebate, if doing so will qualify a Market 
Maker for the rebate.\8\
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    \8\ See Securities Exchange Act Release Nos. 62507 (July 15, 
2010), 75 FR 42802 (July 22, 2010) (SR-ISE-2010-68); and 67039 (May 
22, 2012), 77 FR 31680 (May 29, 2013) (SR-ISE-2012-39).
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    The Exchange now proposes to amend the fees and rebates for Market 
Makers who attain Market Maker Plus status. Specifically, Market Makers 
qualifying for Market Maker Plus in the Select Symbols will pay no fee 
and receive no rebate when providing liquidity against a Priority 
Customer Complex order that legs into the regular orderbook.
    The Exchange currently 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 current stated criteria. 
The Exchange will continue to provide Market Makers a daily report so 
that Market Makers can track their quoting activity to determine 
whether or not they qualify for the Market Maker Plus rebate.
    Since the rate changes to the Schedule of Fees pursuant to this 
proposal will be effective upon filing, for the transactions occurring 
in April 2013 prior to the effective date of this filing members will 
be assessed the rates in effect immediately prior to those proposed by 
this filing. For transactions occurring in April 2013 on and after the 
effective date of this filing, members will be assessed the rates 
proposed by this filing.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Schedule of 
Fees is consistent with Section 6(b) of the Securities and Exchange Act 
of 1934 (the ``Act'') \9\ in general, and furthers the objectives of 
Section 6(b)(4) of the Act \10\ in particular, in that it is an 
equitable allocation of reasonable 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 Select Symbols and a 
Market Maker's ability to qualify for Market Maker Plus status.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4).
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    The Exchange has determined to charge fees and provide rebates for 
regular orders in mini options at a rate that is 1/10th the rate of 
fees and rebates the Exchange currently provides for trading in 
standard options. The Exchange believes it is reasonable and equitable 
and not unfairly discriminatory to assess lower fees and rebates to 
provide market participants an incentive to trade mini options on the 
Exchange. The Exchange believes the proposed fees and rebates are 
reasonable and equitable in light of the fact that mini options have a 
smaller exercise and assignment value, specifically 1/10th that of a 
standard option contract, and, as such, levying fees that are 1/10th of 
what market participants pay today.
    The Exchange believes the proposed rule change to not charge Market 
Makers who qualify for Market Maker Plus status a fee or provide a 
rebate when providing liquidity against a Priority Customer complex 
order that legs into the regular orderbook is reasonable and equitable 
because the purpose of the Market Maker Plus rebate is to incent 
simple, non-complex order flow to the Exchange. The Exchange believes 
the proposed rule change is also reasonable and equitable because it 
will continue to differentiate Market Makers who meet higher quoting 
standards and thereby encourage them to continue to post narrow and 
liquid markets. The Exchange believes the proposed rule change will 
also encourage Market Makers to post tighter markets in the Select 
Symbols and thereby maintain liquidity and attract additional order 
flow to the Exchange. The Market Maker Plus rebate employed by the 
Exchange has proven to be an effective incentive for Market Makers to 
provide liquidity in the Select Symbols.
    The Exchange believes the proposed rule change is not unfairly 
discriminatory because it will uniformly apply to all Market Makers on 
the Exchange. The Exchange further believes that the Exchange's Market 
Maker Plus rebate is not unfairly discriminatory because this rebate 
program is consistent with rebates that exist today at other options 
exchanges. The Exchange believes that the Market Maker Plus rebate is a 
competitive rebate and equivalent to incentives provided by other 
exchanges and is therefore reasonable and equitably allocated to those 
members that direct orders to the Exchange rather than to a competing 
exchange. The Exchange operates in a highly competitive market in which 
market participants can readily direct order flow to another exchange 
if they deem rebate levels at a particular exchange to be low.

B. Self-Regulatory Organization's Statement on Burden on Competition

    ISE believes that the proposed rule change, which will maintain 
fees and rebates that are competitive and are within the range of fees 
and rebates charged by other exchanges for similar orders, will not 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. Indeed, as noted above, the 
Exchange believes that the proposed change will promote competition 
among Market Makers, as it is designed to allow Market Makers to post 
tighter markets and compete for order flow and improve the Exchange's 
competitive position.

[[Page 24273]]

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 \11\ and subparagraph (f)(2) of Rule 19b-4 
thereunder,\12\ because it establishes a due, fee, or other charge 
imposed by ISE.
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    \11\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \12\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of the 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-2013-32 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-2013-32. 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 such 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-2013-32, and should be 
submitted on or before May 15, 2013.
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    \13\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-09653 Filed 4-23-13; 8:45 am]
BILLING CODE 8011-01-P