Document ID: SEC-2011-1926-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2011-12-12T05:00Z

[Federal Register Volume 76, Number 238 (Monday, December 12, 2011)]
[Notices]
[Pages 77279-77281]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-31735]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65898; File No. SR-ISE-2011-78]

Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change to Amend the Threshold Levels for Tier-Based Rebates for 
Qualified Contingent Cross Orders and Solicitation Orders Executed on 
the Exchange

 December 6, 2011.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby 
given that, on November 22, 2011, the International Securities 
Exchange, LLC (the ``Exchange'' or the ``ISE'') filed with the 
Securities and Exchange Commission (the ``Commission'') the proposed 
rule change as described in Items I and II below, which Items have been 
prepared by the Exchange. 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 is proposing to amend the threshold levels for tier-based 
rebates for Qualified Contingent Cross (``QCC'') orders and 
Solicitation orders. 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 this proposed rule change is to amend the threshold 
contract levels to encourage members to submit greater numbers of QCC 
orders and Solicitation orders to the Exchange. The Exchange currently 
provides a rebate to Members who reach a certain volume threshold in 
QCC orders and/or Solicitation orders during a month.\3\ Once a Member 
reaches the volume threshold, the Exchange provides a rebate to that 
Member for all of its QCC and Solicitation traded contracts for that 
month. The rebate is paid to the Member entering a qualifying order, 
i.e., a QCC order and/or a Solicitation order. The rebate applies to 
QCC orders and Solicitation orders in all symbols traded on the 
Exchange. Additionally, the threshold levels are based on the 
originating side so if, for example, a Member submits a Solicitation 
order for 1,000 contracts, all 1,000 contracts are counted to reach the 
established threshold even if the order is broken up and executed with 
multiple counter parties.
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    \3\ See Exchange Act Release Nos. 65087 (August 10, 2011), 76 FR 
50783 (August 16, 2011) (SR-ISE-2011-47); 65583 (October 18, 2011), 
76 FR 65555 (October 21, 2011) (SR-ISE-2011-68); and 65705 (November 
8, 2011), 76 FR 70789 (November 15, 2011) (SR-ISE-2011-70).
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    The current volume threshold and corresponding rebate per contract 
is:

------------------------------------------------------------------------
                                                            Rebate per
               Originating contract sides                    contract
------------------------------------------------------------------------
0-99,999................................................           $0.00
100,000-1,699,999.......................................            0.01
1,700,000-2,499,999.....................................            0.03
2,500,000-3,499,999.....................................            0.05
3,500,000+..............................................            0.07
------------------------------------------------------------------------

    The Exchange now proposes to amend the current tiers by: (1) 
Increasing the threshold for Members to qualify for a rebate, from a 
minimum of 100,000 qualifying contracts to 200,000 qualifying 
contracts. While the Exchange proposes to increase the minimum 
threshold level, the Exchange also proposes to increase the rebate 
payable for this tier, from $0.01 per contract to $0.02 per contract; 
(2) lowering the contract threshold level for the middle tier while 
maintaining the rebate at $0.03 per contract; (3) lowering the contract 
threshold and the per contract rebate for the fourth tier; and (4) 
lowering the amount of qualifying contracts a Member must trade to 
qualify for the maximum per contract

[[Page 77280]]

rebate, from 3,500,000 qualifying contracts to 2,000,000 qualifying 
contracts. To accommodate the proposed lower threshold, the Exchange 
also proposes to lower the rebate payable for this tier, from $0.07 per 
contract to $0.05 per contract. With the proposed changes to the tiers, 
the Exchange is attempting to strike the right balance between the 
number of qualifying contracts and its corresponding rebate to ensure 
that the incentive program achieves its intended purpose of attracting 
greater order flow from its Members.
    With the proposed amended tiers, the volume threshold and 
corresponding rebate per contract will be as follows:

------------------------------------------------------------------------
                                                            Rebate per
               Originating contract sides                    contract
------------------------------------------------------------------------
0-199,999...............................................           $0.00
200,000-999,999.........................................            0.02
1,000,000-1,699,999.....................................            0.03
1,700,000-1,999,999.....................................            0.04
2,000,000+..............................................            0.05
------------------------------------------------------------------------

    Further, the Exchange currently assesses per contract transaction 
charges and credits to market participants that add or remove liquidity 
from the Exchange (``maker/taker fees'') in a select number of options 
classes (the ``Select Symbols'').\4\ For Solicitation orders in the 
Select Symbols, the Exchange currently provides a rebate of $0.15 to 
contracts that do not trade with the contra order in the Solicited 
Order Mechanism. The Exchange does not propose any change to that 
rebate and that rebate will continue to apply.
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    \4\ Options classes subject to maker/taker fees are identified 
by their ticker symbol on the Exchange's Schedule of Fees.
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    The Exchange has designated this proposal to be operative on 
December 1, 2011.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Schedule of 
Fees is consistent with Section 6(b) of the Securities Exchange Act of 
1934 (``Exchange Act'') \5\ in general, and furthers the objectives of 
Section 6(b)(4) of the Exchange Act \6\ in particular, in that it is an 
equitable allocation of reasonable dues, fees and other charges among 
Exchange Members. The Exchange believes that the proposed fee change 
will generally allow the Exchange and its Members to better compete for 
order flow and thus enhance competition. Specifically, the Exchange 
believes that its proposal, which among other things, lowers the 
threshold level for Members to qualify for the highest per contract 
rebate payable, is reasonable as it will encourage Members who direct 
their QCC and Solicitation orders to the Exchange to continue to do so 
instead of sending this order flow to a competing exchange. The 
Exchange believes that with the proposed amended tiers, more Members 
are now likely to qualify for higher rebates for sending their QCC and 
Solicitation orders to the Exchange.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(4).
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    The Exchange notes that it currently has other incentive programs 
to promote and encourage growth in specific business areas. For 
example, the Exchange has lower fees (or no fees) for customer orders; 
\7\ and tiered pricing that reduces rates for market makers based on 
the level of business they bring to the Exchange.\8\ This proposed rule 
change targets a particular segment in which the Exchange seeks to 
garnish greater order flow. The Exchange further believes that the 
rebate currently in place for QCC and Solicitation orders is reasonable 
because it is designed to give Members who trade a minimum of 200,000 
qualifying contracts in QCC and Solicitation orders on the Exchange a 
benefit by way of a lower transaction fee. As noted above, once a 
Member reaches an established volume threshold, all of the trading 
activity in the specified order type by that Member will be subject to 
the corresponding rebate.
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    \7\ For example, the customer fee is $0.00 per contract for 
products other than Singly Listed Indexes, Singly Listed ETFs and FX 
Options. For Singly Listed Options, Singly Listed ETFs and FX 
Options, the customer fee is $0.18 per contract. The Exchange also 
currently has an incentive plan in place for certain specific FX 
Options which has its own pricing. See ISE Schedule of Fees.
    \8\ The Exchange currently has a sliding scale fee structure 
that ranges from $0.01 per contract to $0.18 per contract depending 
on the level of volume a Member trades on the Exchange in a month.
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    The Exchange also believes that its rebate program for QCC and 
Solicitation orders is equitable because it would uniformly apply to 
all Members engaged in QCC and Solicitation trading in all option 
classes traded on the Exchange.

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 Exchange 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)(A)(ii) of the Act.\9\ 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.
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    \9\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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 Exchange 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-2011-78 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-2011-78. 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

[[Page 77281]]

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 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-2011-78 and should be submitted on 
or before January 3, 2012.

    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).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-31735 Filed 12-9-11; 8:45 am]
BILLING CODE 8011-01-P