Document ID: SEC-2011-1556-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2011-10-13T04:00Z

[Federal Register Volume 76, Number 198 (Thursday, October 13, 2011)]
[Notices]
[Pages 63693-63695]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-26436]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65499; File No. SR-ISE-2011-64]

Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change Relating to Professional Customer Fees

October 6, 2011.
    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 September 26, 2011, 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 
and II 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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[[Page 63694]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The ISE proposes to amend its Schedule of Fees relating to certain 
professional customer orders executed on the Exchange. 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
    ISE proposes to increase the execution fee for ``professional 
customers,'' who execute orders as a result of taking liquidity from 
ISE's order book in certain option classes, from $0.18 per contract to 
$0.20 per contract. This proposed fee change is applicable to option 
classes that are not subject to the Exchange's modified maker/taker 
pricing structure (``Non-Select Symbols''). In addition to the Non-
Select Symbols, this proposed fee change shall also apply to non-
complex orders in option classes that are in the Penny Pilot 
program.\3\
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    \3\ The Exchange recently extended its maker/taker pricing 
structure to all complex orders in option classes that are in the 
Penny Pilot program. See Exchange Act Release No. 65021 (August 3, 
2011), 76 FR 48933 (August 9, 2011) (SR-ISE-2011-45). The Penny 
Pilot program, which commenced on January 26, 2007, permits ISE and 
all of the other options exchanges to quote certain option classes 
in pennies. See Exchange Act Release No. 55161 (January 24, 2007), 
72 FR 4754 (February 1, 2007) (SR-ISE-2006-62). The current pilot is 
scheduled to expire on December 31, 2011. See Exchange Act Release 
No. 63437 (December 6, 2010), 75 FR 77032 (December 10, 2010) (SR-
ISE-2010-116).
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    ISE rules distinguish between Priority Customer Orders \4\ and 
Professional Orders.\5\ For purpose of this discussion, ``professional 
customers'' are non-broker/dealer participants who enter at least 390 
orders per day on average during a calendar month for their own 
beneficial account(s). The Exchange notes that the level of trading 
activity by professional customers more resembles that of broker/
dealers, i.e., proprietary traders, than it does of a retail, or 
``Priority'' customer. As a result, professional customers are on 
parity with broker/dealers and generally pay the same transaction fees 
as broker/dealers. For example, for years broker/dealer orders have 
been charged an execution fee of $0.20 per contract in the Non-Select 
Symbols. And recently, the Exchange began charging professional 
customers who execute orders as a result of posting liquidity to ISE's 
order book in the Non-Select Symbols $0.20 per contract.\6\
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    \4\ A Priority Customer is defined in ISE Rule 100(a)(37A) as a 
person or entity that is not a broker or 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).
    \5\ A Professional Order is defined in ISE Rule 100(a)(37C) as 
an order that is for the account of a person or entity that is not a 
Priority Customer.
    \6\ See Securities Exchange Act Release No. 61434 (January 27, 
2010), 75 FR 5826 (February 4, 2010).
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    With this proposed fee change, the Exchange seeks to standardize 
the fee charged to professional customers for trading on the Exchange 
in the Non-Select Symbols as all professional customers will now pay 
$0.20 per contract, regardless of whether they are posting liquidity or 
taking liquidity in the Non-Select Symbols and for non-complex orders 
in option classes that are in the Penny Pilot program. The Exchange 
believes that the proposed fees for professional customers will allow 
the Exchange to remain competitive with other options exchanges who 
apply fees to professional customers. Further, in addition to 
standardizing theses [sic] fees, the Exchange believes the proposed fee 
change will make the Exchange's transaction fees simpler and more 
concise to Exchange Members.
    The Exchange has designated this proposal to be operative on 
October 3, 2011.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Schedule of 
Fees is consistent with Section 6(b) of the Act \7\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \8\ 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 changes will generally allow the Exchange to 
better compete for professional customer order flow and thus enhance 
competition. Specifically, the Exchange believes that its proposal to 
assess a $0.20 per contract fee for professional customers who take 
liquidity from the Exchange's order book in the Non-Select Symbols and 
for non-complex orders in option classes that are in the Penny Pilot 
program is equitable and reasonable as it will standardize fees charged 
by the Exchange for all professional customers that engage in a similar 
activity. The Exchange further believes it is reasonable, equitable and 
not unfairly discriminatory to charge professional customers the same 
level of fees that the Exchange charges broker/dealers as both groups 
of market participants essentially engage in similar trading activity.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 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.

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) of the Act \9\ and Rule 19b-4(f)(2) \10\ thereunder. 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.
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(2).
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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 Act. Comments may be submitted by any of 
the following methods:

[[Page 63695]]

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-2011-64 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-2011-64. 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, 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-2011-64 and should be 
submitted on or before November 3, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-26436 Filed 10-12-11; 8:45 am]
BILLING CODE 8011-01-P