Document ID: SEC-2013-0724-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2013-04-12T04:00Z

[Federal Register Volume 78, Number 71 (Friday, April 12, 2013)]
[Notices]
[Pages 21999-22001]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-08608]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69337; File No. SR-ISE-2013-29]

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

April 8, 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 March 27, 2013, 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, 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 its Schedule of Fees. 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 manner in 
which the fees for Crossing Orders \3\ and the Fee for Responses to 
Crossing Orders \4\ is [sic] applied for regular and complex orders 
traded on the Exchange. The fee for Crossing Orders and the fee for 
Responses to Crossing Orders discussed below apply 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 notes the fees and rebates for standard options, the 
fees and rebates for Mini Options, which are not discussed below, are 
1/10th of the fees and rebates for standard options.\5\
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    \3\ A Crossing Order is an order executed in the Exchange's 
Facilitation Mechanism, Solicited Order Mechanism, Price Improvement 
Mechanism (PIM) or submitted as a Qualified Contingent Cross order. 
For purposes of the Schedule of Fees, orders executed in the Block 
Order Mechanism are also considered Crossing Orders. See Preface, 
ISE Schedule of Fees.
    \4\ ``Responses to Crossing Order'' (other than Regular Orders 
in Non-Select Symbols) is any contra-side interest submitted after 
the commencement of an auction in the Exchange's Facilitation 
Mechanism, Solicited Order Mechanism, Block Order Mechanism or PIM. 
``Responses to Crossing Order'' (for Regular Orders in Non-Select 
Symbols) is any response message entered with respect to a specific 
auction in the Exchange's Facilitation Mechanism, Solicited Order 
Mechanism, Block Order Mechanism or PIM. See Preface, ISE Schedule 
of Fees.
    \5\ See SR-ISE-2013-28 (not yet published).
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    First, the Exchange currently charges a fee of $0.20 per contract 
to Market Maker, Market Maker Plus, Non-ISE Market Maker, Firm 
Proprietary/Broker-Dealer and Professional Customer orders (except for 
Priority Customer, this fee is currently $0.00 per contract) for 
regular Crossing Orders in the Select Symbols.
    The Exchange also currently charges a fee of $0.20 per contract 
(for largest leg only) to Market Maker, Non-ISE Market Maker, Firm 
Proprietary/Broker-Dealer and Professional Customer orders (except for 
Priority Customer, this fee is currently $0.00 per contract) for 
complex Crossing Orders in all symbols.
    As an incentive to attract crossing orders for execution in the 
Exchange's various auction mechanisms, the Exchange currently provides 
a per contract rebate. This rebate is provided to those contracts that 
do not trade with the contra order in the Exchange's Facilitation 
Mechanism, Price Improvement Mechanism and Solicited Order Mechanism. 
This rebate currently applies to regular and complex orders in the 
Select Symbols. For the Facilitation and Solicited Order Mechanisms, 
the rebate is currently $0.15 per contract. For the Price Improvement 
Mechanism, the rebate is currently $0.25 per contract. The Exchange 
does not currently charge an execution fee for contracts that receive 
the rebate.
    The Exchange now proposes to apply the existing crossing order fees 
for the full size of a crossing order, regardless if a portion of the 
order also receives a rebate. For example, assume a member enters a 
facilitation order for 1000 contracts; a market maker responds and 
trades 200 contracts; and the remaining 800 contracts are traded by the 
member that entered the order. Currently, the member that entered the 
order is charged a crossing fee for the 800 contracts it executed and 
receives a rebate for the 200 contracts that were executed by the 
market maker. Under this proposed rule change, the member that entered 
the order will be charged an

[[Page 22000]]

execution fee for the full size of the order (1000 contracts) and 
receive a rebate for any portion of the order it did not execute (200 
contracts).
    Second, the Exchange currently charges a Fee for Responses to 
Crossing Orders for regular orders in Non-Select Symbols, as follows: 
(i) $0.20 per contract to Market Maker (for orders sent by Electronic 
Access Members), Firm Proprietary/Broker-Dealer, Professional Customer, 
Priority Customer and Priority Customer (Singly Listed Symbols) orders; 
(ii) $0.45 per contract for Non-ISE Market Maker orders; and (iii) 
$0.18 per contract for Market Maker orders. This fee was adopted in 
January 2007 and has always been applied to ``response messages'' 
entered with respect to a particular broadcast message, but not to 
orders that are received on the limit order book after an auction 
commences.\6\
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    \6\ See Exchange Act Release No. 55060 (Jan. 8, 2007), 72 FR 
2050 (Jan. 17, 2007) (SR-ISE-2006-72).
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    The Exchange later adopted a similar response fee for Regular 
Orders in Select Symbols,\7\ for complex orders in Select Symbols \8\ 
of $0.40 per contract, and for complex orders in Non-Select Symbols \9\ 
for responses to special orders,\10\ but specified that a ``response'' 
is any contra-side interest submitted after the commencement of an 
auction. Thus, the fees for Regular Orders in Select Symbols and all 
complex orders are applied to both response messages and to orders 
received on the limit order book after an auction commences, whereas 
the fees for Regular Orders in Non-Select Symbols are applied to 
response messages.
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    \7\ See Exchange Act Release No. 63283 (Nov. 9, 2010), 75 FR 
70059 (Nov. 16, 2010) (SR-ISE-2010-106).
    \8\ See Exchange Act Release No. 65550 (October 13, 2011), 76 FR 
64984 (October 19, 2012 [sic]) (SR-ISE-2011-65). In this filing, the 
Exchange also adopted a response fee for complex orders for symbols 
that are in the Penny Pilot Program.
    \9\ See Exchange Act Release No. 66084 (January 3, 2012), 77 FR 
1103 (January 9, 2012) (SR-ISE-2011-84). This fee has since 
increased and is currently $0.82 per contract for Market Makers 
($0.84 per contract for Non-ISE Market Maker, Firm Proprietary/
Broker-Dealer and Professional Customer orders, and $0.00 per 
contract for Priority Customer orders). See Exchange Act Release No. 
68627 (January 11, 2013), 78 FR 3934 (January 17, 2013) (SR-ISE-
2013-01).
    \10\ The term ``special order'' was changed to ``crossing 
order'' when the Exchange re-formatted its Schedule of Fees. See 
Exchange Act Release No. 67545 (July 31, 2012), 77 FR 46776 (August 
6, 2012) (SR-ISE-2012-65).
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    The distinction noted above is reflected in the Preface of the fee 
schedule where ``Responses to Crossing Order'' (other than Regular 
Orders in Non-Select Symbols) is defined as any contra-side interest 
submitted after the commencement of an auction in the Exchange's 
Facilitation Mechanism, Solicited Order Mechanism, Block Order 
Mechanism or PIM, while ``Responses to Crossing Order'' (for Regular 
Orders in Non-Select Symbols) is defined as any response message 
entered with respect to a specific auction in the Exchange's 
Facilitation Mechanism, Solicited Order Mechanism, Block Order 
Mechanism or PIM.
    The Exchange now proposes to charge the Fee for Responses to 
Crossing Orders in a consistent manner across all symbols. Accordingly, 
the Exchange proposes to adopt a single definition that applies to 
regular and complex orders in all symbols by removing the term 
``Responses to Crossing Order'' (for Regular Orders in Non-Select 
Symbols) entirely and renaming the term ``Responses to Crossing Order'' 
(other than Regular Orders in Non-Select Symbols) as simply ``Responses 
to Crossing Order.'' The Exchange is not proposing any change to the 
level of fees charged for responses to crossing orders; this proposed 
rule change only amends the manner in which the current fee is applied.
    The Exchange has designated this proposed rule change to be 
operative on April 1, 2013.
2. Basis
    The Exchange believes that its proposal to amend its Schedule of 
Fees is consistent with Section 6(b) of the Securities and [sic] 
Exchange Act of 1934 (the ``Exchange Act'') \11\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \12\ 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.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes it is reasonable and equitable to charge the 
existing crossing order fees to the full size of a crossing order to 
recoup some of its costs of providing rebates to crossing orders and 
will result in a more equitable distribution among market participants 
of the costs associated with crossing orders. The Exchange believes the 
proposed fee to charge the existing crossing order fees to the full 
size of a crossing order is not unfairly discriminatory because the fee 
would apply uniformly to all categories of participants in the same 
manner. All market participants who execute crossing orders would be 
uniformly subject to these fees and all market participants whose 
orders are broken-up will continue to receive the break-up rebate at 
current levels.
    The Exchange believes that its proposal to modify the application 
of the Fee for Responses to Crossing Orders in the Non-Select Symbols 
is both reasonable and equitable because the Exchange already applies 
this fee to the Select Symbols in the manner in which it proposes to 
apply to the Non-Select Symbols. With this proposed rule change, this 
fee will now be applied in a consistent manner across all symbols. The 
Exchange believes its proposal to uniformly apply the Fee for Responses 
to Crossing Order across all symbols is not unfairly discriminatory 
because the fee would apply uniformly to all categories of participants 
in the same manner. All market participants that submit a contra-side 
interest after the commencement of an auction in the Exchange's various 
auction mechanisms would be uniformly subject to these fees.

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

    ISE does not believe that the proposed rule change will impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. This proposed rule change, 
which proposes to apply fees to a full size of a crossing order and 
which proposes to apply an existing fee uniformly across all symbols, 
does not impose any burden on competition. With this proposed rule 
change, market participants that trade on the Exchange will be subject 
to fees for the full size of a crossing order and will continue to 
receive the rebate for the portion of the order that was not previously 
charged a fee. With this proposed rule change, market participants that 
respond to crossing orders will be subject to fees that are already in 
place on the Exchange. Therefore, this proposed rule change does not 
impose any additional burden on competition that is not necessary or 
appropriate in furthering 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.

[[Page 22001]]

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 \13\ and subparagraph (f)(2) of Rule 19b-4 
thereunder,\14\ because it establishes a due, fee, or other charge 
imposed by ISE.
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    \13\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \14\ 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-2013-29 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-2013-29. 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 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-2013-29 and should be 
submitted on or before May 3, 2013.

    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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-08608 Filed 4-11-13; 8:45 am]
BILLING CODE 8011-01-P