Document ID: SEC-2010-1033-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2010-07-08T04:00Z

[Federal Register: July 8, 2010 (Volume 75, Number 130)]
[Notices]               
[Page 39311-39313]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08jy10-137]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62431; File No. SR-ISE-2010-70]

 
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

July 1, 2010.
    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 June 30, 2010, 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 the self-
regulatory organization. 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, on the Commission's Internet 
Web site at http://www.sec.gov, at ISE, 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 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.

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.\3\ On June 30, 2010, in SR-ISE-2010-69, the ISE filed for 
immediate effectiveness a proposed rule change to amend DECN's fee 
schedule for ISE Members \4\ to (i) eliminate a trading volume 
threshold found in footnote 4 to the fee schedule; \5\ and (ii) add 
clarifying material to explain how certain volume thresholds will be 
adjusted during the month of July 2010.\6\ The changes made pursuant to 
SR-ISE-2010-69 became operative on July 1, 2010.
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    \3\ This fee filing relates to the trading facility operated by 
ISE and not EDGA Exchange, Inc. and EDGX Exchange, Inc. (``EDGA and 
EDGX Exchanges'') [sic] Direct Edge ECN will cease to operate in its 
capacity as an electronic communications network following the 
commencement of operations of EDGA and EDGX Exchanges as national 
securities exchanges.
    \4\ References to ISE Members in this filing refer to DECN 
Subscribers who are ISE Members.
    \5\ On June 30, 2010, in SR-ISE-2010-69, the Exchange eliminated 
the trading volume threshold found in footnote 4 of the DECN fee 
schedule relating to Flags E and 5. Currently, the lower rate of 
$0.000025 per share is contingent upon meeting a 1,000,000 share 
volume threshold on a daily basis, measured monthly. The Exchange 
eliminated the 1,000,000 share threshold in footnote 4 to the fee 
schedule and added ``intentionally omitted'' to the footnote in 
order to keep the current footnote numbering intact. The Exchange 
believes that the elimination of such threshold will enable it to 
avoid having to adjust the threshold calculation for the month of 
July 2010. This will result in an administratively easier process 
for both the Exchange and Members during the migration of symbols 
from DECN to EDGA and EDGX Exchanges.
    \6\ EDGA and EDGX Exchanges expect to begin operating as 
national securities exchanges on July 2, 2010. (See SR-EDGA-2010-04 
and SR-EDGX-2010-04 for EDGA and EDGX Exchange fee schedules). 
Following the launch date there will be a two week, phase-in period 
during which securities currently trading on DECN will be moved from 
DECN to EDGA and EDGX Exchanges. Once a symbol is migrated from DECN 
to EDGA and EDGX Exchanges, it will no longer be available for 
trading on DECN and will only be available for trading on the EDGA 
and EDGX Exchanges. Once the EDGA and EDGX Exchanges begin trading 
their first security, they will thus operate in conjunction with 
DECN until all symbols are fully migrated.
    As a result of the phased migration of symbols from DECN to EDGA 
and EDGX Exchanges, per SR-ISE-2010-69, three volume thresholds were 
adjusted for the month of July 2010 only to reflect the portion of 
the volume that occurs on DECN during the month. In that filing, the 
Exchange placed clarifying language about how these rebates are 
calculated in footnote numbers 1 and 2 to the DECN fee schedule. 
First, the removal rate on EDGA (a rebate of $0.0002 per share) is 
currently contingent on the attributed MPID adding (including 
hidden) and/or routing a minimum average daily share volume, 
measured monthly, of 50,000 shares on EDGA. Any attributed MPID not 
meeting the aforementioned minimum is charged $0.0030 per share for 
removing liquidity from EDGA (0.20% of dollar value for stocks 
priced less than $1.00). However, per SR-ISE-2010-69, the Exchange 
amended its fee schedule to provide that for the month of July 2010 
only, the 50,000 average daily volume threshold will be multiplied 
by a fraction, the numerator of which shall be the sum of the daily 
consolidated volumes for each DECN-traded symbol for all days that 
such symbol is traded on the DECN during the month of July and the 
denominator of which shall be the monthly consolidated volume for 
all DECN-traded symbols during the month of July.
    Secondly, Members can qualify for a rebate of $0.0032 per share 
for all liquidity posted on EDGX if they add or route at least 
5,000,000 shares of average daily volume prior to 9:30 a.m. or after 
4 p.m. (includes all flags except 6) AND add a minimum of 50,000,000 
shares of average daily volume on EDGX in total, including during 
both market hours and pre and post-trading hours. In SR-ISE-2010-69, 
the Exchange amended its fee schedule for the month of July 2010 
only to provide that these average daily volume thresholds 
(5,000,000 and 50,000,000) will be multiplied by a fraction, the 
numerator of which shall be the sum of the daily consolidated 
volumes for each DECN-traded symbol for all days that such symbol is 
traded on the DECN during the month of July and the denominator of 
which shall be the monthly consolidated volume for all DECN-traded 
symbols during the month of July.
    Third, the rebate for adding hidden orders is currently 
contingent upon Members adding greater than 1,000,000 shares on a 
daily basis, measured monthly. Members not meeting this minimum will 
be charged $0.0030 per share. In SR-ISE-2010-69, for the month of 
July 2010 only, the Exchange amended its fee schedule to provide 
that the 1,000,000 monthly share volume threshold will be multiplied 
by a fraction, the numerator of which shall be the sum of the daily 
consolidated volumes for each DECN-traded symbol for all days that 
such symbol is traded on the DECN during the month of July and the 
denominator of which shall be the monthly consolidated volume for 
all DECN-traded symbols during the month of July.
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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 charges were changed pursuant to SR-ISE-
2010-69, DECN wishes to make corresponding changes to the amounts it 
passes through to non-

[[Page 39312]]

ISE Member subscribers of DECN for which it acts as introducing broker. 
As a result, the per share amounts that non-ISE Member subscribers are 
charged will be the same as the amounts that ISE Members are charged.
    ISE is seeking accelerated approval of this proposed rule change, 
as well an effective date of July 1, 2010. 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 be charged 
equivalent amounts and that the imposition of such amounts will begin 
on the same July 1, 2010 start date.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\7\ in general, and 
furthers the objectives of Section 6(b)(4),\8\ 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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    \7\ 15 U.S.C. 78f.
    \8\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    This 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. 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 Number SR-ISE-2010-70 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-2010-70. 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-2010-70 and should be 
submitted on or before July 29, 2010.

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.\9\ 
Specifically, the Commission finds that the proposed rule change is 
consistent with Section 6(b)(4) \10\ 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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    \9\ In approving this proposal, the Commission has considered 
its impact on efficiency, competition, and capital formation. 15 
U.S.C 78c(f).
    \10\ 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 pursuant to SR-ISE-2010-69 (the ``Member Fee 
Filing''). The changes to the DECN fee schedule made pursuant to the 
Member Fee Filing became operative on July 1, 2010. 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. The current proposal, which will apply beginning on July 
1, 2010, will allow DECN to pass through the revised fees and rebates 
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 establish fees and rebates for non-ISE member 
subscribers that are equivalent to those established for ISE Member 
subscribers in the Member Fee Filing.
    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 fees and rebates established for ISE Member 
subscribers in the Member Fee Filing, resulting in equivalent fees and 
rebates for ISE Member and non-member subscribers. In addition, because 
the proposal will apply the revised fees and rebates beginning on July 
1, 2010, the revised fees and rebates 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,\11\ that the proposed rule change (SR-ISE-2010-70) is approved on 
an accelerated basis.
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    \11\ 15 U.S.C. 78s(b)(2).

[[Page 39313]]

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    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010-16669 Filed 7-7-10; 8:45 am]
BILLING CODE 8010-01-P