80 FR 34185 - Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Schedule of Fees

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 114 (June 15, 2015)

[Federal Register Volume 80, Number 114 (Monday, June 15, 2015)]
[Notices]
[Pages 34185-34186]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-14479]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75130; File No. SR-ISE-2015-19]


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

June 9, 2015.
    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 1, 2015, 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 Schedule of Fees to increase certain 
complex order fees in Select Symbols, and to introduce tiered fees for 
certain Market Maker complex orders based on affiliated Priority 
Customer complex order volume. 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 the proposed rule change is to increase certain 
complex order fees in Select Symbols,\3\ and to introduce tiered fees 
for certain Market Maker \4\ complex orders based on affiliated 
Priority Customer \5\ complex order volume. Currently, the Exchange 
charges complex order taker fees in Select Symbols that are $0.43 per 
contract for Market Maker orders,\6\ and $0.44 per contract for Non-ISE 
Market Maker,\7\ Firm Proprietary \8\/Broker-Dealer,\9\ and
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    \3\ ``Select Symbols'' are options overlying all symbols listed 
on the ISE that are in the Penny Pilot Program.
    \4\ The term ``Market Makers'' refers to ``Competitive Market 
Makers'' and ``Primary Market Makers'' collectively. See Rule 
100(a)(25).
    \5\ A ``Priority Customer'' is 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), as defined in ISE Rule 100(a)(37A).
    \6\ ISE Market Makers making or taking liquidity receive a 
discount of $0.02 when trading against Priority Customer orders 
preferenced to them in the Complex Order Book in equity options that 
are able to be listed and traded on more than one options exchange. 
This discount does not apply to FX Options Symbols or to option 
classes designated by the Exchange to receive a guaranteed 
allocation pursuant to ISE Rule 722(b)(3)(i)(B).
    \7\ A ``Non-ISE Market Maker'' is a market maker as defined in 
Section 3(a)(38) of the Securities Exchange Act of 1934, as amended, 
registered in the same options class on another options exchange.
    \8\ A ``Firm Proprietary'' order is an order submitted by a 
member for its own proprietary account.
    \9\ A ``Broker-Dealer'' order is an order submitted by a member 
for a broker-dealer account that is not its own proprietary account.
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    Professional Customer \10\ orders.\11\ The Exchange also charges an 
equivalent maker fee in Select Symbols that applies specifically when 
trading against Priority Customer orders. The Exchange now proposes to 
increase the above fees for Non-ISE Market Maker, Firm Proprietary/
Broker-Dealer, and Professional Customer orders to $0.47 per contract. 
For Market Maker orders, the Exchange proposes to charge a tiered fee 
based on total affiliated Priority Customer complex order average daily 
volume (``ADV'').\12\ As proposed, Market Makers with a total 
affiliated Priority Customer ADV of up to 149,999 contracts will pay a 
fee of $0.46 per contract, while Market Makers with a total affiliated 
Priority Customer Complex ADV of 150,000 or more contracts will pay 
fees at the current rate of $0.43 per contract.\13\
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    \10\ A ``Professional Customer'' is a person or entity that is 
not a broker/dealer and is not a Priority Customer.
    \11\ Priority Customer Complex Orders are not charged maker/
taker fees and are instead provided a volume based rebate that 
ranges from $0.30 per contract to $0.46 per contract in Select 
Symbols.
    \12\ As is the case for other fees based on affiliated member 
volume, the Exchange will continue to aggregate eligible volume from 
affiliated members in determining total affiliated Priority Customer 
Complex ADV, provided there is at least 75% common ownership between 
the Members as reflected on each Member's Form BD, Schedule A.
     For purposes of determining Priority Customer Complex ADV, any 
day that the complex order book is not open for the entire trading 
day may be excluded from such calculation; provided that the 
Exchange will only remove the day for members that would have a 
lower ADV with the day included.
    \13\ The fee for the highest volume tier achieved will be 
applied retroactively to all eligible volume once the threshold has 
been reached.
     Preferenced Market Makers will continue to be eligible for a 
$0.02 per contract discount as described in footnote 6 above.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\14\ in general, and 
Section 6(b)(4) of the Act,\15\ 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.
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    \14\ 15 U.S.C. 78f.
    \15\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that the proposed fee increase is reasonable 
and equitable as the proposed fees are set at levels that the Exchange 
believes will continue to be attractive to market participants that 
trade on ISE, and offset rebates provided to Priority Customer complex 
orders, which were recently

[[Page 34186]]

increased.\16\ Moreover, the proposed fees are competitive with fees 
charged by other options exchanges and remain attractive to members for 
this reason. The Exchange notes that Priority Customer orders will 
continue to receive complex order rebates, while other market 
participants will continue to pay a fee. The Exchange does not believe 
that this is unfairly discriminatory as a Priority Customer is by 
definition 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). This limitation does 
not apply to participants whose behavior is substantially similar to 
that of market professionals, including Professional Customers, who 
will generally submit a higher number of orders (many of which do not 
result in executions) than Priority Customers. With respect to Market 
Maker orders, the Exchange believes that it is reasonable and equitable 
to charge lower fees to Market Makers with significant affiliated 
Priority Customer complex order volume, as this will incentivize 
members to bring additional order flow to ISE, creating additional 
liquidity to the benefit of all members that trade complex orders on 
the Exchange. The Exchange notes that the proposed tiered structure 
will allow Market Makers to continue to pay the same fees that they pay 
today by executing, through their affiliates, sufficient Priority 
Customer complex order volume to qualify for the lower fee. The 
Exchange does not believe that it is unfairly discriminatory only to 
provide these lower fees to Market Maker orders as Market Makers are 
subject to additional requirements and obligations (such as quoting 
requirements) that other market participants are not.
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    \16\ See Securities Exchange Act Release No. 74525 (March 18, 
2015), 80 FR 15646 (March 24, 2015) (SR-ISE-2015-09).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\17\ the Exchange 
does not believe that the proposed rule change will impose any burden 
on intermarket or intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The Exchange 
believes that the proposed complex order fees remain competitive with 
fees charged by other options exchanges. The Exchange operates in a 
highly competitive market in which market participants can readily 
direct their order flow to competing venues. In such an environment, 
the Exchange must continually review, and consider adjusting, its fees 
and rebates to remain competitive with other exchanges. For the reasons 
described above, the Exchange believes that the proposed fee changes 
reflect this competitive environment.
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    \17\ 15 U.S.C. 78f(b)(8).
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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 \18\ and subparagraph (f)(2) of Rule 19b-4 
thereunder,\19\ because it establishes a due, fee, or other charge 
imposed by ISE.
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    \18\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \19\ 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 [email protected]. Please include 
File Number SR-ISE-2015-19 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549.

All submissions should refer to File Number SR-ISE-2015-19. 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 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-2015-19 and should be 
submitted on or before July 6, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-14479 Filed 6-12-15; 8:45 am]
 BILLING CODE 8011-01-P