80 FR 56517 - 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 181 (September 18, 2015)

[Federal Register Volume 80, Number 181 (Friday, September 18, 2015)]
[Notices]
[Pages 56517-56519]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-23398]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75912; File No. SR-ISE-2015-27]


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

September 14, 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 September 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 the 
Substance of the Proposed Rule Change

    The ISE proposes to amend the Schedule of Fees to increase certain 
complex order fees and rebates as described in more detail below. 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

[[Page 56518]]

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 Exchange currently provides volume-based tiered rebates for 
Priority Customer \3\ complex orders when these orders trade with non-
Priority Customer orders in the complex order book, or trade with 
quotes and orders on the regular order book. These complex order 
rebates are provided to members based on the member's average daily 
volume (``ADV'') in Priority Customer complex orders in six volume 
tiers as follows: 0 to 29,999 contracts (Tier 1), 30,000 to 59,999 
contracts (Tier 2), 60,000 to 99,999 contracts (Tier 3), 100,000 to 
149,999 contracts (Tier 4), 150,000 to 199,999 contracts (Tier 5), and 
200,000 or more contracts (Tier 6). Currently, Priority Customer 
complex orders receive a rebate of $0.30 per contract in Select Symbols 
\4\ and $0.63 per contract in Non-Select Symbols \5\ for Tier 1, $0.35 
per contract in Select Symbols and $0.71 per contract in Non-Select 
Symbols for Tier 2, $0.40 per contract in Select Symbols and $0.78 per 
contract in Non-Select Symbols for Tier 3, $0.43 per contract in Select 
Symbols and $0.80 per contract in Non-Select Symbols for Tier 4, $0.45 
per contract in Select Symbols and $0.82 per contract in Non-Select 
Symbols for Tier 5, and $0.46 per contract in Select Symbols and $0.83 
per contract in Non-Select Symbols for Tier 6.\6\ The Exchange now 
proposes to increase these rebates by $0.01 per contract for members 
that achieve Tiers 3, 4, 5, and 6. As proposed, the Priority Customer 
complex order rebate in Select Symbols will be increased to $0.41 per 
contract for Tier 3, $0.44 per contract for Tier 4, $0.46 per contract 
for Tier 5, and $0.47 per contact for Tier 6. For Non-Select Symbols 
the rebate will be increased to $0.79 per contract for Tier 3, $0.81 
per contract for Tier 4, $0.83 per contract for Tier 5, and $0.84 per 
contract for Tier 6. Other rebate amounts will remain unchanged from 
their current levels.
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    \3\ A ``Priority Customer'' is a person or entity that is to a 
broker/dealer in securities, and does not place more than 390 orders 
in listed options per day on a average during a calendar month for 
its own beneficial account(s), as defined in Rule 100(a)(37A).
    \4\ ``Select Symbols'' are options overlying all symbols listed 
on the ISE that are in the Penny Pilot Program.
    \5\ ``Non-Select Symbols'' are options overlying all symbols 
excluding Select Symbols.
    \6\ These rebates are provided per contract per leg if the order 
trades with non-Priority Customer orders in the complex order book, 
or trades with quotes and orders on the regular order book.
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    In addition, the Exchange charges complex order taker fees and an 
equivalent maker fee that applies specifically when trading against 
Priority Customer orders. In Select Symbols these fees are $0.46 per 
contract for Market Maker \7\ orders (or $0.43 per contract for Market 
Makers with total affiliated Priority Customer Complex ADV of 150,000 
or more contracts),\8\ and $0.47 per contract for Non-ISE Market 
Maker,\9\ Firm Proprietary \10\/Broker-Dealer,\11\ and Professional 
Customer \12\ orders. In Non-Select Symbols these fees are $0.85 per 
contract for Market Maker orders,\13\ and $0.87 per contract for Non-
ISE Market Maker, Firm Proprietary/Broker-Dealer, and Professional 
Customer orders. The Exchange now proposes to increase these fees by 
$0.01 per contract. As proposed, the taker fee and equivalent maker fee 
for trading against Priority Customer orders in Select Symbols will be 
increased to $0.47 per contract for Market Maker orders (or $0.44 per 
contract for Market Makers with total affiliated Priority Customer 
Complex ADV of 150,000 or more contracts), and $0.48 per contract for 
Non-ISE Market Maker, Firm Proprietary/Broker-Dealer, and Professional 
Customer orders. In Non-Select Symbols the fee will be increased to 
$0.86 per contract for Market Maker orders, and $0.88 per contract for 
Non-ISE Market Maker, Firm Proprietary/Broker-Dealer, and Professional 
Customer orders. Preferenced Market Makers will continue to receive the 
applicable discount of $0.02 per contract when trading against Priority 
Customer order preferenced to them in the complex order book.\14\
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    \7\ The term ``Market Makers'' refers to ``Competitive Market 
Makers'' and ``Primary Market Makers'' collectively. See Rule 
100(a)(25).
    \8\ ISE Market Makers or 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).
    \9\ 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.
    \10\ A ``Firm Proprietary'' order is an order submitted by a 
member for its own proprietary account.
    \11\ A ``Broker-Dealer'' order is an order submitted by a member 
for a broker-dealer account that is not its own proprietary account.
    \12\ A ``Professional Customer'' is a person or entity that is 
not a broker/dealer and is not a Priority Customer.
    \13\ 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).
    \14\ See notes 6 [sic] and 11 [sic] supra.
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    Finally, the Exchange charges a fee for responses to complex 
crossing orders that is $0.47 per contract for Market Maker, Non-ISE 
Market Maker, Firm Proprietary/Broker-Dealer, Professional Customer, 
and Priority Customer orders in Select Symbols. In Non-Select Symbols 
this response fee is $0.90 per contract for Market Maker orders, and 
$0.95 per contract for Non-ISE Market Maker, Firm Proprietary/Broker-
Dealer, Professional Customer, and Priority Customer orders. The 
Exchange now proposes to increase its complex order response fees by 
$0.01 per contract. As proposed, the response fee in Select Symbols 
will be increased to $0.48 per contract for all market participants, 
and the response fee in Non-Select Symbols will be increased to $0.91 
per contract for Market Maker orders, and $0.96 per contract for Non-
ISE Market Maker, Firm Proprietary/Broker-Dealer, Professional 
Customer, and Priority Customer orders.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\15\ in general, and 
Section 6(b)(4) of the Act,\16\ 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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    \15\ 15 U.S.C. 78f.
    \16\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that it is reasonable and equitable to 
increase the rebates provided to Priority Customer complex orders, as 
these proposed rebates are designed to attract additional Priority 
Customer complex order volume to the Exchange. The Exchange already 
provides volume-based tiered rebates for Priority Customer complex 
orders, and believes that increasing the rebates will incentivize 
members to send additional order flow to the ISE in order to achieve 
these rebates for their Priority Customer complex order volume, 
creating additional liquidity to

[[Page 56519]]

the benefit of all members that trade complex orders on the Exchange. 
The Exchange also believes that the corresponding increase to the 
complex order taker fee and complex order maker fee for trading against 
Priority Customer orders, as well as the fee for responses to complex 
crossing orders, 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 that are competitive with 
fees charged by other options exchanges.
    The Exchange notes that Priority Customer orders will continue to 
receive complex order rebates,\17\ 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. The Exchange also notes that 
Market Maker orders will continue to be eligible for lower fees than 
other non-Priority Customer orders. The Exchange does not believe that 
it is unfairly discriminatory provide 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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    \17\ With the exception of responses to complex crossing orders 
where Priority Customers are charged a fee like other market 
participants.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\18\ 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 and rebates remain 
competitive with fees and rebates offered on 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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    \18\ 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 \19\ and subparagraph (f)(2) of Rule 19b-4 
thereunder,\20\ because it establishes a due, fee, or other charge 
imposed by ISE.
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    \19\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \20\ 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-2015-27 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-ISE-2015-27. 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 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-2015-27, and should be 
submitted on or before October 9, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-23398 Filed 9-17-15; 8:45 am]
BILLING CODE 8011-01-P