
[Federal Register Volume 75, Number 92 (Thursday, May 13, 2010)]
[Notices]
[Pages 27029-27030]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-11397]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62050; File No. SR-ISE-2010-37]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change Relating to Amending the Direct Edge ECN Fee Schedule

May 6, 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 April 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, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

    The Exchange proposes to amend Direct Edge ECN's (``DECN'') fee 
schedule for ISE Members \3\ to (i) change the rates for routing in 
securities priced less than $1.00 to certain away market centers; (ii) 
reintroduce the rebate on securities priced less than $1.00 that add 
liquidity to EDGX; (iii) pass through rebates/fees from other market 
centers; and (iv) increase the rebate for Members meeting the Ultra 
Tier. All of the changes described herein are applicable to ISE 
Members.
---------------------------------------------------------------------------

    \3\ References to ISE Members in this filing refer to DECN 
Subscribers who are ISE Members.
---------------------------------------------------------------------------

    The text of the proposed rule change is available on the Exchange's 
Internet Web site at http://www.ise.com.

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
    DECN, a facility of ISE, operates two trading platforms, EDGX and 
EDGA.\4\
---------------------------------------------------------------------------

    \4\ This fee filing relates to the trading facility operated by 
ISE and not EDGA Exchange, Inc. and EDGX Exchange, Inc. Direct Edge 
ECN LLC (EDGA and EDGX) will cease to operate in its capacity as an 
electronic communications network following the commencement of 
operations of EDGA Exchange, Inc. and EDGX Exchange, Inc. as 
national securities exchanges.
---------------------------------------------------------------------------

    The Exchange is proposing to amend the routing rates to certain 
away market centers associated with the removal of liquidity from EDGA 
and EDGX in securities priced less than $1.00. Currently, for orders in 
securities priced less than $1.00 that are routed to Nasdaq BX in Tapes 
A & C securities and that remove liquidity, orders are charged the 
Exchange's standard routing charge for securities less than $1.00 
(0.30% of the total dollar value of the transaction, both on EDGA and 
EDGX). As a result of a decrease in fees by Nasdaq OMX when removing 
liquidity in securities priced less than $1.00,\5\ the Exchange 
proposes to amend its fee schedule in order to charge 0.10% of the 
total dollar value of the transaction (instead of 0.30%) when orders 
are routed to Nasdaq BX in Tapes A & C securities and remove liquidity. 
This is proposed to be indicated by footnote number 3 on the existing 
``C'' flag. A conforming amendment has also been made to the fee 
schedule to append footnote number 3 to indicate an exception to the 
standard rate (0.30% of dollar value) for routing liquidity in 
securities priced less than $1.00.
---------------------------------------------------------------------------

    \5\ See Nasdaq OMX Equity Trader Alert, 2010-27 (April 
19, 2010) (``Firms will be charged 0.10% (i.e., 10 basis points) of 
the total dollar value of the transaction when removing liquidity in 
stocks with prices below $1.00'').
---------------------------------------------------------------------------

    Additionally, the Exchange proposes to charge 0.20% of the total 
dollar value of the transaction when orders are routed to Nasdaq and 
remove liquidity in securities on all Tapes or orders are routed to 
Nasdaq using the INET \6\ order type and remove liquidity in securities 
on all Tapes. This is proposed to be indicated by footnote number 3 
appended to the existing ``J,'' ``L,'' and ``2'' flags. A conforming 
amendment has also been made to the fee schedule to append footnote 
number 3 to indicate an exception to the standard rate (0.30% of dollar 
value) for routing liquidity in securities priced less than $1.00.
---------------------------------------------------------------------------

    \6\ The INET order type sweeps the EDGA or EDGX book and removes 
liquidity from Nasdaq, if the order is marketable, or posts on 
Nasdaq, if the order is non-marketable.
---------------------------------------------------------------------------

    The Exchange believes that this rate change will seek to 
incentivize the removal of liquidity from EDGA and EDGX in securities 
priced less than $1.00 that are routed to certain away market centers.

Re-Introduction of Rebate

    Currently, there is no rebate for adding liquidity on EDGX in 
securities priced less than $1.00. The Exchange is proposing to re-
introduce a rebate of $0.00003 per share for orders that add liquidity 
to EDGX in securities priced less than $1.00. The Exchange believes 
that this rebate is appropriate as it represents 30% of the minimum 
price increment for securities priced less than $1.00 ($0.0001) and 
effectively aligns the rebate with access fee caps under Regulation 
NMS.\7\
---------------------------------------------------------------------------

    \7\ The Access Rule of Regulation NMS limits the fees any 
trading center can charge, or allow to be charged, for accessing its 
protected quotations, both displayed and reserve size, to no more 
than $0.003 per share. See Rule 610(c) of Regulation NMS, Securities 
and Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496 (June 
29, 2005).

---------------------------------------------------------------------------

[[Page 27030]]

Amendment to Ultra-Tier Rebate

    The Exchange's fee schedule currently provides that Members can 
qualify for a rebate of $0.0031 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. Effective May 1, 2010, the Exchange is proposing to increase 
this rebate to $0.0032 per share to further incentivize posting 
liquidity to EDGX. In addition, the higher rebate also results, in 
part, from lower administrative costs associated with higher volume.

Pass-through of NYSE Fees/Rebates

    The NYSE recently announced changes, effective May 2010, that it 
will increase the fee for removing liquidity in Tape A securities to 
$0.0021 per share (from 0.0018 per share) and increase the rebate for 
trading in Tape A securities to $0.0013 per share (from $0.0010 per 
share). Flag D, which indicates orders that are routed or re-routed to 
NYSE, and remove liquidity, will be amended to reflect the charge of 
$0.0021 per share. A conforming amendment is also proposed to Flag F 
(routed to NYSE, adds liquidity) to increase the rebate to $0.0013 per 
share. Footnote 3 is proposed to be amended to reflect NYSE's fee 
change for trading in securities with a per share price below $1.00 
(from $0.0018 per share to $0.0021 per share). In addition, the ``Q'' 
flag, which denotes an order type (ROUC) that routes to the NYSE, is 
proposed to be increased from $0.0015 per share to $0.0018 per share on 
EDGA and EDGX to reflect the increase.
    The changes discussed in this filing will become operative on May 
1, 2010.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\8\ in general, and 
furthers the objectives of Section 6(b)(4),\9\ in particular, as 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. ISE notes that DECN operates in a highly competitive market 
in which market participants can readily direct order flow to competing 
venues if they deem fee levels at a particular venue to be excessive. 
The proposed rule change reflects a competitive pricing structure 
designed to incent market participants to direct their order flow to 
DECN. The Exchange believes that the proposed amendment to the Ultra-
Tier rebate is equitable in that it applies uniformly to all Members 
and provides a higher rebate for higher volume thresholds, resulting 
from lower administrative costs. Finally, the Exchange believes that 
the proposed rates further the objectives of Regulation NMS by 
promoting competition and granting fair and equal access to all 
exchange participants. ISE believes the fees and credits remain 
competitive with those charged by other venues and therefore continue 
to be reasonable and equitably allocated to those members that opt to 
direct orders to DECN rather than competing venues.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f.
    \9\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

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 \10\ and Rule 19b-4(f)(2) \11\ thereunder. At any 
time within 60 days of the filing of such proposed rule change, the 
Commission may summarily abrogate 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.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 19b-4(f)(2).
---------------------------------------------------------------------------

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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-ISE-2010-37 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-2010-37. 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,\12\ 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-
2010-37 and should be submitted on or before June 3, 2010.
---------------------------------------------------------------------------

    \12\ The text of the proposed rule change is available on ISE's 
Web site at http://www.ise.com, on the Commission's Web site at 
http://www.sec.gov, at ISE, and at the Commission's Public Reference 
Room.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-11397 Filed 5-12-10; 8:45 am]
BILLING CODE 8011-01-P


