
[Federal Register Volume 77, Number 75 (Wednesday, April 18, 2012)]
[Notices]
[Pages 23312-23313]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-9283]



[[Page 23312]]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66790; File No. SR-ISE-2012-25]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change Relating to Fees and Rebates

April 12, 2012.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is 
hereby given that on April 4, 2012, the International Securities 
Exchange, LLC (the ``Exchange'' or the ``ISE'') filed with the 
Securities and Exchange Commission (the ``Commission'') the proposed 
rule change as described in Items I and II below, which Items have been 
prepared by the Exchange. 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 ISE is proposing to amend the threshold levels and rebate 
amounts for Qualified Contingent Cross (``QCC'') orders and 
Solicitation orders. 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 threshold 
levels and rebate amounts for QCC orders and Solicitation orders to 
further encourage Members to submit greater numbers of QCC orders and 
Solicitation orders to the Exchange. The Exchange currently provides a 
rebate to Members who reach a certain volume threshold in QCC orders 
and/or Solicitation orders during a month.\3\ Once a Member reaches the 
volume threshold, the Exchange provides a rebate to that Member for all 
of its QCC and Solicitation contracts traded for that month. The rebate 
is paid to the Member entering a qualifying order, i.e., a QCC order 
and/or a Solicitation order. The rebate applies to QCC orders and 
Solicitation orders in all symbols traded on the Exchange. 
Additionally, the threshold levels are based on the originating side so 
if, for example, a Member submits a Solicitation order for 1,000 
contracts, all 1,000 contracts are counted to reach the established 
threshold even if the order is broken up and executed with multiple 
counter parties.
---------------------------------------------------------------------------

    \3\ See Exchange Act Release Nos. 65087 (August 10, 2011), 76 FR 
50783 (August 16, 2011) (SR-ISE-2011-47); 65583 (October 18, 2011), 
76 FR 65555 (October 21, 2011) (SR-ISE-2011-68); 65705 (November 8, 
2011), 76 FR 70789 (November 15, 2011) (SR-ISE-2011-70); 65898 
(December 6, 2011), 76 FR 77279 (December 12, 2011) (SR-ISE-2011-
78); and 66169 (January 17, 2012), 77 FR 3295 (January 23, 2012) 
(SR-ISE-2012-01).
---------------------------------------------------------------------------

    The current volume threshold and corresponding rebate per contract 
is:

------------------------------------------------------------------------
                                                              Rebate per
                 Originating contract sides                    contract
------------------------------------------------------------------------
0-199,999..................................................        $0.00
200,000-999,999............................................         0.05
1,000,000-1,599,999........................................         0.08
1,600,000+.................................................         0.10
------------------------------------------------------------------------

    The Exchange now proposes to amend the current tiers by: (1) 
Adjusting the second tier (200,000-999,999 contracts) so that it 
becomes 200,000-499,999 contracts and increasing the rebate for this 
tier from $0.05 per contract to $0.07 per contract; (2) adopting a new 
tier for 500,000-699,999 contracts with a corresponding rebate of $0.08 
per contract; (3) adopting a new tier for 700,000-999,999 contracts 
with a corresponding rebate of $0.09 per contract; and (4) adjusting 
the last tier (1,600,000+ contracts) so that it becomes 1,000,000+ 
contracts and increasing the rebate for this last tier from $0.10 to 
$0.11 per contract. With the proposed changes to the tiers, which 
reflect the recent decline in options trading volume, the Exchange is 
attempting to strike the right balance between the number of qualifying 
contracts and its corresponding rebate to ensure that the incentive 
program achieves its intended purpose of attracting greater order flow 
from its Members.
    With the proposed amended tiers, the volume threshold and 
corresponding rebate per contract will be as follows:

------------------------------------------------------------------------
                                                              Rebate per
                 Originating contract sides                    contract
------------------------------------------------------------------------
0-199,999..................................................        $0.00
200,000-499,999............................................         0.07
500,000-699,999............................................         0.08
700,000-999,999............................................         0.09
1,000,000+.................................................         0.11
------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal to amend its Schedule of 
Fees is consistent with Section 6(b) of the Exchange Act \4\ in 
general, and furthers the objectives of Section 6(b)(4) of the Exchange 
Act \5\ in particular, in that it is an equitable allocation of 
reasonable dues, fees and other charges among Exchange Members. The 
Exchange believes that the proposed fee change will generally allow the 
Exchange and its Members to better compete for order flow and thus 
enhance competition. Specifically, the Exchange believes that its 
proposal, which among other things, lowers the threshold level for 
Members to qualify for the highest per contract rebate payable, is 
reasonable as it will encourage Members who direct their QCC and 
Solicitation orders to the Exchange to continue to do so instead of 
sending this order flow to a competing exchange. The Exchange believes 
that with the proposed amended tiers, which provides for additional 
volume thresholds, more Members are now likely to qualify for higher 
rebates for sending their QCC and Solicitation orders to the Exchange.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange notes that it currently has other incentive programs 
to promote and encourage growth in specific business areas. For 
example, the Exchange has lower fees (or no fees) for customer orders; 
\6\ and tiered pricing that reduces rates for market makers based on 
the level of business they bring to the Exchange.\7\ This proposed rule 
change targets a particular segment in which the Exchange seeks to 
attract

[[Page 23313]]

greater order flow. The Exchange further believes that the rebate 
currently in place for QCC and Solicitation orders is reasonable 
because it is designed to give Members who trade a minimum of 200,000 
qualifying contracts in QCC and Solicitation orders on the Exchange a 
benefit by way of a lower transaction fee. As noted above, once a 
Member reaches an established volume threshold, all of the trading 
activity in the specified order type by that Member will be subject to 
the corresponding rebate.
---------------------------------------------------------------------------

    \6\ For example, the customer fee is $0.00 per contract for 
products other than Singly Listed Indexes, Singly Listed ETFs and FX 
Options. For Singly Listed Options, Singly Listed ETFs and FX 
Options, the customer fee is $0.18 per contract. The Exchange also 
currently has an incentive plan in place for certain specific FX 
Options which has its own pricing. See ISE Schedule of Fees.
    \7\ The Exchange currently has a sliding scale fee structure 
that ranges from $0.01 per contract to $0.18 per contract depending 
on the level of volume a Member trades on the Exchange in a month. 
See ISE Schedule of Fees.
---------------------------------------------------------------------------

    The Exchange also believes that its rebate program for QCC and 
Solicitation orders is equitable because it would uniformly apply to 
all Members engaged in QCC and Solicitation trading in all option 
classes traded on the Exchange. The Exchange further believes that its 
fees and credits remain competitive with fees charged by other 
exchanges and therefore are reasonable and equitably allocated to those 
members that opt to direct orders to the Exchange rather than to a 
competing exchange. The QCC and Solicitation rebate program employed by 
the Exchange has proven to be an effective pricing mechanism and 
attractive to Exchange participants and their customers.

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 Exchange 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)(A)(ii) of the Exchange Act.\8\ 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 Exchange Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

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 Exchange 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-2012-25 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-2012-25. 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 
a.m. and 3 p.m. Copies of the 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-2012-25 and should be 
submitted on or before May 9, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
---------------------------------------------------------------------------

    \9\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-9283 Filed 4-17-12; 8:45 am]
BILLING CODE 8011-01-P


