[Federal Register Volume 75, Number 13 (Thursday, January 21, 2010)]
[Notices]
[Pages 3508-3509]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-1019]
[[Page 3508]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61348: File No. SR-ISE-2010-01]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of a Proposal To
Codify Certain Provisions of the Options Listing Procedures Plan Into
ISE's Rules
January 14, 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 January 4, 2010, the International Securities Exchange, LLC
(the ``Exchange'' or ``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
Exchange. The Exchange filed the proposal as a ``non-controversial''
proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act
\3\ and Rule 19b-4(f)(6) thereunder.\4\ 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.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend its Rule 504 and adopt Rule 504A to
apply uniform objective standards to the range of options series
exercise (or strike) prices available for trading on the Exchange. 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 Exchange 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 those 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to implement in ISE
rules changes that were recently made to the Plan for the Purpose of
Developing and Implementing Procedures Designated to Facilitate the
Listing and Trading of Standardized Options Submitted Pursuant to
Section 11A(a)(3)(B) of the Securities Exchange Act of 1934, also known
as the Options Listing Procedures Plan (``OLPP''), in Amendment No. 3
thereto.\5\ Proposed new ISE Rule 504A incorporates uniform objective
standards to the range of options series exercise (or strike) prices
available for trading on the Exchange, as a quote mitigation strategy
intended to reduce the overall number of option series available for
trading, which will in turn lessen the rate of increase in quote
traffic (``range limitations'' or ``range limitation strategy'').
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\5\ See Securities Exchange Act Release No. 60531 (August 19,
2009), 74 FR 43173 (August 26, 2009) (Order approving Amendment No.
3 to the OLPP, which would apply uniform objective standards to the
range of options series exercise or strike prices available for
trading on exchanges that are sponsors of OLPP). The sponsors of
OLPP include ISE, Chicago Board Options Exchange, Inc.; NASDAQ OMX
PHLX, Inc.; NASDAQ OMX BX, Inc.; The NASDAQ Stock Market LLC; NYSE
Amex, LLC; and NYSE Arca, Inc. (together known as the ``Plan Sponsor
Exchanges''). The OLPP is a national market system plan that, among
other things, sets forth procedures governing the listing of new
options series and replaces and supersedes the Joint-Exchange
Options Plan (``JEOP''). See Securities Exchange Act Release No.
44521 (July 6, 2009) [sic], 66 FR 36809 (July 13, 2001) (Order
approving OLPP). See also Securities Exchange Act Release No. 29698
(September 17, 1991), 56 FR 48954 [sic] (September 25, 1991) (Order
approving JEOP).
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Rule 504 currently indicates what series of option contracts may be
open for trading after a particular class of options has been approved
for trading on the Exchange. Proposed new Rule 504A applies certain
``range limitations'' to the addition of new series for options classes
overlying equity securities, Exchange Traded Fund Shares (``ETFs''), or
Trust Issued Receipts (``TIRs'').
As proposed in Rule 504A, if the price of the underlying security
is less than or equal to $20, the Exchange would not list new option
series with an exercise price more than 100 percent above or below the
price of the underlying security.\6\ If the price of the underlying
security is greater than $20, the Exchange would not list new options
series with an exercise price more than 50 percent above or below the
price of the underlying security. The proposal provides for an
objective basis upon which the underlying prices for the price range
limitations described above shall be determined, specifically in regard
to intra-day add-on series and next-day series additions, new
expiration months and for options series to be added as a result of
pre-market trading.
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\6\ This restriction would not prohibit the listing of at least
three options series per expiration month in an options class.
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This proposed rule change also allows the Exchange to designate up
to five underlying securities to which, instead of the aforementioned
50 percent restriction, a 100 percent restriction would apply. These
designations would be made on an annual basis and cannot be removed
during the calendar year unless the options class is delisted by the
Exchange, in which case the Exchange may designate another class to
replace the delisted class. If a designated class is delisted by the
Exchange but continues to trade on at least one other exchange, any
additional series for the class which are added from that point forward
would again be subject to the proposed exercise price range
limitations, unless the class is subsequently designated by another
exchange. The proposal also provides a procedure for the Exchange to
request, if conditions warrant, additional case-by-case exceptions even
when it has already so designated five underlying securities.
In addition, the Exchange may request, on a case-by-case basis, an
exemption when it desires to list a series from the 100 percent range
limitation. This procedure would enable the Exchange to list options
series with strike prices that are more than 100 percent above or below
the price of an underlying security, if unanimously agreed upon by all
exchanges that list options overlying the security.\7\
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\7\ Application of any of the aforementioned exceptions and/or
exemptions to the strike price range limitations for an underlying
security would be available to all exchanges listing options on such
security.
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The Exchange notes that the proposal would not restrict its ability
to list options series in two situations. First, the Exchange would not
be restricted from listing options series that have been properly
listed by another exchange. And second, the proposal expressly
eliminates the applicability of range limitations with regard to the
[[Page 3509]]
listing of $1 strike prices in option classes participating in the $1
Strike Program, and the listing of series of FLEX options.
The Exchange believes that the proposed rule change implementing
range limitation strategies for equity, ETF, and TIR options should be
beneficial in reducing quote traffic on the Exchange and in the options
industry.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations under the Act applicable to a national securities exchange
and, in particular, the requirements of Section 6(b) of the Act.\8\
Specifically, the Exchange believes the proposed rule change is
consistent with Section 6(b)(5) of the Act's \9\ requirements that the
rules of a national securities exchange be designed to promote just and
equitable principles of trade, to prevent fraudulent and manipulative
acts and, in general, to protect investors and the public interest. In
particular, the Exchange believes that codifying certain range
limitation provisions of the OLPP, as amended, serves to foster
investor protection.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
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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 Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \10\ and Rule 19b-4(f)(6) thereunder.\11\
Because the proposed rule change does not: (i) Significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act \12\ and Rule 19b-
4(f)(6)(iii) thereunder.\13\
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\10\ 15 U.S.C. 78s(b)(3)(A)(iii).
\11\ 17 CFR 240.19b-4(f)(6).
\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires the Exchange to give the Commission written
notice of the Exchange's intent to file the proposed rule change
along with a brief description and the text of the proposed rule
change, at least five business days prior to the date of filing of
the proposed rule change, or such shorter time as designated by the
Commission. The Exchange has satisfied the pre-filing requirement.
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At any time within 60 days of the filing of the 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.
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-2010-01 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-2010-01. 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 inspection and
copying 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 self-regulatory
organization. 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-
2010-01 and should be submitted on or before February 11, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-1019 Filed 1-20-10; 8:45 am]
BILLING CODE 8011-01-P