[Federal Register Volume 76, Number 104 (Tuesday, May 31, 2011)]
[Notices]
[Pages 31385-31387]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-13315]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64538; File No. SR-ISE-2011-30)
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing of Proposed Rule Change Relating to Complex
Orders
May 24, 2011.
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 May 23, 2011, 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 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.
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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 Exchange proposes to specify in its rules that complex orders
may be entered into the Price Improvement Mechanism for options classes
traded on its Optimise platform. 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, at the Commission's Public Reference
Room, and on the Commission's Web site at http://www.sec.gov.
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,
[[Page 31386]]
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 has developed an enhanced technology trading platform
(the ``Optimise platform''). To assure a smooth transition, the
Exchange is in the process of migrating option classes from its current
trading system to the Optimise platform.\3\ The Optimise platform
offers members the same trading functionality as the current trading
system with some enhancements, several of which were previously added
to the ISE's rules.\4\ The purpose of this rule filing is to specify in
the Exchange's rules that complex orders may be entered into the Price
Improvement Mechanism for options classes traded on the Optimise
platform.
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\3\ Options classes are being transferred from the current
trading platform to the Optimise trading platform. The same options
cannot trade on both systems at the same time.
\4\ See Securities Exchange Act Release No. 63117 (October 15,
2010), 75 FR 65042 (October 21, 2010) (SR-ISE-2010-101); and
Securities Exchange Act Release No. 64275 (April 8, 2011), 76 FR
21087 (April 14, 2011) (File No. SR-ISE-2011-24).
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The Exchange's Facilitation Mechanism has been available for the
execution of complex orders since 2005 \5\ and the Solicited Order
Mechanism has been available for the execution of complex orders since
2006.\6\ Both of the mechanisms expose orders to all exchange members
for one second to provide an opportunity for price improvement.
Supplementary Material .08 to Rule 716 specifies that members may use
the Facilitation Mechanism and the Solicited Order Mechanism to execute
complex orders at a net price. The complex orders are processed in the
mechanisms at the net price in the same manner as single-legged orders.
With respect to the bids and offers for the individual legs of a
complex order entered into the mechanisms, the priority rules for
complex orders contained in Rule 722(b)(2) continue to apply. If an
improved net price for the complex order being executed can be achieved
from bids and offers for the individual legs of the complex order in
the Exchange's auction market, the order being executed will receive an
execution at the better net price.
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\5\ Securities Exchange Act Release No. 52327 (August 24, 2005),
70 FR 51854 (August 31, 2005) (File No. SR-ISE-2004-33).
\6\ Securities Exchange Act Release No. 53729 (April 26, 2006),
71 FR 26154 (May 3,
2006) (File No. SR-ISE-2006-14).
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The Price Improvement Mechanism works in the same basic manner as
the Facilitation Mechanism and the Solicited Order Mechanism, exposing
orders to all members for one second to provide an opportunity for
price improvement. The Exchange proposes to make the Price Improvement
Mechanism available for the execution of complex orders on the Optimise
platform by adding Supplementary Material .10 to Rule 723. Proposed
Supplementary Material .10 to Rule 723 specifies that members may use
the Price Improvement Mechanism to execute complex orders at a net
price. The complex orders are processed in the mechanisms at the net
price in the same manner as single-legged orders. With respect to the
bids and offers for the individual legs of a complex order entered into
the mechanisms, the priority rules for complex orders contained in Rule
722(b)(2) continue to apply. If an improved net price for the complex
order being executed can be achieved from bids and offers for the
individual legs of the complex order in the Exchange's auction market,
the order being executed will receive an execution at the better net
price.\7\
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\7\ The Exchange provides the Commission with monthly statistics
related to PIM order execution. These statistics will include
Complex Orders executed through the PIM.
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Rule 723(b)(1) requires that orders entered into the Price
Improvement Mechanism be entered at a price that is better than the ISE
best bid or offer and equal to or better than the national best bid or
offer, and Supplementary Material .08 to Rule 723 provides an exception
to this requirement. Proposed Supplementary Material .10 to Rule 723
specifies that Complex orders must be entered at a price that is better
than the best net price (i) available on the complex order book; and
(ii) achievable from the best ISE bids and offers for the individual
legs (an ``improved net price''). It also specifies that Supplementary
Material .08 is not applicable to the entry of complex orders; complex
orders will be rejected unless they are entered at an improved net
price. Proposed Supplementary Material .10 further specifies that all
references to the national best bid and offer in Rule 723 and the
Supplementary Material thereto are inapplicable. Finally, Rule
723(c)(5) specifies that the exposure period will automatically
terminate upon the receipt of certain orders. Proposed Supplementary
Material .10 specifies that the provisions of Rule 723(c)(5) shall
apply with respect to the receipt of complex orders during the exposure
period, and not to the receipt of orders for the individual legs of the
complex order. Accordingly, the exposure period will not automatically
terminate due to the receipt of orders for the individual legs of the
complex order during the exposure period. As mentioned previously, if
at the end of the exposure period an improved net price for the complex
order can be achieved from bids and offers for the individual legs of
the complex order, the order will be executed against such bids and
offers.
2. Statutory Basis
The basis under the Act for this proposed rule change is found in
Section 6(b)(5),\8\ in that the proposed change will serve to remove
impediments to and perfect the mechanisms of a free and open market and
a national market system and, in general, to protect investors and the
public interest. The proposed rule change will make an existing service
available to an additional order type. By making the Price Improvement
Mechanism available for complex orders, members will be given an
additional way in which they can seek price improvement for their
customers when executing complex orders on the Exchange. Moreover, the
Proposal assures that the existing priority rules applicable to the
execution of complex orders is maintained and automatically enforced by
the system.
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\8\ 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.
[[Page 31387]]
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove the proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule
change should be 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 e-mail to [email protected]. Please include
File Number SR-ISE-2011-30 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-2011-30. 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 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-2011-30 and should be
submitted on or before June 21, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-13315 Filed 5-27-11; 8:45 am]
BILLING CODE 8011-01-P