[Federal Register Volume 76, Number 201 (Tuesday, October 18, 2011)]
[Notices]
[Pages 64417-64419]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-26853]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65534; File No. SR-ISE-2011-58]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change Relating to Competitive Market Maker Trading Rights
October 12, 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 October 3, 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 refine how it assigns point values to
options classes for purposes of Competitive Market Maker trading
rights. The text of the proposed rule change is as follows, with
deletions marked in [brackets] and additions in italics:
Rule 802. Appointment of Market Makers
(a) No change.
(b) No change.
(c) Appointments to Competitive Market Makers. Competitive
market makers may request appointments to options classes traded on
the Exchange, subject to the trading licensing requirements of Rule
2013 with respect to index options and Rule 2213 with respect to
foreign currency options.
(1) On a quarterly basis, the Exchange shall assign points to
each options class equal to its percentage of overall industry
volume (not including exclusively traded index options), rounded
down to the nearest [tenth] one hundredth of a percentage with a
maximum of 15 points. New listings [with no industry volume in the
previous quarter] will be assigned a point value of zero for the
remainder of the quarter in which it was listed.
(2) No change.
(3) No change.
(d) The Exchange may suspend or terminate any appointment of a
market maker under this Rule and may make additional appointments
whenever, in the Exchange's judgment, the interests of a fair and
orderly market are best served by such action. In the case of an
Index-Based Product, during the term of that appointment, the
Exchange may also base a decision to suspend or terminate a Primary
Market Maker's appointment on the failure of the Primary Market
Maker to meet the terms of its commitments under paragraph (b)(1)
above.
(e) Market Maker Performance. In making appointments to market
makers, the Exchange may evaluate the performance of market makers
relating to, among other things, quality of markets, competition
among market makers, observance of ethical standards, and
administrative factors. The Exchange may consider any relevant
information, including but not limited to the results of a market
maker evaluation questionnaire, trading data, a market maker's
regulatory history and such other factors and data as may be
pertinent in the circumstances. Moreover, failure by a market maker
to meet minimum performance standards may result in, among other
things: (1) suspension, termination or restriction of an appointment
to one or more of the options classes appointed to the market maker
[within the market maker's appointed Group]; (2) restriction of
appointments to
[[Page 64418]]
additional options classes [in the market maker's appointed Group];
or (3) suspension, termination, or restriction of the market makers
registration.
Supplementary Material to Rule 802
.01-.02 No change.
* * * * *
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 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 recently changed the structure of Competitive Market
Maker (``CMM'') appointments to give market makers flexibility to
choose the options classes to which they are appointed.\3\ Under this
structure, the Exchange assigns points to each options class equal to
its percentage of overall industry volume (not including exclusively-
traded index options), rounded down to the nearest tenth of a
percentage. A CMM is then permitted to seek appointments to options
classes that total twenty points for the first CMM trading right owned
or leased by a member, and ten points for each subsequent CMM trading
right owned or leased by the same member.\4\
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\3\ See Securities Exchange Act Release No. 65100 (Aug. 11,
2011), 76 FR 51075 (Aug. 17, 2011) (order approving SR-ISE-2011-33).
\4\ CMMs can select the options classes to which they seek
appointment, but the Exchange retains the authority to make such
appointments and to remove appointments from CMMs based on their
performance. See ISE Rule 802.
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The Exchange proposes to make three refinements to the point values
assigned to certain options classes. First, to prevent any one symbol
from having a disproportionate weight with respect to CMM trading
rights, the Exchange seeks to cap the total number of points an options
class is assigned to 15 (equivalent to 15 percent of industry volume).
Second, since point values are refreshed on a quarterly basis, we seek
to clarify that any new ISE listings during a quarter will have a point
value of zero until a point value is determined at the end of the
quarter. Finally, when assigning point values, the Exchange proposes to
round down to the nearest hundredth of a percentage, rather than a
tenth of a percentage, to more precisely reflect an options class'
percentage of industry volume.
Finally, the Exchange proposes to make four changes to Rule 802.
First, the Exchange proposes to add the words `whenever, in the' to
Rule 802(d). Second, the Exchange proposes to add the words `appointed
to the market maker' to Rule 802(e)(1). Third, the Exchange proposes to
delete the words `within the market maker's appointed Group' from Rule
802(e)(1). Fourth, the Exchange proposes to delete the words `in the
market maker's appointed Group' from Rule 802(e)(2). The Exchange
inadvertently failed to make these rule text changes when it recently
amended Rule 802.\5\
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\5\ See supra note 3.
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2. Basis
The basis under the Securities Exchange Act of 1934 (``Exchange
Act'') for this proposed rule change is the requirement under Section
6(b)(5) that an exchange have rules that are designed to promote just
and equitable principles of trade, and to remove impediments to and
perfect the mechanism for a free and open market and a national market
system, and in general, to protect investors and the public interest.
In particular, the proposal will provide clarity to members regarding
how points are assigned to options classes for purposes of CMM trading
rights, and assure that the process is administered in an efficient
manner.
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
Because the foregoing proposed rule change: (1) Does not
significantly affect the protection of investors or the public
interest; (2) does not impose any significant burden on competition;
and (3) by its terms does not become operative for 30 days after the
date of this filing, 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) \6\ of the Act and Rule 19b-4(f)(6) thereunder.\7\
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\6\ 15 U.S.C. 78s(b)(3)(A). In addition, Rule 19b-4(f)(6)
requires the Exchange to give the Commission written notice of the
Exchange's intent to file 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 this requirement.
\7\ 17 CFR 240.19b-4(f)(6).
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At any time within 60 days of the filing of the 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 change 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 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 E-mail to [email protected]. Please include
File No. SR-ISE-2011-58 in 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-2011-58. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your
[[Page 64419]]
comments more efficiently, please use only one method. The Commission
will post all comments on the Commissions 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 such
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-2011-58 and should be submitted by November 8, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-26853 Filed 10-17-11; 8:45 am]
BILLING CODE 8011-01-P