[Federal Register Volume 77, Number 42 (Friday, March 2, 2012)]
[Notices]
[Pages 12900-12901]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-5082]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-66471; File No. SR-ISE-2012-10]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change To Amend the Exchange's Obvious Error Rule
February 27, 2012.
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 February 22, 2012, 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 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 amend Rule 720 regarding Obvious Errors.
The proposed rule change will re-define theoretical price
(``Theoretical Price'') for the purposes of determining whether an
execution price constitutes an obvious error (``Obvious Error''). The
text of the proposed rule change is available on the Exchange's Web
site 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 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 Obvious Error rules and procedures in the ISE Rules provide
objective criteria by which certain transactions may be analyzed if
believed to have been executed at erroneously high or low prices. ISE
Rule 720 currently defines the Theoretical Price of an options series,
if the series is traded on at least one other options exchange, as
``the last bid price with respect to an erroneous sell transaction, and
last offer price with respect to an erroneous buy transaction, just
prior to the trade disseminated by the competing options exchange that
has the most liquidity in that option; or if there are no quotes for
comparison purposes, as determined by designated personnel in the
Exchange's market control center.''
The proposed rule change would re-define Theoretical Price to mean,
with respect to options series traded on at least one other options
exchange, either the last National Best Bid price (with respect to an
erroneous sell transaction) or the last National Best Offer price (with
respect to an erroneous buy transaction), just prior to the trade in
question. The proposed new definition of Theoretical Price will provide
the Exchange's market control center with a clearly defined measure of
the price on which to base their determination as to whether or not a
particular transaction resulted from an erroneous price thus [sic] was
an obvious error.\3\ This proposed rule change would continue to permit
the Exchange's market control center to establish the Theoretical Price
when there are no quotes available for comparison purposes.
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\3\ The Exchange notes that Boston Options Exchange (``BOX'')
uses the NBBO to determine the theoretical price of an option. See
BOX Chapter V, Sec. 20.
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As this proposed rule change will eliminate any comparison to the
``competing options exchange that has the most liquidity in that
option,'' the Exchange proposes to remove Supplementary Material .06 to
ISE Rule 720.
2. Basis
The Exchange believes that this proposed rule change is consistent
with the requirements of Section 6(b) of the Securities Exchange Act of
1934 (``Exchange Act''),\4\ in general, and Section 6(b)(5) of the
Exchange Act,\5\ in particular, in that it is designed to promote just
and equitable principles of trade, to prevent fraudulent and
manipulative acts, 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 proposed rule change will establish an objective definition of
Theoretical Price when determining whether a particular transaction was
or was not an Obvious Error.
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\4\ 15 U.S.C. 78f(b).
\5\ 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
Because the foregoing proposed rule change does not significantly
affect the protection of investors or the public interest, does not
impose any significant burden on competition, and, by its terms, does
not become operative for 30 days from the date on which it was filed,
or such shorter time as the Commission may designate, it has become
effective pursuant to Section
[[Page 12901]]
19(b)(3)(A) \6\ of the Act and Rule 19b-4(f)(6) \7\ thereunder. The
Exchange provided the Commission with written notice of its intent to
file the proposed rule change, along with a brief description and text
of the proposed rule change, at least five business days prior to the
date of filing the proposed rule change.
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\6\ 15 U.S.C. 78s(b)(3)(A).
\7\ 17 CFR 240.19b-4(f)(6).
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The proposed rule change will offer Exchange Members the same
potential for relief that is available at other options exchanges for
certain obvious errors. Further, the proposed rule change is similar to
rules currently in place at BOX. For the foregoing reasons, this rule
filing qualifies for immediate effectiveness as a ``non-controversial''
rule change under paragraph (f)(6) of Rule 19b-4 of the Act, as it does
not raise any new, unique or substantive issues, and is beneficial for
competitive purposes and to promote a free and open market for the
benefit of investors.
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.
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 email to [email protected]. Please include
File Number SR-ISE-2012-10 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-2012-10. 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-2012-10 and should be
submitted on or before March 23, 2012.
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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-5082 Filed 3-1-12; 8:45 am]
BILLING CODE 8011-01-P