[Federal Register Volume 77, Number 122 (Monday, June 25, 2012)]
[Notices]
[Pages 37944-37945]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-15380]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67216; File No. SR-ISE-2012-52]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing of Proposed Rule Change To Allow Competitive
Market Makers To Use Their Membership Points To Enter Multiple Quotes
in an Options Class
June 19, 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 June 6, 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 self-
regulatory organization. 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 adopt .03 of the Supplementary Material to
Rule 802 (Appointment of Market Makers) to allow Competitive Market
Makers (``CMMs'') to use their membership points to enter multiple
quotes in an options class. The text of the proposed rule change is
available on the Exchange's Internet Web site at 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
On August 11, 2011, the Exchange changed the structure of CMM
appointments to give market makers flexibility to choose the options
classes to which they are appointed.\3\ On October 3, 2011, the
Exchange made three refinements to the point values assigned to certain
options classes.\4\ Currently, 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 hundredth of a percentage, with a maximum
of 15 points. New listings are assigned a point value of zero for the
remainder of the quarter in which it was listed. 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.\5\
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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\ See Securities Exchange Act Release No. 65534 (October 12,
2011), 76 FR 64417 (October
18, 2011) (Notice of Filing and Immediate Effectiveness SR-ISE-
2011-58).
\5\ 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 is now proposing to adopt .03 of the Supplementary
Material to Rule 802 (Appointment of Market Makers) to allow CMMs to
use their membership points to enter multiple quotes in an options
class. The quoting requirements in ISE Rules will be applicable to each
set of quotes that a CMM enters in an options class. In other words,
CMMs will not be permitted to aggregate multiple quotes in an options
class in order to meet the quoting requirements under ISE Rules.
Additionally, there will be no restriction on a CMM seeking appointment
to options classes in which it or an affiliated market-maker holds a
CMM or
[[Page 37945]]
Primary Market Maker appointment,\6\ provided that such Member has
sufficient CMM points for each such appointment.
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\6\ The Chicago Board Options Exchange (``CBOE'') has a
membership structure that allows a market maker and its affiliates
to enter multiple quotes in an options class. CBOE Rule 8.3(c)(vi)
restricts market makers from holding appointments in the same class
as an affiliate if CBOE uses in that class an allocation algorithm
that allocates electronic trades, in whole or in part, in an equal
percentage based on the number of market participants quoting at the
best bid or offer. The CBOE rule then provides that this restriction
does not apply if CBOE uses in a particular options class an
allocation algorithm that does not allocate electronic trades, in
whole or in part, in an equal percentage based on the number of
market participants quoting at the best bid or offer. Unlike the
CBOE, the ISE allocation algorithm does not provide for the
potential allocation of orders, in whole or in part, in an equal
percentage based on the number of market participants quoting at the
best bid or offer. ISE Rule 713. Therefore, the proposed ISE rule
text does not reference the restriction contained in CBOE Rule
8.3(c)(vi).
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2. Statutory Basis
The basis under the Act for this proposed rule change is found in
Section 6(b)(5),\7\ in that the proposed change is designed to promote
just and equitable principles of trade, to remove impediments to and
perfect the mechanism of 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 promote competition by increasing the
number of competitive quotes in active options classes traded on the
Exchange. The proposed rule change is consistent with the current CMM
membership structure because it requires market makers to use their
membership points in order to enter multiple quotes. Additionally, the
proposed rule change is non-discriminatory in that each CMM is able to
choose how to use their membership points. Accordingly, the Exchange
believes that the proposed rule change is consistent with the
requirements of the Exchange Act.
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\7\ 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
Within 45 days of the publication date of this notice or within
such longer period (1) as the Commission may designate up to 45 days of
such date if it finds such longer period to be appropriate and
publishes its reasons for so finding or (2) as to which the self-
regulatory organization consents, the Commission will:
(a) By order approve or disapprove such 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 email to [email protected]. Please include
File Number SR-ISE-2012-52 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-2012-52. 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-2012-52 and should be
submitted on or before July 16, 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. 2012-15380 Filed 6-22-12; 8:45 am]
BILLING CODE 8011-01-P