[Federal Register Volume 77, Number 155 (Friday, August 10, 2012)]
[Notices]
[Pages 47897-47898]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-19613]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67602; File No. SR-ISE-2012-52]
Self-Regulatory Organizations; International Securities
Exchange, LLC; Order Granting Approval of Proposed Rule Change To Allow
Competitive Market Makers To Use Their Membership Points To Enter
Multiple Quotes in an Options Class
August 6, 2012.
I. Introduction
On June 6, 2012, International Securities Exchange, LLC
(``Exchange'' or ``ISE'') filed with the Securities and Exchange
Commission (``Commission''), pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to allow Competitive Market
Makers (``CMMs'') to use their membership points to enter multiple
quotes in an options class. The proposed rule change was published for
comment in the Federal Register on June 25, 2012.\3\ The Commission
received no comment letters on the proposed rule change. This order
approves the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 67216 (June 19,
2012), 77 FR 37944.
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II. Description of the Proposal
The Exchange's structure of CMM appointments allows market makers
flexibility in choosing the options classes to which they are
appointed.\4\ On a quarterly basis, the Exchange assigns point values
to options classes based on their percentage of overall industry volume
(not including exclusively traded index options).\5\ A CMM is allowed
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.\6\
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\4\ See Securities Exchange Act Release Nos. 65534 (October 12,
2011), 76 FR 64417 (October 18, 2011)(SR-ISE-2011-58); and 65100
(Aug. 11, 2011), 76 FR 51075 (Aug. 17, 2011).
\5\ See ISE Rule 802(c)(1).
\6\ 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(d).
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The Exchange proposes to adopt .03 of the Supplementary Material to
Rule 802 (Appointment of Market Makers) to allow CMMs to seek
appointment to options classes in which it or an affiliated market
maker holds a CMM or Primary Market Maker appointment. Thus, the
proposed rule would allow CMMs to use their membership points to enter
multiple quotes in an options class, provided that such Member has
sufficient CMM points for each such appointment. The Exchange states
that the quoting requirements for CMMs would be applicable to each set
of quotes that the CMM enters, and CMMs will not be permitted to
aggregate multiple quotes in an options class in order to meet the
quoting requirements under ISE rules.
III. Discussion and Commission Findings
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange.\7\
Specifically, the Commission finds that the proposal is consistent with
Section 6(b)(5) of the Act,\8\ which requires, among other things, that
the rules of a national securities exchange be designed to prevent
fraudulent and manipulative acts and practices, 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.
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\7\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\8\ 15 U.S.C. 78f(b)(5).
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The proposal allows CMMs to seek appointment to options classes in
which it or an affiliated market maker holds a CMM or Primary Market
Maker appointment. The Commission believes that the proposal is
consistent with the Act. The Commission notes that the proposal should
allow CMMs more flexibility in using their membership points. The
proposal may also promote
[[Page 47898]]
competition by increasing the number of competitive quotes in options
classes traded on the Exchange. Moreover, the Commission notes that
according to the ISE, each set of CMM quotes will have independent
quoting obligations, and thus CMMs cannot aggregate multiple quotes in
an options class to meet its quoting requirements under the ISE rules.
The Exchange will run surveillance on each set of quotes for compliance
with the quoting obligations of market makers, ISE Rules, and the
Exchange Act.\9\
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\9\ See Telephone conversation between Katherine Simmons
(``Katherine Simmons''), Deputy General Counsel, ISE, and John C.
Roeser, Assistant Director, and David A. Garcia, Attorney-Advisor,
Division of Trading and Markets (``Division''), Commission, on June
21, 2012; Telephone conversation between Katherine Simmons and Susie
Cho, Special Counsel, Division, Commission, on July 23, 2012.
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\10\ that the proposed rule change (SR-ISE-2012-52), be, and hereby
is, approved.
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\10\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-19613 Filed 8-9-12; 8:45 am]
BILLING CODE 8011-01-P