[Federal Register Volume 78, Number 56 (Friday, March 22, 2013)]
[Notices]
[Pages 17729-17731]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-06568]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69153; File No. SR-ISE-2013-23]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change To Amend Its Rules Related to Mini Options Traded on the
Exchange
March 15, 2013.
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 March 13, 2013, 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, 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 its rules related to Mini Options
traded on the Exchange. 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
ISE proposes to amend its rules related to Mini Options traded on
the Exchange. Mini Options overlie 10 equity or ETF shares, rather than
the standard 100 shares.\3\ Mini Options are currently approved on the
following five (5) underlying securities: SPDR S&P 500 ETF (``SPY''),
Apple Inc. (``AAPL''), SPDR Gold Trust (``GLD''), Google Inc.
(``GOOG''), and Amazon.com, Inc. (``AMZN'').
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\3\ Mini Options were approved for trading on September 28,
2012. See Securities Exchange Act Release No. 67948 (September 28,
2012), 77 FR 60735 (October 4, 2012) (Approving SR-ISE-2012-58). The
Exchange expects to begin trading Mini Options on March 18, 2013.
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The purpose of this proposed rule change is to adopt new
Supplementary Material .13(d) to ISE Rule 504 to codify the minimum
contract threshold requirement for the execution of Mini Options in the
Exchange's Block Order Mechanism and Solicited Order Mechanism. The
Block Order Mechanism is a process by which a Member can obtain
liquidity for the execution of block-size orders.\4\ Block-size orders
are orders for fifty (50) or more contracts.\5\ The Solicited Order
Mechanism is a process by which an Electronic Access Member can attempt
to execute orders of 500 or more contracts it represents as agent
against contra orders that it solicited.\6\ The minimum contract
threshold required for the Block Order Mechanism and the Solicited
Order Mechanism applies to option contracts that overlie 100 shares and
therefore does not currently apply to Mini Options.
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\4\ See ISE Rule 716(c).
\5\ See ISE Rule 716(a).
\6\ See ISE Rule 716(e).
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This proposed rule change also proposes to adopt a minimum contract
threshold for the execution of a Qualified Contingent Cross Order in
Mini Options. A Qualified Contingent Cross Order is an order to buy or
sell at least 1000 contracts that is identified as being part of a
qualified contingent trade coupled with a contra-side order to buy or
sell an equal number of contracts.\7\ Again, the minimum contract
threshold required for the execution of a Qualified Contingent Cross
order applies to option contracts that overlie 100 shares and therefore
does not currently apply to Mini Options.
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\7\ See ISE Rule 715(j).
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[[Page 17730]]
The Exchange now proposes to adopt new Supplementary Material
.13(d) to Rule 504 to adjust the minimum contract threshold for
executing Mini Options in the Block Order Mechanism and Solicited Order
Mechanism by ten times their current requirement. Thus, Mini Options
executed in the Block Order Mechanism must be for five hundred (500) or
more Mini Option contracts, and Mini Options executed in the Solicited
Order Mechanism must be for five thousand (5,000) or more Mini Option
contracts. Further, new Supplementary Material .13(d) to Rule 504 also
adjusts the minimum contract threshold for the execution of Qualified
Contingent Cross orders in Mini Options. Thus, a Qualified Contingent
Cross order in Mini Options must be comprised of an order to buy or
sell at least 10,000 Mini Option contracts coupled with a contra-side
order to buy or sell an equal number of Mini Option contracts.
The Exchange believes it is appropriate to adjust the minimum
contract threshold for Mini Options so they are equivalent (same number
of underlying securities) to the minimum contract threshold required
for standard options that are executed in the Block Order Mechanism and
Solicited Order Mechanism and for the execution of Qualified Contingent
Cross orders in Mini Options. The Exchange believes that adjusting the
minimum contract threshold will remove any confusion on the part of
market participants that want to use these Exchange functionalities to
execute Mini Options.
2. Statutory Basis
The basis under the Securities Exchange Act of 1934 (the ``Exchange
Act'') for this proposed rule change is found in Section 6(b)(5), in
that the proposed change is designed to promote just and equitable
principles of trade, 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. In
particular, the proposed rule change will assure that standard options
and Mini Options on the same underlying security will have an
equivalent minimum contract threshold for the execution of orders in
the Exchange's Block Order Mechanism and Solicited Order Mechanism and
for Qualified Contingent Cross orders executed on the Exchange. The
Exchange believes the proposed rule change will also avoid investor
confusion because in the absence of this proposal, the minimum contract
threshold for executing Mini Options in the Block Order Mechanism and
Solicited Order Mechanism and for executing Qualified Contingent Cross
orders in Mini Options would have been different than that for standard
options (i.e., different number of underlying securities). The Exchange
does not intend that Mini Options and standard options have different
minimum contract threshold requirements for its auction mechanisms and
for Qualified Contingent Cross orders executed on the Exchange. The
Exchange further believes that investors and other market participants
will benefit from this proposed rule change because it proposes to
clarify and establish the minimum contract threshold for executing Mini
Options in the Block Order Mechanism and Solicited Order Mechanism and
for executing Qualified Contingent Cross orders in Mini Options prior
to the commencement of trading. The Exchange believes that investors
generally will be expecting the minimum contract threshold for Mini
Options to be equivalent to the minimum contract threshold for standard
options when it comes to executing trades in the Exchange's various
auctions and in executing Qualified Contingent Cross orders in Mini
Options on the same underlying security. This proposed rule change will
therefore lessen investor confusion.
B. Self-Regulatory Organization's Statement on Burden on Competition
This proposed rule change does not impose any burden on competition
that is not necessary or appropriate in furtherance of the purposes of
the Exchange Act. ISE believes that the proposed rule change will in
fact relieve any burden on, or otherwise promote, competition. Mini
Options are currently approved for trading on multiple options
exchanges and all of the options exchanges that have a minimum contract
threshold in their rules will have the opportunity to amend their rules
to adopt minimum contract thresholds for Mini Options that are
equivalent to the minimum contract threshold for standard options.
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) of the Act \8\ and Rule 19b-4(f)(6) thereunder.\9\
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\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to provide 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 of the
proposed rule change, or such shorter time as designated by the
Commission. The Exchange has fulfilled this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative for 30 days after the date of filing. However,
Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter
time if such action is consistent with the protection of investors and
the public interest. The Exchange requests that the Commission waive
the 30-day operative delay so that the proposed rule change may
coincide with the anticipated launch of trading in Mini Options. The
Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public
interest.\10\ Waiver of the operative delay will allow the Exchange to
implement its proposal consistent with the commencement of trading in
Mini Options as scheduled and expected by members and other
participants on March 18, 2013. For these reasons, the Commission
designates the proposed rule change as operative upon filing.
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\10\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
[[Page 17731]]
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-2013-23 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-2013-23. 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
10:00 a.m. and 3:00 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-2013-23 and should be
submitted on or before April 12, 2013.
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. 2013-06568 Filed 3-21-13; 8:45 am]
BILLING CODE 8011-01-P