[Federal Register Volume 79, Number 199 (Wednesday, October 15, 2014)]
[Notices]
[Pages 61920-61922]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-24419]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73318; File No. SR-ISE-2014-49]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule
Change To Amend Rule 723 to Add a New PIM ISO Order Type
October 8, 2014.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on October 3, 2014 the International Securities Exchange, LLC
(``Exchange'' or ``ISE'') filed with the Securities and Exchange
Commission the proposed rule change, as described in Items I and II
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 ISE proposes to amend its rules to add a new PIM ISO order
type. The text of the proposed rule change is available on the
Exchange's Web site (http://www.ise.com), at the principal
[[Page 61921]]
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
The purpose of this proposed rule change is to amend the Exchange's
rules to add a new PIM ISO order type.
The Price Improvement Mechanism (``PIM'') is a process that allows
Electronic Access Members (``EAM'') to provide price improvement
opportunities for a transaction wherein the Member seeks to execute an
agency order as principal or execute an agency order against a
solicited order (a ``Crossing Transaction''). A Crossing Transaction is
comprised of the order the EAM represents as agent (the ``Agency
Order'') and a counter-side order for the full size of the Agency Order
(the ``Counter-Side Order''). The Counter-Side Order may represent
interest for the Member's own account, or interest the Member has
solicited from one or more other parties, or a combination of both. A
Crossing Transaction must be entered only at a price that is equal to
or better than the national best bid or offer (``NBBO'') and better
than the limit order or quote on the ISE orderbook on the same side of
the Agency Order.
An intermarket sweep order (``ISO'') is defined in Rule 1900(h) as
a limit order that is designated as an ISO in the manner prescribed by
the Exchange and is executed within the system by Members at multiple
price levels without respect to Protected Quotations of other Eligible
Exchanges as defined in Rule 1900.\3\ ISOs are immediately executable
within the Exchange's options trading system or cancelled, and shall
not be eligible for routing as set out in Rule 1900. Simultaneously
with the routing of an ISO to the Exchange's options trading system,
one or more additional limit orders, as necessary, are routed by the
entering party to execute against the full displayed size of any
Protected Bid or Protected Offer in the case of a limit order to sell
or buy with a price that is superior to the limit price of the limit
order identified as an ISO. These additional routed orders must be
identified as ISOs.
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\3\ Under Rule 1900, a ``Protected Quotation'' includes a
Protected Bid or Protected Offer. A ``Protected Bid'' or ``Protected
Offer'' means a Bid or Offer in an options series, respectively,
that: (i) Is disseminated pursuant to the OPRA Plan; and (ii) is the
Best Bid or Best Offer, respectively, displayed by an Eligible
Exchange. ``Bid'' or ``Offer'' means the bid price or the offer
price communicated by a member of an Eligible Exchange to any broker
or dealer, or to any customer, at which it is willing to buy or
sell, as either principal or agent, but shall not include
indications of interest. The ``OPRA Plan'' means the plan filed with
the SEC pursuant to Section 11Aa(1)(C)(iii) of the Act, approved by
the SEC and declared effective as of January 22, 1976, as from time
to time amended. ``Best Bid'' and ``Best Offer'' mean the highest
priced Bid and the lowest priced Offer. Finally, ``Eligible
Exchange'' means a national securities exchange registered with the
SEC in accordance with Section 6(a) of the Act that: (i) Is a
Participant Exchange in The Options Clearing Corporation (``OCC'')
(as that term is defined in Section VII of the OCC by-laws); (ii) is
a party to the OPRA Plan; and (iii) if the national securities
exchange is not a party to the OPRA Plan, is a participant in
another plan approved by the Commission providing for comparable
trade-through and locked and crossed market protection.
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The Exchange proposes to implement a PIM ISO order type (``PIM
ISO'') that will allow the submission of an ISO into the PIM.
Specifically, a PIM ISO is the transmission of two orders for crossing
pursuant to Rule 723 without regard for better priced Protected Bids or
Protected Offers because the Member transmitting the PIM ISO to the
Exchange has, simultaneously with the routing of the PIM ISO, routed
one or more ISOs, as necessary, to execute against the full displayed
size of any Protected Bid or Protected Offer that is superior to the
starting PIM auction price and has swept all interest in the Exchange's
book priced better than the proposed auction starting price. Any
execution(s) resulting from such sweeps shall accrue to the PIM order,
meaning that any execution(s) obtained from the away side will be given
to the agency side of the order.
The Exchange will accept a PIM ISO provided the order adheres to
the current PIM order acceptance requirements outlined above, but
without regard to the NBBO. The Exchange will execute the PIM ISO in
the same manner that it currently executes PIM orders, except that it
will not protect prices away. Instead, order flow providers will bear
the responsibility to clear all better priced interest away
simultaneously with submitting the PIM ISO order. There is no other
impact to PIM functionality. Specifically, liquidity present at the end
of the PIM auction will continue to be included in the PIM auction as
it is with PIM orders not marked as ISOs.
The Exchange will announce the implementation of this order type in
an information circular.
2. Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Securities Exchange Act of 1934 (the ``Act'') \4\ in
general, and furthers the objectives of Section 6(b)(5) of the Act \5\
in particular, in that it is designed to promote just and equitable
principles of trade, 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. The proposed
rule change promotes just and equitable principles or trade and removes
impediments to a free and open market in that it promotes competition,
as described below. Specifically, the proposal allows the Exchange to
offer its members an order type that is already offered by another
exchange.\6\ In addition, the proposal benefits traders and investors
because it adds a new order type for seeking price improvement through
the PIM. Finally, the proposal does not unfairly discriminate among
members because all Members are eligible to submit a PIM ISO order.
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\4\ 15 U.S.C. 78f(b).
\5\ 15 U.S.C. 78f(b)(5).
\6\ See NASDAQ OMX PHLX LLC (``PHLX'') Rule 1080, Commentary
.09.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange's proposal to
adopt a PIM ISO order type is pro-competitive because it will enable
the Exchange to provide market participants with an additional method
of seeking price improvement through the PIM. The proposed rule change
will also allow the Exchange to compete with other markets that already
allow an ISO order type in their price improvement mechanisms.\7\
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\7\ Id.
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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
[[Page 61922]]
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
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \8\ and Rule 19b-4(f)(6) \9\ thereunder because
the proposal does not: (i) Significantly affect the protection of
investors or the public interest; (ii) impose any significant burden on
competition; and (iii) by its terms, become operative for 30 days from
the date on which it was filed, or such shorter time as the Commission
may designate if consistent with the protection of investors and the
public interest.\10\
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\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 240.19b-4(f)(6).
\10\ In addition, Rule 19b-4(f)(6)(iii) requires the Exchange to
give the Commission written notice of the Exchange's 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 satisfied this
requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) normally may
not become operative prior to 30 days after the date of filing.
However, Rule 19b-4(f)(6)(iii) \11\ permits the Commission to designate
a shorter time if such action is consistent with the protection of
investors and the public interest.
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\11\ 17 CFR 240.19b-4(f)(6)(iii).
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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.\12\
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\12\ 15 U.S.C. 78s(b)(3)(C).
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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-2014-49 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-ISE-2014-49. 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 such 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-2014-49 and should be
submitted on or before November 5, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-24419 Filed 10-14-14; 8:45 am]
BILLING CODE 8011-01-P