[Federal Register Volume 80, Number 7 (Monday, January 12, 2015)]
[Notices]
[Pages 1559-1560]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-00218]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73999; File No. SR-ISE-2014-52]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Order Granting Approval of Proposed Rule Change Regarding the
Short Term Option Series Program
January 6, 2015.
I. Introduction
On November 6, 2014, the International Securities Exchange, LLC
(the ``Exchange'' or the ``ISE'') filed with the Securities and
Exchange Commission (``Commission''), pursuant to Section 19(b)(1) \1\
of the Securities Exchange Act of 1934 (``Act''),\2\ and Rule 19b-4
thereunder,\3\ a proposed rule change to extend the current $0.50
strike price intervals in non-index options to short term options with
strike prices less than $100. The proposed rule change was published
for comment in the Federal Register on November 24, 2014.\4\ The
Commission received no comment letters on the proposal. This order
approves the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
\4\ See Securities Exchange Act Release No. 73633 (November 18,
2014), 79 FR 69974 (``Notice'').
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II. Description of the Proposed Rule Change
On any Thursday or Friday that is a business day, the Exchange
currently may list short term option series in designated option
classes that expire at the close of business on each of the next five
Fridays that are business days and
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are not Fridays in which monthly or quarterly options expire.\5\ These
short term option series may be listed in strike price intervals of
$0.50, $1, or $2.50 depending on the strike price and whether the
option trades in dollar increments in the related monthly
expiration.\6\ Specifically, the Exchange may list short term option
series at strike price intervals of $0.50 or greater where the strike
price is less than $75, or for option classes that trade in one dollar
increments in the related non-short term option, $1 or greater where
the strike price is between $75 and $150, and $2.50 or greater where
the strike price is above $150.\7\ During the month prior to expiration
of an option class that is selected for the Short Term Option Series
Program, the strike price intervals for the related non-short term
option shall be the same as the strike price intervals for the short
term option.\8\
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\5\ See Supplementary Material .02 to ISE Rule 504.
\6\ See Supplementary Material .12 to ISE Rule 504.
\7\ Id.
\8\ See Supplementary Material .02(e) to ISE Rule 504.
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The Exchange also currently operates a $2.50 Strike Price Program
that permits monthly expiration options in classes admitted to the
$2.50 Strike Price Program to trade in $2.50 intervals where the strike
price is greater than $25 but less than $50; or between $50 and $100 if
the strikes are no more than $10 from the closing price of the
underlying stock in its primary market on the preceding day.\9\ In
certain instances, these strike price parameters conflict with the
strike prices allowed for related non-short term options as dollar
strikes between $75 and $100 otherwise allowed under the Short Term
Option Series Program may be within $0.50 of strikes listed pursuant to
the $2.50 Strike Price Program. As a result, the Exchange has proposed
to amend Supplementary Material .12 to Rule 504 to extend the $0.50
strike price intervals currently allowed for short term options with
strike prices less than $75 to short term options with strike prices
less than $100. With this proposed change, short term options in non-
index option classes will trade in: (1) $0.50 or greater intervals for
strike prices less than $100, or for option classes that trade in one
dollar increments in the related non-short term option; (2) $1 or
greater intervals for strike prices that are between $100 and $150; and
(3) $2.50 or greater intervals for strike prices above $150.
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\9\ See ISE Rule 504(g). The term ``primary market'' is defined
in ISE Rule 100(a)(37) as the principal market in which an
underlying security is traded.
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With regard to the impact of the proposal on system capacity, the
Exchange states that it has analyzed its capacity and represents that
it and the Options Price Reporting Authority (``OPRA'') have the
necessary systems capacity to handle any potential additional traffic
associated with this proposed rule change.\10\ In addition, the
Exchange states that it believes that its members will not experience a
capacity issue as a result of this proposal.\11\ Furthermore, the
Exchange states that it does not believe the proposed rule change will
cause fragmentation of liquidity.\12\
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\10\ See Notice, supra note 4, at 69975.
\11\ Id.
\12\ Id.
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III. Discussion and Commission Findings
After careful review, 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.\13\ In particular, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act,\14\ which
requires, among other things, that the rules of a national securities
exchange be designed to promote just and equitable principles of trade,
to prevent fraudulent and manipulative acts, 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. The Commission believes that the proposed change may provide
the investing public and other market participants more flexibility to
closely tailor their investment and hedging decisions in short term
options, as well as in related non-short term options, thus allowing
them to better manage their risk exposure.
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\13\ In approving the proposed rule change, the Commission has
considered its impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
\14\ 15 U.S.C. 78f(b)(5).
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In approving this proposal, the Commission notes that the Exchange
has represented that it and OPRA have the necessary systems capacity to
handle the potential additional traffic associated with this proposed
rule change.\15\ The Exchange further stated that it believes its
members will not have a capacity issue as a result of the proposal and
that it does not believe this expansion will cause fragmentation of
liquidity.\16\
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\15\ See Notice, supra note 4, at 69975.
\16\ Id.
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the Act
\17\ that the proposed rule change (SR-ISE-2014-52) be, and hereby is,
approved.
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\17\ 15 U.S.C. 78f(b)(2).
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For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
Brent J. Fields,
Secretary.
[FR Doc. 2015-00218 Filed 1-9-15; 8:45 am]
BILLING CODE 8011-01-P