[Federal Register Volume 75, Number 174 (Thursday, September 9, 2010)]
[Notices]
[Pages 54925-54926]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-22443]
[[Page 54925]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62815; File No. SR-ISE-2010-86]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change Amending Rules 413 and 2006
September 1, 2010.
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 August 23, 2010, the International Securities Exchange, LLC
(the ``Exchange'' or the ``ISE'') filed with the Securities and
Exchange Commission (the ``SEC'' or the ``Commission'') the proposed
rule change as described in Items I, II, and III below, which Items
have been prepared by the Exchange. The Exchange has filed the proposal
as a ``non-controversial'' proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ 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.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(6).
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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 ISE Rules 413 (Exemptions from
Position Limits) and 2006 (Exemptions from Position Limits) to enable
Exchange members to rely on position limit exemptions granted by other
options exchanges. The text of the proposed rule change is available on
the Exchange's Web site http://www.ise.com, at the principal office of
the Exchange, on the Commission's Web site at http://www.sec.gov, 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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to amend ISE Rules 413
and 2006 to enable Exchange members to rely on position limit
exemptions granted by other options exchanges under specified
circumstances. This proposed rule change is based on similar rules of
The NASDAQ Stock Market LLC (``Nasdaq''), NASDAQ OMX PHLX (``Phlx'')
and NYSE Arca.\5\
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\5\ See Rules of the Nasdaq Options Market (``NOM'') Chapter
III, Section 8 and Chapter XIV, Section 8; Phlx 1001 and 1001A; and
NYSE Arca 5.17 and 6.8.
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ISE Rule 413 governs position limit exemptions for equity options
and ISE Rule 2006 governs position limit exemptions for index options.
These rules include a number of position limit exemptions available to
Exchange members. Rules 413 and 2006, however, do not have a provision
that recognizes position limit exemptions that are granted to Exchange
members by other option exchanges, as provided for in NOM, Phlx and
NYSE Arca rules. In light of the desirability to have similar position
limit standards, the Exchange proposes to add a similar an exemption to
both Rule 413 and Rule 2006.
Specifically, the Exchange proposes to add a new subsection to both
ISE Rule 413 and Rule 2006 to address position limit exemptions granted
by other options exchanges. This proposed addition will provide that an
Exchange member may rely upon any valid exemption from applicable
position limits that has been granted by another options exchange for
any options contract traded on ISE, provided that such Exchange member
provides the Exchange either with a copy of any written exemption
issued by another options exchange or with a written description of any
exemption issued by another options exchange that is not in writing,
where such description contains sufficient detail for Exchange to
verify the validity of that exemption with the issuing options
exchange. In addition, such Exchange member must fulfill all conditions
precedent for such exemption and comply at all times with the
requirements of such exemption with respect to trading on the Exchange.
The Exchange notes that position limits tend to be similar across
options exchanges, which is desirable in light of cross option exchange
membership(s) and multiple listing and trading of similar product(s) on
different exchanges. Because Exchange members frequently have
membership and/or trading privileges on other options exchanges, it is
important that ad hoc position limit exemptions granted by other
options exchanges (``exemption grants'') are available to Exchange
members to the extent that such exemption grants are reduced to writing
and verifiable by the Exchange.
These new proposed rules do not give the Exchange the ability to
alter the scope of these exemptions but only to recognize the exemption
so that the position limit process would be the same across the
exchanges.
For example, an Exchange member may go to another options exchange
of which it is a member, such as the NYSE Arca or NOM to request a
position limit exemption (exemption grant) for option contracts in the
SPDRs (SPY). The other exchange provides the exemption grant until
expiration in the same month to this particular firm for this
particular issue (SPY). Should the same Exchange member want to trade
SPY on the ISE to the extent of the exemption grant, the Exchange's
proposed rule change would allow it to do so, but only to the extent
that the firm provides the Exchange with a copy of the written
exemption grant provided by the issuing exchange or, if the exemption
is not in writing, to the extent that said Exchange member provides the
Exchange with sufficient detail for Exchange regulatory staff to be
able to verify the validity of the exemption grant with the issuing
options exchange.\6\
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\6\ Additionally, the Exchange member would have to fulfill all
conditions precedent for such exemption grant and comply with the
requirements of such exemption with respect to trading on the
Exchange.
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The Exchange believes that by adding uniformity and predictability
to the position limit process, the proposed rule change should be
beneficial to the Exchange members, and their customers. Moreover, the
proposed rule change should promote competition by allowing trades
across options exchanges that are similar in respect of position
limits.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act \7\ in general, and furthers the
objectives of Section 6(b)(5) of the Act \8\ in particular, because it
is designed to prevent fraudulent and manipulative acts and practices,
and to promote just and equitable principles of
[[Page 54926]]
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, by allowing the Exchange to have
uniform position limit procedures.
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\7\ 15 U.S.C. 78f (b).
\8\ 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
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days after the date of the filing, or such
shorter time as the Commission may designate, it has become effective
pursuant to Section 19(b)(3)(A) of the Act \9\ and Rule 19b-4(f)(6)
thereunder.\10\
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\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under 19b-4(f)(6) normally may not
become operative prior to 30 days after the date of filing.\11\
However, Rule 19b-4(f)(6)(iii) \12\ permits the Commission to designate
a shorter time if such action is consistent with the protection of
investors and the public interest. The Exchange has requested that the
Commission waive the 30-day operative delay so that the proposal may
become operative immediately upon filing, thereby giving the Exchange a
position limit process that can recognize exemptions granted by other
exchanges. The Commission believes that waiving the 30-day operative
delay is consistent with the protection of investors and the public
interest because such waiver will afford Exchange members the benefit
of the proposal--the ability to rely on exemptions granted by other
exchanges, when appropriately documented--without unnecessary delay.
For this reason, the Commission designates the proposed rule change as
operative under upon filing.\13\
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\11\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires that a self-regulatory organization submit to
the Commission 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 satisfied this requirement.
\12\ Id.
\13\ For the purposes only of waiving the 30-day operative
delay, the Commission has 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
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 e-mail to [email protected]. Please include
File Number SR-ISE-2010-86 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-2010-86. This file
number should be included on the subject line if e-mail 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 ISE. 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-2010-86 and should be
submitted on or before September 30, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-22443 Filed 9-8-10; 8:45 am]
BILLING CODE 8010-01-P