[Federal Register Volume 75, Number 237 (Friday, December 10, 2010)]
[Notices]
[Pages 77032-77034]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-31050]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63437; File No. SR-ISE-2010-116]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule
Change To Extend the Penny Pilot Program
December 6, 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 December 2, 2010, the International Securities Exchange, LLC
(the ``Exchange'' or the ``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 relating to a pilot program to
quote and
[[Page 77033]]
to trade certain options in pennies (``Penny Pilot Program''). The text
of the proposed rule change is as follows, with deletions in [brackets]
and additions italicized:
Rule 710. Minimum Trading Increments
(a) The Board may establish minimum trading increments for options
traded on the Exchange. Such changes by the Board will be designated as
a stated policy, practice, or interpretation with respect to the
administration of this Rule 710 within the meaning of subparagraph
(3)(A) of Section 19(b) of the Exchange Act and will be filed with the
SEC as a rule change for effectiveness upon filing. Until such time as
the Board makes a change in the increments, the following principles
shall apply:
(1) If the options contract is trading at less than $3.00 per
option, $.05; and
(2) If the options contract is trading at $3.00 per option or
higher, $.10.
(b) Minimum trading increments for dealings in options contracts
other than those specified in paragraph (a) may be fixed by the
Exchange from time to time for options contracts of a particular
series.
(c) Notwithstanding the above, the Exchange may trade in the
minimum variation of the primary market in the underlying security.
Supplementary Material to Rule 710
.01 Notwithstanding any other provision of this Rule 710, the
Exchange will operate a pilot program to permit options classes to be
quoted and traded in increments as low as $.01. The Exchange will
specify which options trade in such pilot, and in what increments, in
Regulatory Information Circulars filed with the Commission pursuant to
Rule 19b-4 under the Exchange Act and distributed to Members.
The Exchange may replace, on a semi-annual basis, any penny pilot
issues that have been delisted with the next most actively traded
multiply listed options classes that are not yet included in the penny
pilot, based on trading activity in the previous six months. The
replacement issues may be added to the penny pilot on the second
trading day following January 1, 2011 [2010] and July 1, 2011 [2010].
.02 No Change.
* * * * *
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 parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
Under the Penny Pilot Program, the minimum price variation for all
participating options classes, except for the Nasdaq-100 Index Tracking
Stock (``QQQQ''), the SPDR S&P 500 Exchange Traded Fund (``SPY'') and
the iShares Russell 2000 Index Fund (``IWM''), is $0.01 for all
quotations in options series that are quoted at less than $3 per
contract and $0.05 for all quotations in options series that are quoted
at $3 per contract or greater. QQQQ, SPY and IWM are quoted in $0.01
increments for all options series. The Penny Pilot Program is currently
scheduled to expire on December 31, 2010.\3\ The Exchange proposes to
extend the time period of the Penny Pilot Program through December 31,
2011, and to provide revised dates for adding replacement issues to the
Penny Pilot program. The Exchange proposes that the semi-annual dates
to replace issues that have been delisted be revised to the second
trading day following January 1, 2011 and July 1, 2011. The Exchange
notes that the replacement issues will be selected based on trading
activity for the six month period beginning June 1, 2010 and ending
November 30, 2010 for the January 2011 replacement, and the six month
period beginning December 1, 2010 and ending May 31, 2011 for the July
2011 replacements. This filing does not propose any substantive changes
to the Penny Pilot Program: all classes currently participating will
remain the same and all minimum increments will remain unchanged. The
Exchange believes the benefits to public customers and other market
participants who will be able to express their true prices to buy and
sell options have been demonstrated to outweigh the increase in quote
traffic.
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\3\ See Exchange Act Release No. 60865 (October 22, 2009), 74 FR
55880 (October 29, 2009).
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The Exchange agrees to submit reports to the Commission that will
analyze the impact of the Penny Pilot Program on market quality and
options systems capacity. These reports will include, but are not
limited to: (1) Data and analysis on the number of quotations generated
for options included in the report; (2) an assessment of the quotation
spreads for the options included in the report; (3) an assessment of
the impact of the Penny Pilot Program on the capacity of the ISE's
automated systems; (4) data reflecting the size and depth of markets;
and (5) any capacity problems or other problems that arose related to
the operation of the Penny Pilot Program and how the Exchange addressed
them.
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 rule change is designed to promote just and equitable
principles of trade, 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, which extends the Penny Pilot Program for an
additional one year, will enable public customers and other market
participants to express their true prices to buy and sell options for
the benefit of all market participants.
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 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
[[Page 77034]]
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 \4\ and Rule 19b-4(f)(6) thereunder.\5\
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\4\ 15 U.S.C. 78s(b)(3)(A).
\5\ 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. ISE has satisfied this requirement.
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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-2010-116 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-2010-116. 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 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-2010-116 and should be
submitted on or before January 3, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\6\
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\6\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-31050 Filed 12-9-10; 8:45 am]
BILLING CODE 8011-01-P