Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Make Technical Corrections to ISE Rules, 74797-74800 [2014-29363]
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Federal Register / Vol. 79, No. 241 / Tuesday, December 16, 2014 / Notices
clearance and settlement of securities
transactions.
III. Discussion
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will be announced via a DTC Important
Notice.
IV. Conclusion
On the basis of the foregoing, the
Commission finds that the Proposed
Rule Change is consistent with the
requirements of the Act and in
particular with the requirements of
Section 17A of the Act 17 and the rules
and regulations thereunder.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act, that
proposed rule change SR–DTC–2014–10
be, and hereby is, approved.18
Section 19(b)(2)(C) of the Act 11
directs the Commission to approve a
proposed rule change of a selfregulatory organization if it finds that
such proposed rule change is consistent
with the requirements of the Act and
rules and regulations thereunder
applicable to such organization. Section
17A(b)(3)(F) of the Act requires, among
other things, that the rules of a clearing
agency be designed to promote the
prompt and accurate clearance and
settlement of securities transactions.12
In addition, Rule 17Ad–22(d)(12) of the
Act requires that a clearing agency
establish, implement, maintain and
enforce written policies and procedures
reasonably designed to ensure that final
settlement occurs no later than the end
of the settlement day and require that
intraday or real-time finality be
provided where necessary to reduce
risks.13
The Commission finds the Proposed
Rule Change consistent with the Act.
More specifically, as the Proposed Rule
Change pertains to requiring acceptance
through RAD of any affirmed ID
Transaction, the Commission finds that
the Proposed Rule Change is consistent
with Section 17A(b)(3)(F) of the Act 14
because the change will increase the
number of deliveries that will require
Receiver approval prior to DTC
processing. This requirement will
reduce the intraday uncertainty and
associated risks that may currently arise
from same-day reclaims, thus
facilitating the prompt and accurate
clearance and settlement of securities
transactions. The Commission also finds
these aspects of the Proposed Rule
Change consistent with Rule 17Ad–
22(d)(12) under the Act 15 because more
transactions will be subject to DTC’s
risk management controls, which helps
ensure that final settlement occurs no
later than the end of the settlement day.
As the Proposed Rule Change pertains
to the proposed technical changes, the
Commission finds that the Proposed
Rule Change is also consistent with
Section 17A(b)(3)(F) of the Act 16
because updates to the Guide to make it
more clear, consistent, and current
supports the prompt and accurate
U.S.C. 78s(b)(2)(C).
U.S.C. 78q–1(b)(3)(F).
13 17 CFR 240.17Ad–22(d)(12).
14 15 U.S.C. 78q–1(b)(3)(F).
15 17 CFR 240.17Ad–22(d)(12).
16 15 U.S.C. 78q–1(b)(3)(F).
12 15
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[FR Doc. 2014–29360 Filed 12–15–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–73808; File No. SR–ISE–
2014–54]
Self-Regulatory Organizations;
International Securities Exchange,
LLC; Notice of Filing and Immediate
Effectiveness of Proposed Rule
Change To Make Technical
Corrections to ISE Rules
December 10, 2014.
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
3, 2014, the International Securities
Exchange, LLC (the ‘‘Exchange’’ or the
‘‘ISE’’) filed with the Securities and
Exchange Commission (‘‘SEC’’ or
‘‘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.
I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
The ISE proposes to make certain
technical corrections to ISE rules as
described in more detail below. The text
of the proposed rule change is available
on the Exchange’s Web site (https://
17 15
U.S.C. 78q–1.
approving the proposed rule change, the
Commission considered the proposal’s impact on
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
19 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
18 In
11 15
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Kevin M. O’Neill,
Deputy Secretary.
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74797
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
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 the proposed rule
change is to eliminate investor
confusion by making certain technical
corrections to ISE rules that are either
obsolete or outdated, as described in
more detail below.
1. Order Type Cleanup
The Exchange adopted Customer
Participation Orders in August 2005 in
order to facilitate members providing
access to the Price Improvement
Mechanism (‘‘PIM’’) 3 to Public
Customers.4 Upon the entry of a
Crossing Transaction into the PIM,5 a
broadcast message is sent to all
members, who then have 500
milliseconds to enter orders that
indicate the size and price at which they
want to participate in the execution
(‘‘Improvement Orders’’).6 The
Customer Participation Order is an
instruction to the member to enter an
3 The PIM is a process by which an Electronic
Access Member can provide price improvement
opportunities for a transaction wherein the
Electronic Access Member seeks to facilitate an
order it represents as agent, and/or a transaction
wherein the Electronic Access Member solicited
interest to execute against an order it represents as
agent (a ‘‘Crossing Transaction’’). See Rule 723(a).
4 See Securities Exchange Act Release No. 52364
(August 31, 2005), 70 FR 53403 (September 8, 2005)
(SR–ISE–2005–41). The term ‘‘Public Customer’’
means a person or entity that is not a broker or
dealer in securities. See ISE Rule 100(a)(38).
5 A Crossing Transaction is comprised of the
order the Electronic Access Member 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.
See Rule 723(b).
6 See ISE Rule 723(c)(1).
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Improvement Order on behalf of a
Public Customer. Specifically, a
Customer Participation Order is a limit
order on behalf of a Public Customer
that, in addition to the limit order price
in standard increments, includes a price
stated in one cent increments at which
the Public Customer wishes to
participate in trades executed in the
same options series in penny
increments through the PIM.7 The
Exchange no longer offers Customer
Participation Orders and therefore
proposes to remove this order type from
its rules. Furthermore, the Exchange
proposes to remove two obsolete
references to Customer Participation
Orders in other rules. Specifically, the
Exchange proposes to remove references
to Customer Participation Orders in
Supplementary Material .06 to Rule 723,
which explains when Improvement
Orders can be entered with respect to a
Customer Participation Order,8 and in
Rule 723(d), which notes that the
agency side of an order entered into the
PIM may execute against Customer
Participation Orders at the end of the
exposure period.
In September 2008, the ISE adopted
rules to allow members to enter nondisplayed orders and quotes in penny
increments in designated options with a
minimum trading increment greater
than one cent (‘‘non-displayed penny
orders and quotes’’).9 As proposed in
that filing, a non-displayed penny order
or quote is available for execution at its
penny price but is displayed at the
closest minimum trading increment that
does not violate the limit price. The
Exchange does not offer non-displayed
penny orders or quotes and therefore
proposes to delete references to this
order type from its rules as described
below. First, the Exchange proposes to
delete Rule 715(b)(4), which defines
non-displayed penny order. Second, the
Exchange proposes to delete language in
Rule 804(b)(1) and Rule 805(a) that
permits market makers to enter nondisplayed penny quotes and orders,
respectively. Third, the Exchange
proposes to delete language in
Supplementary Material .06 to Rule 716
concerning split prices for nondisplayed penny orders and quotes
entered into the Facilitation and
Solicitation Mechanisms. Finally, the
Exchange proposes to delete language in
Supplementary Material .03 to Rule 717
7 See
Rule 715(f).
8 Although Customer Participation Orders are no
longer available, members will continue to be able
to enter Improvement Orders for the account of
Public Customers.
9 See Exchange Act Release No. 58486 (September
8, 2008), 73 FR 53298 (September 15, 2008) (SR–
ISE–2008–36).
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concerning the execution of nondisplayed penny orders that an
Electronic Access Member represents as
agent against principal orders and
orders solicited from other broker
dealers.
2. No Bid Options/Limit Price
Rule 713(b), which deals with priority
of orders, provides that if the lowest
offer for any options contract is $0.05
then no member shall enter a market
order to sell that series, and any such
market order shall be considered a limit
order to sell at a price of $0.05. This
provision is intended to prevent
members from submitting market orders
to sell in no bid series, which would
execute at a price of $0.00, and to
instead convert those orders to limit
orders with a limit price equal to the
minimum trading increment, i.e., $0.05
for most option classes.10 A ‘‘no bid’’ or
‘‘zero bid’’ series refers to an option
where the bid price is $0.00. Series of
options quoted no bid are usually deep
out-of-the-money series that are
perceived as having little if any chance
of expiring in-the-money. For options
that trade in regular nickel increments,
a best offer of $0.05 corresponds to a
best bid of $0.00, i.e. one minimum
trading increment below the offer.
However, option series may be no bid
with other offer prices as well. For
example, an option class would be
considered no bid if it is quoted at $0.00
(bid)–$0.15 (offer). In order to avoid
having these orders execute at a price of
$0.00, the Exchange proposes to clarify
that Rule 713(b) applies to all option
classes that are quoted no bid, rather
than just those option classes that have
an offer of $0.05. Furthermore, on
January 26th, 2007, the options
exchanges commenced a pilot (the
‘‘Penny Pilot’’) to quote and trade
options in one cent increments,
lowering the minimum trading
increment from $0.05 in certain
symbols.11 The Exchange therefore
proposes to clarify in Rule 713(b) that it
will put a limit price equal to the
minimum trading increment on market
orders to sell a no bid option series. For
example, if the deep out-of-the-money
SPY December $230.00 call, which is
traded in penny increments, is quoted at
$0.00 (bid)–$0.03 (offer), a market order
10 Symbols not included in the Penny Pilot
(discussed below) generally trade in $0.05
increments if the options contract is trading at less
than $3.00 per option, and $0.10 increments if the
options contract is trading at $3.00 per option or
higher. See Rule 710.
11 See Exchange Act Release No. 55161 (January
24, 2007), 72 FR 4754 (February 1, 2007) (SR–ISE–
2006–62) (Approval Order); 54603 (October 16,
2006), 71 FR 62024 (October 20, 2006) (SR–ISE–
2006–62) (Notice).
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to sell would instead be treated as a
limit order to sell at a price of $0.01.
3. Linkage Rules
On April 18, 2013 the Commission
approved a proposed rule change that
modified the ISE’s linkage handling
procedures under the Options Order
Protection and Locked/Crossed Market
Plan (the ‘‘Plan’’).12 Prior to this rule
change Primary Market Makers
(‘‘PMMs’’) were responsible for routing
orders to away markets when necessary
to comply with the Plan. Under the
current rules, however, the ISE has
contracted with unaffiliated broker
dealers to route orders to other
exchanges when necessary to comply
with the linkage rules (‘‘Linkage
Handlers’’). Since PMMs no longer
perform linkage handling, the Exchange
proposes to move related language in
Rule 803, which concerns the obligation
of market makers, to Chapter 19. In
particular, the Exchange proposes to
move Supplementary Material .04 and
.05 to Rule 803 to the Supplementary
Material to Rule 1901, which contains
provisions relevant to linkage handling.
In connection with this change, the
Exchange also proposes to correct
incorrect internal cross references to
‘‘paragraph (c)(2)’’ in this
Supplementary Material. Prior to the
proposed rule change described above,
paragraph (c)(2) of Rule 803 contained
language concerning a PMM’s linkage
handling function. As away market
routing is now handled by Linkage
Handlers pursuant to the
Supplementary Material to Rule 1901,
the Exchange proposes to reference
these rules instead.
4. Supplementary Material
Finally, the Exchange notes that
certain supplementary material is
mistakenly labelled as ‘‘supplemental’’
material in the Exchange’s rulebook.13
In order to achieve consistency with
how other rules are labelled, the
Exchange proposes to change these to
instead refer to ‘‘supplementary’’
material.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the requirements of the Act and the
rules and regulations thereunder that
are applicable to a national securities
12 See Securities Exchange Act Release No. 69396
(April 18, 2013), 78 FR 24273 (April 24, 2013) (SR–
ISE–2013–18).
13 See ‘‘Supplemental’’ Material to Rules 717,
809, 810, and 1615. See also references in Rule
721(a)(3) to ‘‘Supplemental’’ Material .01 to Rule
717, in Rule 1903 to ‘‘Supplemental’’ Material .02
and .03 to Rule 1901, and in Rule 2011 to the
‘‘Supplemental’’ Material to Rule 2001.
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exchange, and, in particular, with the
requirements of Section 6(b) of the
Act.14 In particular, the proposal is
consistent with Section 6(b)(5) of the
Act,15 because 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. As explained in more
detail below, the Exchange believes it is
appropriate to make the proposed
technical corrections to its rules so that
members and investors have a clear and
accurate understanding of the meaning
of the ISE’s rules.
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1. Order Type Cleanup
As explained above, the Exchange
does not offer Customer Participation
Orders or non-displayed penny orders
or quotes, and thus proposes to remove
obsolete definitions and other outdated
references to these order types. The
Exchange believes that these changes
will eliminate investor confusion
regarding order types available for
trading on the ISE to the benefit of
members of investors.
2. No Bid Options/Limit Price
The ISE, along with other options
exchanges, currently operates a pilot
program to permit designated options
classes to be quoted and traded in
increments as low as one cent. The
Exchange is proposing to amend Rule
713(b) to account for the fact that option
classes selected for inclusion in the
Penny Pilot are permitted to trade in
penny increments. For penny classes
that are quoted no bid, the Exchange
will convert a market order to sell to a
limit order with a price of one cent. In
addition, the proposed rule change
clarifies that Rule 713(b) applies to all
series with a bid of $0.00, and not just
those series that also have an offer of
$0.05. The proposed rule change is
necessary to account for options trading
in multiple trading increments,
including under the Penny Pilot, and
will ensure that market orders to sell are
not inadvertently executed at a price of
zero. The Exchange believes that these
changes more accurately reflect the
intent of Rule 713(b), as described
above, and will eliminate investor
confusion with respect to the operation
of this rule by more accurately
describing the functionality provided by
the Exchange. Moreover, the Exchange
notes that other exchanges have similar
rules whereby a market order to sell a
no bid series is treated as a limit order
14 15
15 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
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with a limit price equal to the minimum
trading increment for the series.16
3. Linkage Rules
The proposed changes to the linkage
rules are non-substantive and intended
to reduce investor confusion by moving
rules concerning linkage handling to the
appropriate chapter of the Exchange’s
rulebook. As explained above, since
PMMs previously conducted the linkage
handling function, these rules were
located in Chapter 8 of the rulebook.
With the introduction of away market
routing by Linkage Handlers, the
Exchange believes that these rules are
more appropriately located in Chapter
19. In addition, the Exchange notes that
it is correcting related internal cross
references.
4. Supplementary Material
The proposed change to label
supplementary material correctly is
non-substantive and is intended to
achieve consistency in how these rules
are labelled to the benefit of members
and investors.
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 that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed rule change makes technical,
non-substantive, amendments to the
Exchange’s rules in order to eliminate
investor confusion, and is not designed
to have any competitive impact.
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 from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
16 See e.g. Securities Exchange Act Release No.
59475 (February 27, 2009), 74 FR 9840 (March 6,
2009) (SR–BX–2009–014) (Notice); 59742 (April 9,
2009), 74 FR 17701 (April 16, 2009).
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19(b)(3)(A) of the Act 17 and Rule 19b–
4(f)(6) thereunder.18
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 19 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6)(iii) 20
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 asked
the Commission to waive the 30-day
operative delay so that the proposal may
become operative immediately upon
filing. The Exchange believes that
waiving the 30-day operative delay is
consistent with the protection of
investors and the public interest
because the proposed rule change makes
non-substantive, technical changes to
the ISE’s rules. The Exchange believes
that these changes should take effect on
filing as they increase the clarity of the
ISE’s rules to the benefit of members
and investors that trade on the
Exchange. With respect to the
provisions regarding no bid options, the
Exchange believes the proposed rule
change will update and clarify those
rules consistent with treatment on other
options exchanges. The Commission
believes that waiving the 30-day
operative delay is consistent with the
protection of investors and the public
interest, as it will enhance the clarity of
the ISE’s rules and will reduce investor
confusion with respect to the operation
of the ISE’s rules. Therefore, the
Commission hereby waives the
operative delay and designates the
proposed rule change operative upon
filing.21
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. If the
Commission takes such action, the
Commission shall institute proceedings
17 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) 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.
19 17 CFR 240.19b–4(f)(6).
20 17 CFR 240.19b–4(f)(6)(iii).
21 For 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).
18 17
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to determine whether the proposed rule
should be approved or disapproved.
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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
ISE–2014–54 on the subject line.
Paper Comments
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• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–ISE–2014–54. 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 (https://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–
2014–54, and should be submitted on or
before January 6, 2015.
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19:38 Dec 15, 2014
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–29363 Filed 12–15–14; 8:45 am]
BILLING CODE 8011–01–P
DEPARTMENT OF STATE
[Public Notice: 8974]
Request for Information for the 2015
Trafficking in Persons Report
The Department of State (‘‘the
Department’’) requests written
information to assist in reporting on the
degree to which the United States and
foreign governments comply with the
minimum standards for the elimination
of trafficking in persons (‘‘minimum
standards’’) that are prescribed by the
Trafficking Victims Protection Act of
2000, (Div. A, Pub. L. 106–386) as
amended (‘‘TVPA’’). This information
will assist in the preparation of the
Trafficking in Persons Report (‘‘TIP
Report’’) that the Department submits
annually to the U.S. Congress on
governments’ level of compliance with
the minimum standards. Foreign
governments that do not comply with
the minimum standards and are not
making significant efforts to do so may
be subject to restrictions on
nonhumanitarian, nontrade-related
foreign assistance from the United
States, as defined by the TVPA.
Submissions must be made in writing to
the Office to Monitor and Combat
Trafficking in Persons at the Department
of State by January 20, 2015. Please refer
to the Addresses, Scope of Interest, and
Information Sought sections of this
Notice for additional instructions on
submission requirements.
DATES: Submissions must be received by
5 p.m. on January 30, 2015.
ADDRESSES: Written submissions and
supporting documentation may be
submitted by the following methods:
Email (preferred): tipreport@state.gov
for submissions related to foreign
governments and tipreportUS@state.gov
for submissions related to the United
States.
• Facsimile (fax): 202–312–9637.
• Mail, Express Delivery, Hand
Delivery and Messenger Service: U.S.
Department of State, Office to Monitor
and Combat Trafficking in Persons (J/
TIP), 1800 G Street NW., Suite 2148,
Washington, DC 20520. Please note that
materials submitted by mail may be
delayed due to security screenings and
processing.
SUMMARY:
22 17
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Scope of Interest: The Department
requests information relevant to
assessing the United States’ and foreign
governments’ compliance with the
minimum standards for the elimination
of trafficking in persons in the year
2014. The minimum standards for the
elimination of trafficking in persons are
listed in the Background section.
Submissions must include information
relevant and probative of the minimum
standards for the elimination of
trafficking in persons and should
include, but need not be limited to,
answering the questions in the
Information Sought section. Only those
questions for which the submitter has
direct professional experience should be
answered and that experience should be
noted. For any critique or deficiency
described, please provide a
recommendation to remedy it. Note the
country or countries that are the focus
of the submission.
Submissions may include written
narratives that answer the questions
presented in this Notice, research,
studies, statistics, fieldwork, training
materials, evaluations, assessments, and
other relevant evidence of local, state,
and federal government efforts. To the
extent possible, precise dates should be
included.
Where applicable, written narratives
providing factual information should
provide citations to sources and copies
of the source material should be
provided. If possible, send electronic
copies of the entire submission,
including source material. If primary
sources are utilized, such as research
studies, interviews, direct observations,
or other sources of quantitative or
qualitative data, details on the research
or data-gathering methodology should
be provided. The Department does not
include in the Report, and is therefore
not seeking, information on prostitution,
human smuggling, visa fraud, or child
abuse, unless such conduct occurs in
the context of human trafficking.
Confidentiality: Please provide the
name, phone number, and email address
of a single point of contact for any
submission. It is Department practice
not to identify in the Report information
concerning sources to safeguard those
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When applicable, portions of
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shared with those agencies.
Response: This is a request for
information only; there will be no
response to submissions.
E:\FR\FM\16DEN1.SGM
16DEN1
]]>Agencies
[Federal Register Volume 79, Number 241 (Tuesday, December 16, 2014)]
[Notices]
[Pages 74797-74800]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-29363]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73808; File No. SR-ISE-2014-54]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change To Make Technical Corrections to ISE Rules
December 10, 2014.
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 3, 2014, the International Securities Exchange, LLC
(the ``Exchange'' or the ``ISE'') filed with the Securities and
Exchange Commission (``SEC'' or ``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 the
Substance of the Proposed Rule Change
The ISE proposes to make certain technical corrections to ISE rules
as described in more detail below. The text of the proposed rule change
is available on the Exchange's Web site (https://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 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 the proposed rule change is to eliminate investor
confusion by making certain technical corrections to ISE rules that are
either obsolete or outdated, as described in more detail below.
1. Order Type Cleanup
The Exchange adopted Customer Participation Orders in August 2005
in order to facilitate members providing access to the Price
Improvement Mechanism (``PIM'') \3\ to Public Customers.\4\ Upon the
entry of a Crossing Transaction into the PIM,\5\ a broadcast message is
sent to all members, who then have 500 milliseconds to enter orders
that indicate the size and price at which they want to participate in
the execution (``Improvement Orders'').\6\ The Customer Participation
Order is an instruction to the member to enter an
[[Page 74798]]
Improvement Order on behalf of a Public Customer. Specifically, a
Customer Participation Order is a limit order on behalf of a Public
Customer that, in addition to the limit order price in standard
increments, includes a price stated in one cent increments at which the
Public Customer wishes to participate in trades executed in the same
options series in penny increments through the PIM.\7\ The Exchange no
longer offers Customer Participation Orders and therefore proposes to
remove this order type from its rules. Furthermore, the Exchange
proposes to remove two obsolete references to Customer Participation
Orders in other rules. Specifically, the Exchange proposes to remove
references to Customer Participation Orders in Supplementary Material
.06 to Rule 723, which explains when Improvement Orders can be entered
with respect to a Customer Participation Order,\8\ and in Rule 723(d),
which notes that the agency side of an order entered into the PIM may
execute against Customer Participation Orders at the end of the
exposure period.
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\3\ The PIM is a process by which an Electronic Access Member
can provide price improvement opportunities for a transaction
wherein the Electronic Access Member seeks to facilitate an order it
represents as agent, and/or a transaction wherein the Electronic
Access Member solicited interest to execute against an order it
represents as agent (a ``Crossing Transaction''). See Rule 723(a).
\4\ See Securities Exchange Act Release No. 52364 (August 31,
2005), 70 FR 53403 (September 8, 2005) (SR-ISE-2005-41). The term
``Public Customer'' means a person or entity that is not a broker or
dealer in securities. See ISE Rule 100(a)(38).
\5\ A Crossing Transaction is comprised of the order the
Electronic Access Member 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.
See Rule 723(b).
\6\ See ISE Rule 723(c)(1).
\7\ See Rule 715(f).
\8\ Although Customer Participation Orders are no longer
available, members will continue to be able to enter Improvement
Orders for the account of Public Customers.
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In September 2008, the ISE adopted rules to allow members to enter
non-displayed orders and quotes in penny increments in designated
options with a minimum trading increment greater than one cent (``non-
displayed penny orders and quotes'').\9\ As proposed in that filing, a
non-displayed penny order or quote is available for execution at its
penny price but is displayed at the closest minimum trading increment
that does not violate the limit price. The Exchange does not offer non-
displayed penny orders or quotes and therefore proposes to delete
references to this order type from its rules as described below. First,
the Exchange proposes to delete Rule 715(b)(4), which defines non-
displayed penny order. Second, the Exchange proposes to delete language
in Rule 804(b)(1) and Rule 805(a) that permits market makers to enter
non-displayed penny quotes and orders, respectively. Third, the
Exchange proposes to delete language in Supplementary Material .06 to
Rule 716 concerning split prices for non-displayed penny orders and
quotes entered into the Facilitation and Solicitation Mechanisms.
Finally, the Exchange proposes to delete language in Supplementary
Material .03 to Rule 717 concerning the execution of non-displayed
penny orders that an Electronic Access Member represents as agent
against principal orders and orders solicited from other broker
dealers.
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\9\ See Exchange Act Release No. 58486 (September 8, 2008), 73
FR 53298 (September 15, 2008) (SR-ISE-2008-36).
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2. No Bid Options/Limit Price
Rule 713(b), which deals with priority of orders, provides that if
the lowest offer for any options contract is $0.05 then no member shall
enter a market order to sell that series, and any such market order
shall be considered a limit order to sell at a price of $0.05. This
provision is intended to prevent members from submitting market orders
to sell in no bid series, which would execute at a price of $0.00, and
to instead convert those orders to limit orders with a limit price
equal to the minimum trading increment, i.e., $0.05 for most option
classes.\10\ A ``no bid'' or ``zero bid'' series refers to an option
where the bid price is $0.00. Series of options quoted no bid are
usually deep out-of-the-money series that are perceived as having
little if any chance of expiring in-the-money. For options that trade
in regular nickel increments, a best offer of $0.05 corresponds to a
best bid of $0.00, i.e. one minimum trading increment below the offer.
However, option series may be no bid with other offer prices as well.
For example, an option class would be considered no bid if it is quoted
at $0.00 (bid)-$0.15 (offer). In order to avoid having these orders
execute at a price of $0.00, the Exchange proposes to clarify that Rule
713(b) applies to all option classes that are quoted no bid, rather
than just those option classes that have an offer of $0.05.
Furthermore, on January 26th, 2007, the options exchanges commenced a
pilot (the ``Penny Pilot'') to quote and trade options in one cent
increments, lowering the minimum trading increment from $0.05 in
certain symbols.\11\ The Exchange therefore proposes to clarify in Rule
713(b) that it will put a limit price equal to the minimum trading
increment on market orders to sell a no bid option series. For example,
if the deep out-of-the-money SPY December $230.00 call, which is traded
in penny increments, is quoted at $0.00 (bid)-$0.03 (offer), a market
order to sell would instead be treated as a limit order to sell at a
price of $0.01.
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\10\ Symbols not included in the Penny Pilot (discussed below)
generally trade in $0.05 increments if the options contract is
trading at less than $3.00 per option, and $0.10 increments if the
options contract is trading at $3.00 per option or higher. See Rule
710.
\11\ See Exchange Act Release No. 55161 (January 24, 2007), 72
FR 4754 (February 1, 2007) (SR-ISE-2006-62) (Approval Order); 54603
(October 16, 2006), 71 FR 62024 (October 20, 2006) (SR-ISE-2006-62)
(Notice).
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3. Linkage Rules
On April 18, 2013 the Commission approved a proposed rule change
that modified the ISE's linkage handling procedures under the Options
Order Protection and Locked/Crossed Market Plan (the ``Plan'').\12\
Prior to this rule change Primary Market Makers (``PMMs'') were
responsible for routing orders to away markets when necessary to comply
with the Plan. Under the current rules, however, the ISE has contracted
with unaffiliated broker dealers to route orders to other exchanges
when necessary to comply with the linkage rules (``Linkage Handlers'').
Since PMMs no longer perform linkage handling, the Exchange proposes to
move related language in Rule 803, which concerns the obligation of
market makers, to Chapter 19. In particular, the Exchange proposes to
move Supplementary Material .04 and .05 to Rule 803 to the
Supplementary Material to Rule 1901, which contains provisions relevant
to linkage handling. In connection with this change, the Exchange also
proposes to correct incorrect internal cross references to ``paragraph
(c)(2)'' in this Supplementary Material. Prior to the proposed rule
change described above, paragraph (c)(2) of Rule 803 contained language
concerning a PMM's linkage handling function. As away market routing is
now handled by Linkage Handlers pursuant to the Supplementary Material
to Rule 1901, the Exchange proposes to reference these rules instead.
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\12\ See Securities Exchange Act Release No. 69396 (April 18,
2013), 78 FR 24273 (April 24, 2013) (SR-ISE-2013-18).
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4. Supplementary Material
Finally, the Exchange notes that certain supplementary material is
mistakenly labelled as ``supplemental'' material in the Exchange's
rulebook.\13\ In order to achieve consistency with how other rules are
labelled, the Exchange proposes to change these to instead refer to
``supplementary'' material.
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\13\ See ``Supplemental'' Material to Rules 717, 809, 810, and
1615. See also references in Rule 721(a)(3) to ``Supplemental''
Material .01 to Rule 717, in Rule 1903 to ``Supplemental'' Material
.02 and .03 to Rule 1901, and in Rule 2011 to the ``Supplemental''
Material to Rule 2001.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder that are applicable to a national securities
[[Page 74799]]
exchange, and, in particular, with the requirements of Section 6(b) of
the Act.\14\ In particular, the proposal is consistent with Section
6(b)(5) of the Act,\15\ because 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. As explained
in more detail below, the Exchange believes it is appropriate to make
the proposed technical corrections to its rules so that members and
investors have a clear and accurate understanding of the meaning of the
ISE's rules.
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\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
1. Order Type Cleanup
As explained above, the Exchange does not offer Customer
Participation Orders or non-displayed penny orders or quotes, and thus
proposes to remove obsolete definitions and other outdated references
to these order types. The Exchange believes that these changes will
eliminate investor confusion regarding order types available for
trading on the ISE to the benefit of members of investors.
2. No Bid Options/Limit Price
The ISE, along with other options exchanges, currently operates a
pilot program to permit designated options classes to be quoted and
traded in increments as low as one cent. The Exchange is proposing to
amend Rule 713(b) to account for the fact that option classes selected
for inclusion in the Penny Pilot are permitted to trade in penny
increments. For penny classes that are quoted no bid, the Exchange will
convert a market order to sell to a limit order with a price of one
cent. In addition, the proposed rule change clarifies that Rule 713(b)
applies to all series with a bid of $0.00, and not just those series
that also have an offer of $0.05. The proposed rule change is necessary
to account for options trading in multiple trading increments,
including under the Penny Pilot, and will ensure that market orders to
sell are not inadvertently executed at a price of zero. The Exchange
believes that these changes more accurately reflect the intent of Rule
713(b), as described above, and will eliminate investor confusion with
respect to the operation of this rule by more accurately describing the
functionality provided by the Exchange. Moreover, the Exchange notes
that other exchanges have similar rules whereby a market order to sell
a no bid series is treated as a limit order with a limit price equal to
the minimum trading increment for the series.\16\
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\16\ See e.g. Securities Exchange Act Release No. 59475
(February 27, 2009), 74 FR 9840 (March 6, 2009) (SR-BX-2009-014)
(Notice); 59742 (April 9, 2009), 74 FR 17701 (April 16, 2009).
---------------------------------------------------------------------------
3. Linkage Rules
The proposed changes to the linkage rules are non-substantive and
intended to reduce investor confusion by moving rules concerning
linkage handling to the appropriate chapter of the Exchange's rulebook.
As explained above, since PMMs previously conducted the linkage
handling function, these rules were located in Chapter 8 of the
rulebook. With the introduction of away market routing by Linkage
Handlers, the Exchange believes that these rules are more appropriately
located in Chapter 19. In addition, the Exchange notes that it is
correcting related internal cross references.
4. Supplementary Material
The proposed change to label supplementary material correctly is
non-substantive and is intended to achieve consistency in how these
rules are labelled to the benefit of members and investors.
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 that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed rule change
makes technical, non-substantive, amendments to the Exchange's rules in
order to eliminate investor confusion, and is not designed to have any
competitive impact.
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 from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \17\ and Rule 19b-
4(f)(6) thereunder.\18\
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\17\ 15 U.S.C. 78s(b)(3)(A).
\18\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
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.
---------------------------------------------------------------------------
A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \19\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \20\ 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 asked the Commission to waive the 30-day operative delay so that
the proposal may become operative immediately upon filing. The Exchange
believes that waiving the 30-day operative delay is consistent with the
protection of investors and the public interest because the proposed
rule change makes non-substantive, technical changes to the ISE's
rules. The Exchange believes that these changes should take effect on
filing as they increase the clarity of the ISE's rules to the benefit
of members and investors that trade on the Exchange. With respect to
the provisions regarding no bid options, the Exchange believes the
proposed rule change will update and clarify those rules consistent
with treatment on other options exchanges. The Commission believes that
waiving the 30-day operative delay is consistent with the protection of
investors and the public interest, as it will enhance the clarity of
the ISE's rules and will reduce investor confusion with respect to the
operation of the ISE's rules. Therefore, the Commission hereby waives
the operative delay and designates the proposed rule change operative
upon filing.\21\
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\19\ 17 CFR 240.19b-4(f)(6).
\20\ 17 CFR 240.19b-4(f)(6)(iii).
\21\ For 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).
---------------------------------------------------------------------------
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. If the Commission
takes such action, the Commission shall institute proceedings
[[Page 74800]]
to determine whether the proposed rule should be approved or
disapproved.
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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-ISE-2014-54 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-ISE-2014-54. 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 (https://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-2014-54, and should be
submitted on or before January 6, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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\22\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-29363 Filed 12-15-14; 8:45 am]
BILLING CODE 8011-01-P
