Self-Regulatory Organizations; International Securities Exchange, LLC; Order Approving a Proposed Rule Change, as Modified by Amendment Nos. 1 and 2, Relating to Complex Orders, 23517-23518 [E8-9460]

Download as PDF Federal Register / Vol. 73, No. 84 / Wednesday, April 30, 2008 / Notices company or a registered unit investment trust that relies on section 12(d)(1)(G) of the Act to acquire, in addition to securities issued by another registered investment company in the same group of investment companies, government securities, and short-term paper: (1) Securities issued by an investment company that is not in the same group of investment companies, when the acquisition is in reliance on section 12(d)(1)(A) or 12(d)(1)(F) of the Act; (2) securities (other than securities issued by an investment company); and (3) securities issued by a money market fund, when the investment is in reliance on rule 12d1–1 under the Act. For the purposes of rule 12d1–2, ‘‘securities’’ means any security as defined in section 2(a)(36) of the Act. 4. Section 6(c) of the Act provides that the Commission may exempt any person, security, or transaction from any provision of the Act, or from any rule under the Act, if such exemption is necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policies and provisions of the Act. 5. Applicants state that the proposed arrangement would comply with the provisions of rule 12d1–2 under the Act, but for the fact that the Funds of Funds may invest a portion of their assets in Other Investments. Applicants request an order under section 6(c) of the Act for an exemption from rule 12d1–2(a) to allow the Funds of Funds to invest in Other Investments. Applicants assert that permitting the Funds of Funds to invest in Other Investments as described in the application would not raise any of the concerns that the requirements of section 12(d)(1) were designed to address. rwilkins on PROD1PC63 with NOTICES Applicants’ Conditions Applicants agree that the order granting the requested relief will be subject to the following conditions: 1. Prior to approving any investment advisory agreement under section 15 of the Act, the board of the appropriate Fund of Funds, including a majority of the directors or trustees who are not ‘‘interested persons’’ as defined in section 2(a)(19) of the Act, will find that the advisory fees, if any, charged under the agreement are based on services provided that are in addition to, rather than duplicative of, services provided pursuant to the advisory agreement of any Underlying Fund’s advisory agreement. Such finding, and the basis upon which the finding is made, will be recorded fully in the minute books of the appropriate Fund of Funds. VerDate Aug<31>2005 17:09 Apr 29, 2008 Jkt 214001 2. Applicants will comply with all provisions of rule 12d1–2 under the Act, except for paragraph (a)(2), to the extent that it restricts any Fund from investing in Other Investments as described in the application. For the Commission, by the Division of Investment Management, under delegated authority. Florence E. Harmon, Deputy Secretary. [FR Doc. E8–9459 Filed 4–29–08; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–57706; File No. SR–ISE– 2007–77] Self-Regulatory Organizations; International Securities Exchange, LLC; Order Approving a Proposed Rule Change, as Modified by Amendment Nos. 1 and 2, Relating to Complex Orders April 24, 2008. I. Introduction On August 24, 2007, the International Securities Exchange, LLC (‘‘ISE’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 a proposal to amend ISE Rule 722, ‘‘Complex Orders,’’ to provide an opportunity for marketable complex orders to receive price improvement and to describe the execution of complex orders on the ISE in greater detail. The ISE filed Amendment Nos. 1 and 2 to the proposal on November 27, 2007, and March 11, 2008, respectively.3 The proposed rule change, as modified by Amendment Nos. 1 and 2, was published for comment in the Federal Register on March 21, 2008.4 The Commission received no comments regarding the proposed rule change, as amended. This order approves the proposed rule change, as amended. II. Description of the Proposal The ISE proposes to amend ISE Rule 722 to provide an opportunity for marketable complex orders to receive price improvement and to describe the execution of complex orders on the ISE 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 Amendment No. 2 replaces the original filing in its entirety. 4 See Securities Exchange Act Release No. 57507 (March 14, 2007), 73 FR 15241. 2 17 PO 00000 Frm 00114 Fmt 4703 Sfmt 4703 23517 in greater detail.5 The ISE proposes to amend ISE Rule 722 to specify that, subject to 722(b)(2), a complex order will be executed automatically against orders on the complex order book in price priority and in time priority at the same price.6 A complex order that is not executed against another complex order will be executed automatically against bids and offers for the individual legs of the complex order, provided that the complex order may be executed in full or in a permissible ratio by such bids and offers.7 The Exchange’s system, however, will not execute two complex orders against each other if the execution price of the options leg(s) would be below the best price available on the ISE for the options series, nor will it execute two complex orders at a price that matches the best price available on the ISE when there is a Public Customer order on the book.8 The ISE also proposes to amend ISE Rule 722 to allow members to choose to provide complex orders with an opportunity for price improvement by marking such orders for price improvement.9 Members will be able to mark all complex orders for price improvement, including stock-option orders. A marketable complex order that has been marked for price improvement will be exposed on the ISE’s complex order book for a period of up to one second before being executed automatically against other complex orders, or against bids and offers for the individual legs of the order.10 Members may view the complex orders through an API. During the exposure period, market participants will have an opportunity to enter contra-side complex orders.11 While the ISE will not conduct an auction for the incoming marketable complex order (i.e., there will be no messages sent to members specifically soliciting interest to trade with the complex order), the exposure period will provide an opportunity for 5 The proposal also deletes ISE Rule 722(b)(5), which contains outdated cross-references. 6 See ISE Rule 722(b)(3)(i). 7 See ISE Rule 722(b)(3)(ii). 8 See ISE Rule 722(b)(2). 9 See ISE Rule 722(b)(3)(iii). 10 See ISE Rule 722(b)(3)(iii). The Exchange will determine the length of the exposure period, not to exceed one second, from time to time. The ISE will communicate the initial exposure period and any subsequent changes to the exposure period to members via an Exchange circular. 11 The complex order book is available to all ISE market participants. However, the application of ISE Rules 717(d) and (e), which require a threesecond exposure period before a member may execute an agency order against a proprietary order or a solicited order, will prohibit the member that entered the complex order from entering contra-side principal orders or solicited orders during the exposure period. E:\FR\FM\30APN1.SGM 30APN1 23518 Federal Register / Vol. 73, No. 84 / Wednesday, April 30, 2008 / Notices the order to receive price improvement. Although the exposed order may receive price improvement, the order may not be executable at the conclusion of the exposure period. In addition, ISE Rules 717(d) and (e), which require members to expose agency orders to the market before executing them against proprietary or solicited orders, will continue to apply to the execution of complex orders. III. Discussion rwilkins on PROD1PC63 with NOTICES After careful review, the Commission finds that the proposed rule change, as amended, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.12 In particular, the Commission finds that the proposal is consistent with Section 6(b)(5) of the Act,13 which requires, in part, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of 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. The Commission notes that the proposal will provide ISE members with the option to seek potential price improvement for complex orders. Marketable complex orders would be exposed to attract contra-side trading interest only if they are marked for price improvement. If marked for price improvement, a complex order that would otherwise be executable upon entry will be exposed on the ISE’s complex order book for a period of up to one second thereby providing an opportunity for market participants to enter contra-side orders that could provide price improvement. Such an order would not be executable by its terms until the end of the exposure period. The Commission believes that, because of the unique nature of complex orders, it is consistent with the Act for ISE’s rules to allow members seeking to execute a particular complex order strategy to choose to attach an additional contingency to their orders that would render such orders unexecutable during an exposure period for the purpose of attracting price improvement.14 12 In approving the proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 13 15 U.S.C. 78f(b)(5). 14 Although a complex order is marketable upon entry, it may not be executable at the conclusion VerDate Aug<31>2005 17:09 Apr 29, 2008 Jkt 214001 In addition, the Commission notes that the requirements of ISE Rule 722, including the priority requirements of ISE Rule 722(b)(2) applicable to public customer orders, will continue to apply. In addition, ISE Rules 717(d) and (e), which require members to expose agency orders for three seconds before executing them against proprietary or solicited orders, will continue to apply to complex orders. Thus, a member would not be able to enter a proprietary order, or a solicited order, to trade with an agency order during the complex order exposure period, which will last for one second or less.15 IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,16 that the proposed rule change (SR–ISE–2007– 77), as amended, is approved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 Florence E. Harmon, Deputy Secretary. [FR Doc. E8–9460 Filed 4–29–08; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–57715; File No. SR–Phlx– 2008–30] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to the Criteria for Securities That Underlie Options Traded on the Exchange April 25, 2008. 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 April 24, 2008, the Philadelphia Stock Exchange, Inc. (‘‘Phlx’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been substantially prepared by the Exchange. The Exchange filed the proposal as a ‘‘non-controversial’’ proposed rule change pursuant to Section 19(b)(3)(A) of the Act 3 and Rule of the exposure period because of changes to ISE’s quoted market. 15 See supra note 11. 16 15 U.S.C. 78s(b)(2). 17 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A). PO 00000 Frm 00115 Fmt 4703 Sfmt 4703 19b–4(f)(6) thereunder,4 which renders the proposal effective upon filing with the Commission. 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 Substance of the Proposed Rule Change The Exchange proposes to amend Phlx Rule 1009, Criteria for Underlying Securities, and Phlx Rule 1010, Withdrawal of Approval of Underlying Securities or Options, to permit the initial and continued listing and trading of options on Index Multiple Exchange Traded Fund Shares (‘‘Index Multiple ETFs’’) and Index Inverse Exchange Traded Fund Shares (‘‘Index Inverse ETFs’’), and the listing and trading of options on shares of certain funds or trusts that hold specified non-U.S. currencies. The text of the proposed rule change is available at the Exchange’s principal office, the Commission’s Public Reference Room, and http:// www.phlx.com. 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. Phlx 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 An Index Multiple ETF seeks to provide investment results, before fees and expenses, that correspond to a specified multiple of the percentage performance on a given day of a particular foreign or domestic stock index. An Index Inverse ETF seeks to provide investment results, before fees and expenses, that correspond to the inverse (opposite) of the percentage performance on a given day of a particular foreign or domestic stock index by a specified multiple. Index Multiple ETFs and Index Inverse ETFs differ from traditional exchange-traded fund shares or ‘‘Units’’ in that they do 4 17 E:\FR\FM\30APN1.SGM CFR 240.19b–4(f)(6). 30APN1

Agencies

[Federal Register Volume 73, Number 84 (Wednesday, April 30, 2008)]
[Notices]
[Pages 23517-23518]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-9460]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57706; File No. SR-ISE-2007-77]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Order Approving a Proposed Rule Change, as Modified by Amendment 
Nos. 1 and 2, Relating to Complex Orders

April 24, 2008.

I. Introduction

    On August 24, 2007, the International Securities Exchange, LLC 
(``ISE'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 
thereunder,\2\ a proposal to amend ISE Rule 722, ``Complex Orders,'' to 
provide an opportunity for marketable complex orders to receive price 
improvement and to describe the execution of complex orders on the ISE 
in greater detail. The ISE filed Amendment Nos. 1 and 2 to the proposal 
on November 27, 2007, and March 11, 2008, respectively.\3\ The proposed 
rule change, as modified by Amendment Nos. 1 and 2, was published for 
comment in the Federal Register on March 21, 2008.\4\ The Commission 
received no comments regarding the proposed rule change, as amended. 
This order approves the proposed rule change, as amended.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 2 replaces the original filing in its 
entirety.
    \4\ See Securities Exchange Act Release No. 57507 (March 14, 
2007), 73 FR 15241.
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II. Description of the Proposal

    The ISE proposes to amend ISE Rule 722 to provide an opportunity 
for marketable complex orders to receive price improvement and to 
describe the execution of complex orders on the ISE in greater 
detail.\5\ The ISE proposes to amend ISE Rule 722 to specify that, 
subject to 722(b)(2), a complex order will be executed automatically 
against orders on the complex order book in price priority and in time 
priority at the same price.\6\ A complex order that is not executed 
against another complex order will be executed automatically against 
bids and offers for the individual legs of the complex order, provided 
that the complex order may be executed in full or in a permissible 
ratio by such bids and offers.\7\ The Exchange's system, however, will 
not execute two complex orders against each other if the execution 
price of the options leg(s) would be below the best price available on 
the ISE for the options series, nor will it execute two complex orders 
at a price that matches the best price available on the ISE when there 
is a Public Customer order on the book.\8\
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    \5\ The proposal also deletes ISE Rule 722(b)(5), which contains 
outdated cross-references.
    \6\ See ISE Rule 722(b)(3)(i).
    \7\ See ISE Rule 722(b)(3)(ii).
    \8\ See ISE Rule 722(b)(2).
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    The ISE also proposes to amend ISE Rule 722 to allow members to 
choose to provide complex orders with an opportunity for price 
improvement by marking such orders for price improvement.\9\ Members 
will be able to mark all complex orders for price improvement, 
including stock-option orders. A marketable complex order that has been 
marked for price improvement will be exposed on the ISE's complex order 
book for a period of up to one second before being executed 
automatically against other complex orders, or against bids and offers 
for the individual legs of the order.\10\ Members may view the complex 
orders through an API. During the exposure period, market participants 
will have an opportunity to enter contra-side complex orders.\11\ While 
the ISE will not conduct an auction for the incoming marketable complex 
order (i.e., there will be no messages sent to members specifically 
soliciting interest to trade with the complex order), the exposure 
period will provide an opportunity for

[[Page 23518]]

the order to receive price improvement. Although the exposed order may 
receive price improvement, the order may not be executable at the 
conclusion of the exposure period. In addition, ISE Rules 717(d) and 
(e), which require members to expose agency orders to the market before 
executing them against proprietary or solicited orders, will continue 
to apply to the execution of complex orders.
---------------------------------------------------------------------------

    \9\ See ISE Rule 722(b)(3)(iii).
    \10\ See ISE Rule 722(b)(3)(iii). The Exchange will determine 
the length of the exposure period, not to exceed one second, from 
time to time. The ISE will communicate the initial exposure period 
and any subsequent changes to the exposure period to members via an 
Exchange circular.
    \11\ The complex order book is available to all ISE market 
participants. However, the application of ISE Rules 717(d) and (e), 
which require a three-second exposure period before a member may 
execute an agency order against a proprietary order or a solicited 
order, will prohibit the member that entered the complex order from 
entering contra-side principal orders or solicited orders during the 
exposure period.
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III. Discussion

    After careful review, the Commission finds that the proposed rule 
change, as amended, is consistent with the requirements of the Act and 
the rules and regulations thereunder applicable to a national 
securities exchange.\12\ In particular, the Commission finds that the 
proposal is consistent with Section 6(b)(5) of the Act,\13\ which 
requires, in part, that the rules of a national securities exchange be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of 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.
---------------------------------------------------------------------------

    \12\ In approving the proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \13\ 15 U.S.C. 78f(b)(5).
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    The Commission notes that the proposal will provide ISE members 
with the option to seek potential price improvement for complex orders. 
Marketable complex orders would be exposed to attract contra-side 
trading interest only if they are marked for price improvement. If 
marked for price improvement, a complex order that would otherwise be 
executable upon entry will be exposed on the ISE's complex order book 
for a period of up to one second thereby providing an opportunity for 
market participants to enter contra-side orders that could provide 
price improvement. Such an order would not be executable by its terms 
until the end of the exposure period. The Commission believes that, 
because of the unique nature of complex orders, it is consistent with 
the Act for ISE's rules to allow members seeking to execute a 
particular complex order strategy to choose to attach an additional 
contingency to their orders that would render such orders unexecutable 
during an exposure period for the purpose of attracting price 
improvement.\14\
---------------------------------------------------------------------------

    \14\ Although a complex order is marketable upon entry, it may 
not be executable at the conclusion of the exposure period because 
of changes to ISE's quoted market.
---------------------------------------------------------------------------

    In addition, the Commission notes that the requirements of ISE Rule 
722, including the priority requirements of ISE Rule 722(b)(2) 
applicable to public customer orders, will continue to apply. In 
addition, ISE Rules 717(d) and (e), which require members to expose 
agency orders for three seconds before executing them against 
proprietary or solicited orders, will continue to apply to complex 
orders. Thus, a member would not be able to enter a proprietary order, 
or a solicited order, to trade with an agency order during the complex 
order exposure period, which will last for one second or less.\15\
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    \15\ See supra note 11.
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\16\ that the proposed rule change (SR-ISE-2007-77), as amended, is 
approved.
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    \16\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-9460 Filed 4-29-08; 8:45 am]
BILLING CODE 8010-01-P