Self-Regulatory Organizations; International Securities Exchange, LLC; Order Approving Proposed Rule Change Relating to Quoting Obligations for Competitive Market Makers, 76080-76081 [E8-29559]
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Federal Register / Vol. 73, No. 241 / Monday, December 15, 2008 / Notices
All submissions should refer to File
Number SR–ISE–2008–90. 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 (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 inspection and copying 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–2008–90 and should be
submitted on or before January 5, 2009.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.4
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–29555 Filed 12–12–08; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–59066; File No. SR–ISE–
2008–78]
Self-Regulatory Organizations;
International Securities Exchange,
LLC; Order Approving Proposed Rule
Change Relating to Quoting
Obligations for Competitive Market
Makers
pwalker on PROD1PC71 with NOTICES
December 8, 2008.
I. Introduction
On October 21, 2008, the International
Securities Exchange, LLC (‘‘ISE’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to Section
4 17
CFR 200.30–3(a)(12).
VerDate Aug<31>2005
20:00 Dec 12, 2008
Jkt 217001
19(b)(1) of the Securities Exchange Act
of 1934 (the ‘‘Act’’),1 and Rule 19b–4
thereunder,2 a proposed rule change
relating to the Exchange’s quoting
obligations for Competitive Market
Makers (‘‘CMMs’’). The proposed rule
change was published for comment in
the Federal Register on November 3,
2008.3 The Commission received no
comments on the proposal. This order
approves the proposed rule change.
II. Description of the Proposal
The Exchange proposes to amend ISE
Rules 713, 804 and 805 to change the
quoting obligation for the Exchange’s
CMMs. ISE currently requires CMMs to
participate in the opening and maintain
continuous quotations in all of the
series of at least 60 per cent of the
options classes in the bin or 60 classes,
whichever is less. In addition, if a CMM
chooses to quote any series of an
options class above and beyond this
minimum requirement, it must then
maintain continuous quotations in all of
the series of that class throughout that
trading day. In September 2007, the
Exchange initiated a pilot to reduce the
quoting obligations for CMMs in 20
options classes.4 Under the Pilot, CMMs
were required to maintain quotations in
only 60 per cent of the series of an
options class overlying the pilot
program securities. The Pilot recently
expired and the Exchange now proposes
to change the quoting requirements for
CMMs on a permanent basis.
The Exchange does not believe that
the reduced quoting obligations adopted
as part of the Pilot have had any
negative effect on the quality of its
markets.5 Therefore, ISE proposes to
adopt the 60 per cent standard for all
options series on a permanent basis,
except for CMMs that receive
preferenced order flow. The Exchange
proposes that a CMM will be required
to maintain continuous quotations in at
least 90% of the series of any option
class in which it receives preferenced
orders.
The Exchange also proposes to lower
the minimum number of options classes
that a CMM is required to quote from 60
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 58861
(October 27, 2008), 73 FR 65432 (the ‘‘Notice’’).
4 See Securities Exchange Act Release No. 56444
(September 14, 2007), 72 FR 54089 (September 21,
2007) (Order Granting Approval of SR–ISE–2007–45
Relating to a Quote Mitigation Plan for Competitive
Market Makers) (the ‘‘Pilot’’).
5 According to the Exchange, in practice, market
makers simply widen their quotations when they do
not want to trade in a particular series, so requiring
them to maintain continuous quotations in all series
merely increases capacity requirements for the
market makers.
2 17
PO 00000
Frm 00091
Fmt 4703
Sfmt 4703
to 40. The Exchange believes that
lowering the requirement will attract
additional market making participants
on the ISE.
Finally, the Exchange proposes to
amend Rule 805 (Market Maker Orders)
regarding the percentage of volume a
CMM may execute in options to which
it is not appointed. Specifically, Rule
805 currently provides that a CMM may
execute up to 25% of its volume in
options classes to which it is not
appointed. Because the Exchange is
lowering the number of appointed
classes in which a CMM is required to
quote, the Exchange believes it is
appropriate to base the 25% allowance
on volume that is executed while a
CMM is actually fulfilling its market
maker quotation obligations.
III. Discussion and Commission
Findings
After careful review, the Commission
finds that the proposed rule change is
consistent with the requirements of the
Act and the rules and regulations
thereunder applicable to a national
securities exchange.6 In particular, the
Commission finds that the proposal is
consistent with Section 6(b)(5) of the
Act,7 which requires that an exchange
have rules designed 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 believes that the
proposed rule change, which is
intended to reduce the number of
options quotations required to be
submitted without adversely affecting
the quality of the Exchange’s markets, is
consistent with the Act. The
Commission notes that the Exchange
has operated a one-year Pilot program
that reduced the quoting obligations for
CMMs and during the Pilot period the
Exchange did not observe any adverse
effect on its market.8 The Commission
believes it is appropriate to adopt the
modified quotation obligations for
CMMs on a permanent basis. In
addition, the Commission believes that
it is appropriate to reduce the quoting
obligations of a CMM because the
percentage of volume a CMM may
6 In approving this proposed rule change, the
Commission notes that it has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
7 15 U.S.C. 78f(b)(5).
8 The Commission notes that it has already
approved internal quote mitigation strategies on
other exchanges that relieve some market makers of
the obligation to quote every series of every class
to which they are appointed. See Phlx Rule
1014(b)(ii)(D)(1) and Amex Rule 994(c)(iv).
E:\FR\FM\15DEN1.SGM
15DEN1
Federal Register / Vol. 73, No. 241 / Monday, December 15, 2008 / Notices
execute in options classes to which it is
not appointed will be based on volume
that is executed in those options classes
in which a CMM maintains continuous
quotes in fulfillment of its obligations as
a market maker.
Finally, the Commission believes that
it is appropriate to impose a higher
continuous quoting requirement on
CMMs who receive preferenced order
flow because such CMMs receive the
benefit of enhanced allocation rights
and therefore should assume an
increased obligation to provide
continuous quotations. The Commission
notes that a similar quotation standard
for preferred market makers was
previously adopted on another
exchange.9
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,10 that the
proposed rule change (SR–ISE–2008–78)
be, and hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–29559 Filed 12–12–08; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–59069; File No. SR–NYSE–
2008–124]
Self-Regulatory Organizations; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change by New York
Stock Exchange LLC Extending for
Three Months to March 31, 2009 the
Moratorium Related to the
Qualification and Registration of
Registered Competitive Market Makers
Pursuant to NYSE Rule 107A and
Competitive Traders Pursuant to NYSE
Rule 110
December 8, 2008.
pwalker on PROD1PC71 with NOTICES
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on December
2, 2008, New York Stock Exchange LLC
(‘‘NYSE’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
9 See CBOE Rule 8.13(b)(iii) (requiring a preferred
market-maker to provide continuous electronic
quotes in at least 90% of the series of each class
for which it receives preferred market-maker
orders).
10 15 U.S.C. 78s(b)(2).
11 17 CFR 200.30–3(a)(12).
1 15 U.S.C.78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b-4.
VerDate Aug<31>2005
20:00 Dec 12, 2008
Jkt 217001
Commission (the ‘‘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 Substance of
the Proposed Rule Change
The Exchange proposes to extend for
three months to March 31, 2009 the
moratorium related to the qualification
and registration of Registered
Competitive Market Makers (‘‘RCMMs’’)
pursuant to NYSE Rule 107A and
Competitive Traders (‘‘CTs’’) pursuant
to NYSE Rule 110. The text of the
proposed rule change is available at
www.nyse.com, the NYSE, and 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 those statements may be examined at
the places specified in Item IV below.
The Exchange 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
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to extend for
three months to March 31, 2009 the
moratorium related to the qualification
and registration of RCMMs pursuant to
NYSE Rule 107A and CTs pursuant to
NYSE Rule 110.
On September 22, 2005, the Exchange
filed SR–NYSE–2005–63 4 with the
Securities and Exchange Commission
(‘‘Commission’’) proposing to
implement a moratorium on the
qualification and registration of new
RCMMS and CTs (‘‘Moratorium’’). The
purpose of the Moratorium was to allow
the Exchange an opportunity to review
the viability of RCMMs and CTs in the
4 See Securities Exchange Act Release No. 52648
(October 21, 2005), 70 FR 62155 (October 28, 2005)
(SR–NYSE–2005–63).
PO 00000
Frm 00092
Fmt 4703
Sfmt 4703
76081
NYSE HYBRID MARKETSM (‘‘Hybrid
Market’’).5
During each phase of the Hybrid
Market, the NYSE implemented new
system functionality that generated
additional data to review. As a result,
the Exchange was unable to make an
informed decision as to the viability of
RCMMs and CTs in the Hybrid Market.
The phasing in implementation of the
Hybrid Market required the Exchange to
extend the Moratorium an additional six
times over a twenty-four (24) month
period.6
On October 24, 2008, the Commission
approved the Exchange’s new market
model filing (‘‘New Model’’).7 The New
Model filing: (i) Provided market
participants with additional abilities to
post hidden liquidity on Exchange
systems; (ii) created a Designated
Market Maker (‘‘DMM’’), and phased out
the NYSE specialist; and (iii) enhanced
the speed of execution through
technological enhancements and a
reduction in message traffic between
Exchange systems and its DMMs. In
light of the implementation of the New
Model, the Exchange requested an
extension of the Moratorium to evaluate
the viability of the RCMMs and CTs in
the proposed New Model two times over
a six (6) month period.8
The Exchange is currently
implementing the second phase (‘‘Phase
2’’) of technology required for the
operation of the New Model. Upon
completion of the installation of the
Phase 2 technology,9 the New Model
will operate as a pilot scheduled to end
on October 1, 2009. Accordingly, the
Exchange seeks to have the ability to
review data that will be generated as a
5 See Securities Exchange Act Release No. 53539
(March 22, 2006), 71 FR 16353 (March 31, 2006)
(SR–NYSE–2004–05) (establishing the NYSE
HYBRID MARKETSM).
6 See e-mail from Jennifer Kim, Counsel, NYSE to
Sara Gillis, Special Counsel, Division of Trading
and Markets, Commission, dated December 4, 2008;
See Securities Exchange Act Release Numbers
54140 (July 13, 2006), 71 FR 41491 (July 21, 2006)
(SR–NYSE–2006–48); 54985 (December 21, 2006),
72 FR 171 (January 3, 2007) (SR–NYSE–2006–113);
55992 (June 29, 2007), 72 FR 37289 (July 9, 2007)
(SR–NYSE–2007–57); 56556 (September 27, 2007),
72 FR 56421 (October 3, 2007) (SR–NYSE–2007–
86); 57072 (December 31, 2007), 73 FR 1252
(January 7, 2008) (SR–NYSE–2007–125); 57601
(April 2, 2008), 73 FR 19123 (April 8, 2008) (SR–
NYSE–2008–22).
7 See Securities Exchange Act Release No. 58845
(October 24, 2008), 73 FR 64379 (October 29, 2008)
(SR–NYSE–2008–46).
8 See e-mail from Jennifer Kim, Counsel, NYSE to
Sara Gillis, Special Counsel, Division of Trading
and Markets, Commission, dated December 4, 2008;
See Securities Exchange Act Release Numbers
58033 (June 26, 2008), 73 FR 38265 (July 3, 2008)
(SR–NYSE–2008–49); 58713 (October 2, 2008), 73
FR 59024 (October 8, 2008) (SR–NYSE–2008–96).
9 Phase 2 is scheduled to be completed no later
than January 2, 2009.
E:\FR\FM\15DEN1.SGM
15DEN1
]]>Agencies
[Federal Register Volume 73, Number 241 (Monday, December 15, 2008)]
[Notices]
[Pages 76080-76081]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-29559]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-59066; File No. SR-ISE-2008-78]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Order Approving Proposed Rule Change Relating to Quoting
Obligations for Competitive Market Makers
December 8, 2008.
I. Introduction
On October 21, 2008, 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 (the ``Act''),\1\ and Rule 19b-4
thereunder,\2\ a proposed rule change relating to the Exchange's
quoting obligations for Competitive Market Makers (``CMMs''). The
proposed rule change was published for comment in the Federal Register
on November 3, 2008.\3\ The Commission received no comments on the
proposal. This order approves the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 58861 (October 27,
2008), 73 FR 65432 (the ``Notice'').
---------------------------------------------------------------------------
II. Description of the Proposal
The Exchange proposes to amend ISE Rules 713, 804 and 805 to change
the quoting obligation for the Exchange's CMMs. ISE currently requires
CMMs to participate in the opening and maintain continuous quotations
in all of the series of at least 60 per cent of the options classes in
the bin or 60 classes, whichever is less. In addition, if a CMM chooses
to quote any series of an options class above and beyond this minimum
requirement, it must then maintain continuous quotations in all of the
series of that class throughout that trading day. In September 2007,
the Exchange initiated a pilot to reduce the quoting obligations for
CMMs in 20 options classes.\4\ Under the Pilot, CMMs were required to
maintain quotations in only 60 per cent of the series of an options
class overlying the pilot program securities. The Pilot recently
expired and the Exchange now proposes to change the quoting
requirements for CMMs on a permanent basis.
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release No. 56444 (September 14,
2007), 72 FR 54089 (September 21, 2007) (Order Granting Approval of
SR-ISE-2007-45 Relating to a Quote Mitigation Plan for Competitive
Market Makers) (the ``Pilot'').
---------------------------------------------------------------------------
The Exchange does not believe that the reduced quoting obligations
adopted as part of the Pilot have had any negative effect on the
quality of its markets.\5\ Therefore, ISE proposes to adopt the 60 per
cent standard for all options series on a permanent basis, except for
CMMs that receive preferenced order flow. The Exchange proposes that a
CMM will be required to maintain continuous quotations in at least 90%
of the series of any option class in which it receives preferenced
orders.
---------------------------------------------------------------------------
\5\ According to the Exchange, in practice, market makers simply
widen their quotations when they do not want to trade in a
particular series, so requiring them to maintain continuous
quotations in all series merely increases capacity requirements for
the market makers.
---------------------------------------------------------------------------
The Exchange also proposes to lower the minimum number of options
classes that a CMM is required to quote from 60 to 40. The Exchange
believes that lowering the requirement will attract additional market
making participants on the ISE.
Finally, the Exchange proposes to amend Rule 805 (Market Maker
Orders) regarding the percentage of volume a CMM may execute in options
to which it is not appointed. Specifically, Rule 805 currently provides
that a CMM may execute up to 25% of its volume in options classes to
which it is not appointed. Because the Exchange is lowering the number
of appointed classes in which a CMM is required to quote, the Exchange
believes it is appropriate to base the 25% allowance on volume that is
executed while a CMM is actually fulfilling its market maker quotation
obligations.
III. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities exchange.\6\
In particular, the Commission finds that the proposal is consistent
with Section 6(b)(5) of the Act,\7\ which requires that an exchange
have rules designed 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.
---------------------------------------------------------------------------
\6\ In approving this proposed rule change, the Commission notes
that it has considered the proposed rule's impact on efficiency,
competition, and capital formation. 15 U.S.C. 78c(f).
\7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Commission believes that the proposed rule change, which is
intended to reduce the number of options quotations required to be
submitted without adversely affecting the quality of the Exchange's
markets, is consistent with the Act. The Commission notes that the
Exchange has operated a one-year Pilot program that reduced the quoting
obligations for CMMs and during the Pilot period the Exchange did not
observe any adverse effect on its market.\8\ The Commission believes it
is appropriate to adopt the modified quotation obligations for CMMs on
a permanent basis. In addition, the Commission believes that it is
appropriate to reduce the quoting obligations of a CMM because the
percentage of volume a CMM may
[[Page 76081]]
execute in options classes to which it is not appointed will be based
on volume that is executed in those options classes in which a CMM
maintains continuous quotes in fulfillment of its obligations as a
market maker.
---------------------------------------------------------------------------
\8\ The Commission notes that it has already approved internal
quote mitigation strategies on other exchanges that relieve some
market makers of the obligation to quote every series of every class
to which they are appointed. See Phlx Rule 1014(b)(ii)(D)(1) and
Amex Rule 994(c)(iv).
---------------------------------------------------------------------------
Finally, the Commission believes that it is appropriate to impose a
higher continuous quoting requirement on CMMs who receive preferenced
order flow because such CMMs receive the benefit of enhanced allocation
rights and therefore should assume an increased obligation to provide
continuous quotations. The Commission notes that a similar quotation
standard for preferred market makers was previously adopted on another
exchange.\9\
---------------------------------------------------------------------------
\9\ See CBOE Rule 8.13(b)(iii) (requiring a preferred market-
maker to provide continuous electronic quotes in at least 90% of the
series of each class for which it receives preferred market-maker
orders).
---------------------------------------------------------------------------
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\10\ that the proposed rule change (SR-ISE-2008-78) be, and hereby
is, approved.
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
---------------------------------------------------------------------------
\11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-29559 Filed 12-12-08; 8:45 am]
BILLING CODE 8011-01-P
