Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of a Proposal To Codify Certain Provisions of the Options Listing Procedures Plan Into ISE's Rules, 3508-3509 [2010-1019]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 75, Number 13 (Thursday, January 21, 2010)]
[Notices]
[Pages 3508-3509]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-1019]



[[Page 3508]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61348: File No. SR-ISE-2010-01]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of a Proposal To 
Codify Certain Provisions of the Options Listing Procedures Plan Into 
ISE's Rules

January 14, 2010.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on January 4, 2010, the International Securities Exchange, LLC 
(the ``Exchange'' or ``ISE'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the 
Exchange. The Exchange filed the proposal as a ``non-controversial'' 
proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 
\3\ and Rule 19b-4(f)(6) thereunder.\4\ The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its Rule 504 and adopt Rule 504A to 
apply uniform objective standards to the range of options series 
exercise (or strike) prices available for trading on the Exchange. 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 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 those 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to implement in ISE 
rules changes that were recently made to the Plan for the Purpose of 
Developing and Implementing Procedures Designated to Facilitate the 
Listing and Trading of Standardized Options Submitted Pursuant to 
Section 11A(a)(3)(B) of the Securities Exchange Act of 1934, also known 
as the Options Listing Procedures Plan (``OLPP''), in Amendment No. 3 
thereto.\5\ Proposed new ISE Rule 504A incorporates uniform objective 
standards to the range of options series exercise (or strike) prices 
available for trading on the Exchange, as a quote mitigation strategy 
intended to reduce the overall number of option series available for 
trading, which will in turn lessen the rate of increase in quote 
traffic (``range limitations'' or ``range limitation strategy'').
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    \5\ See Securities Exchange Act Release No. 60531 (August 19, 
2009), 74 FR 43173 (August 26, 2009) (Order approving Amendment No. 
3 to the OLPP, which would apply uniform objective standards to the 
range of options series exercise or strike prices available for 
trading on exchanges that are sponsors of OLPP). The sponsors of 
OLPP include ISE, Chicago Board Options Exchange, Inc.; NASDAQ OMX 
PHLX, Inc.; NASDAQ OMX BX, Inc.; The NASDAQ Stock Market LLC; NYSE 
Amex, LLC; and NYSE Arca, Inc. (together known as the ``Plan Sponsor 
Exchanges''). The OLPP is a national market system plan that, among 
other things, sets forth procedures governing the listing of new 
options series and replaces and supersedes the Joint-Exchange 
Options Plan (``JEOP''). See Securities Exchange Act Release No. 
44521 (July 6, 2009) [sic], 66 FR 36809 (July 13, 2001) (Order 
approving OLPP). See also Securities Exchange Act Release No. 29698 
(September 17, 1991), 56 FR 48954 [sic] (September 25, 1991) (Order 
approving JEOP).
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    Rule 504 currently indicates what series of option contracts may be 
open for trading after a particular class of options has been approved 
for trading on the Exchange. Proposed new Rule 504A applies certain 
``range limitations'' to the addition of new series for options classes 
overlying equity securities, Exchange Traded Fund Shares (``ETFs''), or 
Trust Issued Receipts (``TIRs'').
    As proposed in Rule 504A, if the price of the underlying security 
is less than or equal to $20, the Exchange would not list new option 
series with an exercise price more than 100 percent above or below the 
price of the underlying security.\6\ If the price of the underlying 
security is greater than $20, the Exchange would not list new options 
series with an exercise price more than 50 percent above or below the 
price of the underlying security. The proposal provides for an 
objective basis upon which the underlying prices for the price range 
limitations described above shall be determined, specifically in regard 
to intra-day add-on series and next-day series additions, new 
expiration months and for options series to be added as a result of 
pre-market trading.
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    \6\ This restriction would not prohibit the listing of at least 
three options series per expiration month in an options class.
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    This proposed rule change also allows the Exchange to designate up 
to five underlying securities to which, instead of the aforementioned 
50 percent restriction, a 100 percent restriction would apply. These 
designations would be made on an annual basis and cannot be removed 
during the calendar year unless the options class is delisted by the 
Exchange, in which case the Exchange may designate another class to 
replace the delisted class. If a designated class is delisted by the 
Exchange but continues to trade on at least one other exchange, any 
additional series for the class which are added from that point forward 
would again be subject to the proposed exercise price range 
limitations, unless the class is subsequently designated by another 
exchange. The proposal also provides a procedure for the Exchange to 
request, if conditions warrant, additional case-by-case exceptions even 
when it has already so designated five underlying securities.
    In addition, the Exchange may request, on a case-by-case basis, an 
exemption when it desires to list a series from the 100 percent range 
limitation. This procedure would enable the Exchange to list options 
series with strike prices that are more than 100 percent above or below 
the price of an underlying security, if unanimously agreed upon by all 
exchanges that list options overlying the security.\7\
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    \7\ Application of any of the aforementioned exceptions and/or 
exemptions to the strike price range limitations for an underlying 
security would be available to all exchanges listing options on such 
security.
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    The Exchange notes that the proposal would not restrict its ability 
to list options series in two situations. First, the Exchange would not 
be restricted from listing options series that have been properly 
listed by another exchange. And second, the proposal expressly 
eliminates the applicability of range limitations with regard to the

[[Page 3509]]

listing of $1 strike prices in option classes participating in the $1 
Strike Program, and the listing of series of FLEX options.
    The Exchange believes that the proposed rule change implementing 
range limitation strategies for equity, ETF, and TIR options should be 
beneficial in reducing quote traffic on the Exchange and in the options 
industry.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations under the Act applicable to a national securities exchange 
and, in particular, the requirements of Section 6(b) of the Act.\8\ 
Specifically, the Exchange believes the proposed rule change is 
consistent with Section 6(b)(5) of the Act's \9\ requirements that the 
rules of a national securities exchange be designed to promote just and 
equitable principles of trade, to prevent fraudulent and manipulative 
acts and, in general, to protect investors and the public interest. In 
particular, the Exchange believes that codifying certain range 
limitation provisions of the OLPP, as amended, serves to foster 
investor protection.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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 B. Self-Regulatory Organization's Statement on Burden on Competition

    The proposed rule change does not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act.

 C. Self-Regulatory Organization's Statement on Comments on the 
Proposed Rule Change Received From Members, Participants or Others

    The Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any unsolicited written comments from members or other interested 
parties.

 III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \10\ and Rule 19b-4(f)(6) thereunder.\11\ 
Because the 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 prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act \12\ and Rule 19b-
4(f)(6)(iii) thereunder.\13\
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    \10\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) 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 the 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 the pre-filing requirement.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.

 IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments:

     Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-ISE-2010-01 on the subject line.

Paper Comments:

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-ISE-2010-01. 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 self-regulatory 
organization. All comments received will be posted without change; the 
Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-ISE-
2010-01 and should be submitted on or before February 11, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-1019 Filed 1-20-10; 8:45 am]
BILLING CODE 8011-01-P