Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Expand Its $1 Strike Program, 39597-39599 [2010-16748]
Download as PDF
Federal Register / Vol. 75, No. 131 / Friday, July 9, 2010 / Notices
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.
available publicly. All submissions
should refer to File Number SR–ISE–
2010–72 and should be submitted on or
before July 30, 2010.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010–16749 Filed 7–8–10; 8:45 am]
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–ISE–2010–72 on the subject
line.
wwoods2 on DSK1DXX6B1PROD with NOTICES_PART 1
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:
Self-Regulatory Organizations;
International Securities Exchange,
LLC; Notice of Filing and Immediate
Effectiveness of Proposed Rule
Change To Expand Its $1 Strike
Program
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–2010–72. 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 Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street, NE.,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. All comments received will
be posted without change; the
Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
VerDate Mar<15>2010
15:17 Jul 08, 2010
Jkt 220001
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–62442; File No. SR–ISE–
2010–64]
July 2, 2010.
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 June 24,
2010, 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 Exchange. 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 ISE proposes to expand the $1
Strike Program. 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, on the Commission’s Web
site at https://www.sec.gov, 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
PO 00000
19 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
Frm 00105
Fmt 4703
Sfmt 4703
39597
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 this proposed rule
change is to expand the $1 Strike
Program.3 The $1 Strike Program
currently allows ISE to select a total of
55 individual stocks on which option
series may be listed at $1 strike price
intervals. In order to be eligible for
selection into the $1 Strike Program, the
underlying stock must close below $50
in its primary market on the previous
trading day. If selected for the $1 Strike
Program, the Exchange may list strike
prices at $1 intervals from $1 to $50, but
no $1 strike price may be listed that is
greater than $5 from the underlying
stock’s closing price in its primary
market on the previous day. The
Exchange may also list $1 strikes on any
other option class designated by another
securities exchange that employs a
similar $1 Strike Program under their
respective rules. The Exchange may not
list long-term option series (‘‘LEAPS’’) 4
at $1 strike price intervals for any class
selected for the $1 Strike Program,
except as specified in subparagraph (c)
to Supplementary Material .01 to Rule
504.5 The Exchange is also restricted
from listing series with $1 intervals
within $0.50 of an existing strike price
in the same series, except that strike
3 The Commission approved the $1 Strike
Program as a pilot on June 16, 2003. See Securities
Exchange Act Release No. 48033 (June 16, 2003), 68
FR 37036 (June 20, 2003) (SR–ISE–2003–17). The $1
Strike Program was subsequently extended through
June 5, 2008. See Exchange Act Release Nos. 49827
(June 8, 2004), 69 FR 33966 (June 17, 2004) (SR–
ISE–2004–21); 50060 (July 22, 2004), 69 FR 45864
(July 30, 2004) (SR–ISE–2004–26); 51769 (May 31,
2005), 70 FR 33232 (June 7, 2005) (SR–ISE–2005–
22); 53806 (May 15, 2006), 71 FR 29694 (SR–ISE–
2006–20); and 55715 (May 7, 2007), 72 FR 26854
(May 11, 2007) (SR–ISE–2007–26). The $1 Strike
Program was subsequently expanded and
permanently approved in 2008. See Securities
Exchange Act Release No. 57169 (January 18, 2008),
73 FR 4654 (January 25, 2008) (SR–ISE–2007–110).
The $1 Strike Program was last expanded in 2009.
See Securities Exchange Act Release No. 59587
(March 17, 2009), 74 FR 12414 (March 24, 2009)
(SR–ISE–2009–04).
4 LEAPS are long-term options that generally have
up to thirty-nine months from the time they are
listed until expiration. See Rule 506, Long-Term
Options Contracts.
5 Supplementary Material .01(c) to Rule 504 states
that the Exchange may list $1 strike prices up to $5
in LEAPS in up to 200 option classes in individual
stocks. See Securities Exchange Act Release No.
61102 (December 3, 2009), 74 FR 65191 (December
9, 2009) (SR–ISE–2009–102).
E:\FR\FM\09JYN1.SGM
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Federal Register / Vol. 75, No. 131 / Friday, July 9, 2010 / Notices
wwoods2 on DSK1DXX6B1PROD with NOTICES_PART 1
prices of $2, $3, and $4 shall be
permitted within $0.50 of an existing
strike price for classes also selected to
participate in the $0.50 Strike Program.6
The Exchange now proposes to
expand the $1 Strike Program to allow
ISE to select a total of 150 individual
stocks on which option series may be
listed at $1 strike price intervals. The
existing restrictions on listing $1 strikes
would continue, i.e., no $1 strike price
may be listed that is greater than $5
from the underlying stock’s closing
price in its primary market on the
previous day, and ISE is restricted from
listing any series that would result in
strike prices being $0.50 apart (unless
an option class is selected to participate
in both the $1 Strike Program and the
$0.50 Strike Program).
As stated in the Commission order
that initially approved ISE’s Program
and in subsequent extensions and
expansions of the $1 Strike Program,7
ISE believes that $1 strike price
intervals provide investors with greater
flexibility in the trading of equity
options that overlie lower price stocks
by allowing investors to establish equity
options positions that are better tailored
to meet their investment objectives.
During the time that the $1 Strike
Program was a pilot, the Exchange
submitted three pilot reports to the
Commission in which the Exchange
discussed, among other things, the
strength and efficacy of the Program
based upon the steady increase in
volume and open interest of options
traded on the Exchange at $1 strike
price intervals; and that the Program
had not and, in the future, should not
create capacity problems for ISE or the
Options Price Reporting Authority
(‘‘OPRA’’) systems.8 This has not
changed. Moreover, the number of $1
strike options traded on the Exchange
has continued to increase since the
inception of the $1 Strike Program such
that these options are now among some
6 Regarding the $0.50 Strike Program, which
allows $0.50 strike price intervals for options on
stocks trading at or below $3.00, see Supplementary
Material .05 to Rule 504 and Securities Exchange
Act Release No. 60696 (September 18, 2009), 74 FR
49053 (September 25, 2009) (SR–ISE–2009–65). See
also Securities Exchange Act Release No. 61737
(March 18, 2010), 75 FR 14225 (March 24, 2010)
(SR–ISE–2010–22) (allowing concurrent listing of
$3.50 and $4 strikes for classes that participate in
both the $0.50 Strike Program and the $1 Strike
Program).
7 See supra note 3.
8 See Exchange Act Release Nos. 49827 (June 8,
2004), 69 FR 33966 (June 17, 2004) (SR–ISE–2004–
21); 50060 (July 22, 2004), 69 FR 45864 (July 30,
2004) (SR–ISE–2004–26); 51769 (May 31, 2005), 70
FR 33232 (June 7, 2005) (SR–ISE–2005–22); 53806
(May 15, 2006), 71 FR 29694 (SR–ISE–2006–20);
and 55715 (May 7, 2007), 72 FR 26854 (May 11,
2007) (SR–ISE–2007–26).
VerDate Mar<15>2010
15:17 Jul 08, 2010
Jkt 220001
of the most popular products traded on
the Exchange.
The Exchange believes that market
conditions have led to an increase in the
number of securities trading below $50
warranting the proposed expansion of
the $1 Strike Program. In addition, the
Exchange notes that this filing is based
on a filing previously submitted by
NASDAQ OMX PHLX, Inc (‘‘PHLX’’)
that the Commission recently noticed.9
With regard to previous expansions of
the $1 Strike Program, the Commission
has approved proposals from the
options exchanges that employ a $1
Strike Program in lockstep.
With regard to the impact of this
proposal on system capacity, ISE has
analyzed its capacity and represents that
it and OPRA have the necessary systems
capacity to handle the potential
additional traffic associated with the
listing and trading of an expanded
number of series in the $1 Strike
Program.
The Exchange believes that the $1
Strike Program has provided investors
with greater trading opportunities and
flexibility and the ability to more
closely tailor their investment and risk
management strategies and decisions to
the movement of the underlying
security. Furthermore, the Exchange has
not detected any material proliferation
of illiquid options series resulting from
the narrower strike price intervals. For
these reasons, the Exchange requests an
expansion of the current $1 Strike
Program and the opportunity to provide
investors with additional strikes for
investment, trading, and risk
management purposes.
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
thereunder and, in particular, the
requirements of section 6(b) 10 of the
Act. Specifically, the Exchange believes
the proposed rule change is consistent
with Section 6(b)(5) 11 requirements that
the rules of an exchange be designed to
promote just and equitable principles of
trade, to prevent fraudulent and
manipulative acts, to remove
impediments to and perfect the
mechanism for a free and open market
and a national market system, and, in
general, to protect investors and the
public interest. The Exchange believes
that expanding the current $1 Strike
9 See Securities Exchange Act Release No. 62151
(May 21, 2010), 75 FR 30078 (May 28, 2010) (SR–
Phlx–2010–72).
10 15 U.S.C. 78f(b).
11 15 U.S.C. 78f(b)(5).
PO 00000
Frm 00106
Fmt 4703
Sfmt 4703
Program will result in a continuing
benefit to investors by giving them more
flexibility to closely tailor their
investment decisions in greater number
of securities.
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
Because the foregoing proposed rule
change does not significantly affect the
protection of investors or the public
interest, does not impose any significant
burden on competition, and, by its
terms, does not 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 12 and Rule
19b–4(f)(6) thereunder.13
The Exchange has requested that the
Commission waive the 30-day operative
delay. The Commission believes that
waiver of the operative delay is
consistent with the protection of
investors and the public interest
because the proposal is substantially
similar to a rule of another exchange
that has been approved by the
Commission.14 Therefore, the
Commission designates the proposal
operative upon filing.15
At any time within 60 days of the
filing of the proposed rule change, the
12 15
U.S.C. 78s(b)(3)(A).
C.F.R. 240.19b–4(f)(6). 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 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.
14 See Securities Exchange Act Release No. 62420
(June 30, 2010) (SR–Phlx–2010–72) (order
approving expansion of $1 Strike Program to 150
classes).
15 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).
13 17
E:\FR\FM\09JYN1.SGM
09JYN1
Federal Register / Vol. 75, No. 131 / Friday, July 9, 2010 / Notices
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:
wwoods2 on DSK1DXX6B1PROD with NOTICES_PART 1
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–ISE–2010–64 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–2010–64. 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 Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street, NE.,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. All comments received will
be posted without change; the
Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–ISE–
VerDate Mar<15>2010
15:17 Jul 08, 2010
Jkt 220001
2010–64 and should be submitted on or
before July 30, 2010.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010–16748 Filed 7–8–10; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–62437; File No. SR–EDGX–
2010–06]
Self-Regulatory Organizations; EDGX
Exchange, Inc.; Notice of Filing of
Proposed Rule Change To Amend
EDGX Fee Schedule To Impose Fees
for Physical Ports Used To Connect to
EDGX Exchange
July 1, 2010.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (‘‘Act’’
or ‘‘Exchange Act’’) 1 and Rule 19b–4
thereunder,2 notice is hereby given that
on July 1, 2010, EDGX Exchange, Inc.
(‘‘EDGX’’ or ‘‘Exchange’’) 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
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 its
fee schedule applicable to Members 3
and non-members of the Exchange
pursuant to EDGX Rule 15.1(a) and (c).
Pursuant to the proposed rule change,
the Exchange will commence charging
fees for Members and non-members for
certain physical ports used to connect to
the Exchange’s systems. The Exchange
intends to implement this rule proposal
effective upon Securities and Exchange
Commission (‘‘Commission’’) approval.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://www.directedge.com, on the
Commission’s Web site at https://
www.sec.gov, at the principal office of
the Exchange, and at the Commission’s
Public Reference Room.
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 A Member is any registered broker or dealer that
has been admitted to membership in the Exchange.
PO 00000
16 17
1 15
Frm 00107
Fmt 4703
Sfmt 4703
39599
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 purpose of the proposed rule
change is to begin charging an annual
fee to Members and non-members for
physical ports used to connect to the
Exchange’s systems for purposes
including order entry and the receipt of
Exchange data. A physical port is a port
used by a Member or non-member 4 to
connect into the Exchange at the data
centers where Exchange servers are
located. Physical port connections can
occur either through an external
telecommunication circuit or a crossconnection. Currently, Members and
non-members have a number of
alternative methods available to them
for connecting to the Exchange without
the need to obtain an independent
physical connection, including the use
of financial extranets or service bureaus.
However, some Members and nonmembers may wish to connect directly
with their own dedicated circuit
connection. In order to support their
requirements and the associated
infrastructure costs related to direct
circuit connectivity, EDGX proposes to
charge Members and non-members the
following annual fees based on the
connectivity service type:
Connection
service type
1 Gb Copper ...................
1 Gb Fiber ......................
10 Gb Fiber ....................
Annual fee per
physical port
$5,000
7,500
10,000
Only one physical port is required to
access all services for EDGX. However,
Members and non-members may choose
more than one physical port and
4 Non-members can include non-member service
bureaus that act as a conduit for orders entered by
Exchange Members that are their customers as well
as sponsored participants and market data
recipients.
E:\FR\FM\09JYN1.SGM
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Agencies
[Federal Register Volume 75, Number 131 (Friday, July 9, 2010)]
[Notices]
[Pages 39597-39599]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-16748]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62442; File No. SR-ISE-2010-64]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change To Expand Its $1 Strike Program
July 2, 2010.
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 June 24, 2010, 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 Exchange. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The ISE proposes to expand the $1 Strike Program. 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, on the
Commission's Web site at https://www.sec.gov, 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 this proposed rule change is to expand the $1 Strike
Program.\3\ The $1 Strike Program currently allows ISE to select a
total of 55 individual stocks on which option series may be listed at
$1 strike price intervals. In order to be eligible for selection into
the $1 Strike Program, the underlying stock must close below $50 in its
primary market on the previous trading day. If selected for the $1
Strike Program, the Exchange may list strike prices at $1 intervals
from $1 to $50, but no $1 strike price may be listed that is greater
than $5 from the underlying stock's closing price in its primary market
on the previous day. The Exchange may also list $1 strikes on any other
option class designated by another securities exchange that employs a
similar $1 Strike Program under their respective rules. The Exchange
may not list long-term option series (``LEAPS'') \4\ at $1 strike price
intervals for any class selected for the $1 Strike Program, except as
specified in subparagraph (c) to Supplementary Material .01 to Rule
504.\5\ The Exchange is also restricted from listing series with $1
intervals within $0.50 of an existing strike price in the same series,
except that strike
[[Page 39598]]
prices of $2, $3, and $4 shall be permitted within $0.50 of an existing
strike price for classes also selected to participate in the $0.50
Strike Program.\6\
---------------------------------------------------------------------------
\3\ The Commission approved the $1 Strike Program as a pilot on
June 16, 2003. See Securities Exchange Act Release No. 48033 (June
16, 2003), 68 FR 37036 (June 20, 2003) (SR-ISE-2003-17). The $1
Strike Program was subsequently extended through June 5, 2008. See
Exchange Act Release Nos. 49827 (June 8, 2004), 69 FR 33966 (June
17, 2004) (SR-ISE-2004-21); 50060 (July 22, 2004), 69 FR 45864 (July
30, 2004) (SR-ISE-2004-26); 51769 (May 31, 2005), 70 FR 33232 (June
7, 2005) (SR-ISE-2005-22); 53806 (May 15, 2006), 71 FR 29694 (SR-
ISE-2006-20); and 55715 (May 7, 2007), 72 FR 26854 (May 11, 2007)
(SR-ISE-2007-26). The $1 Strike Program was subsequently expanded
and permanently approved in 2008. See Securities Exchange Act
Release No. 57169 (January 18, 2008), 73 FR 4654 (January 25, 2008)
(SR-ISE-2007-110). The $1 Strike Program was last expanded in 2009.
See Securities Exchange Act Release No. 59587 (March 17, 2009), 74
FR 12414 (March 24, 2009) (SR-ISE-2009-04).
\4\ LEAPS are long-term options that generally have up to
thirty-nine months from the time they are listed until expiration.
See Rule 506, Long-Term Options Contracts.
\5\ Supplementary Material .01(c) to Rule 504 states that the
Exchange may list $1 strike prices up to $5 in LEAPS in up to 200
option classes in individual stocks. See Securities Exchange Act
Release No. 61102 (December 3, 2009), 74 FR 65191 (December 9, 2009)
(SR-ISE-2009-102).
\6\ Regarding the $0.50 Strike Program, which allows $0.50
strike price intervals for options on stocks trading at or below
$3.00, see Supplementary Material .05 to Rule 504 and Securities
Exchange Act Release No. 60696 (September 18, 2009), 74 FR 49053
(September 25, 2009) (SR-ISE-2009-65). See also Securities Exchange
Act Release No. 61737 (March 18, 2010), 75 FR 14225 (March 24, 2010)
(SR-ISE-2010-22) (allowing concurrent listing of $3.50 and $4
strikes for classes that participate in both the $0.50 Strike
Program and the $1 Strike Program).
---------------------------------------------------------------------------
The Exchange now proposes to expand the $1 Strike Program to allow
ISE to select a total of 150 individual stocks on which option series
may be listed at $1 strike price intervals. The existing restrictions
on listing $1 strikes would continue, i.e., no $1 strike price may be
listed that is greater than $5 from the underlying stock's closing
price in its primary market on the previous day, and ISE is restricted
from listing any series that would result in strike prices being $0.50
apart (unless an option class is selected to participate in both the $1
Strike Program and the $0.50 Strike Program).
As stated in the Commission order that initially approved ISE's
Program and in subsequent extensions and expansions of the $1 Strike
Program,\7\ ISE believes that $1 strike price intervals provide
investors with greater flexibility in the trading of equity options
that overlie lower price stocks by allowing investors to establish
equity options positions that are better tailored to meet their
investment objectives.
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\7\ See supra note 3.
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During the time that the $1 Strike Program was a pilot, the
Exchange submitted three pilot reports to the Commission in which the
Exchange discussed, among other things, the strength and efficacy of
the Program based upon the steady increase in volume and open interest
of options traded on the Exchange at $1 strike price intervals; and
that the Program had not and, in the future, should not create capacity
problems for ISE or the Options Price Reporting Authority (``OPRA'')
systems.\8\ This has not changed. Moreover, the number of $1 strike
options traded on the Exchange has continued to increase since the
inception of the $1 Strike Program such that these options are now
among some of the most popular products traded on the Exchange.
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\8\ See Exchange Act Release Nos. 49827 (June 8, 2004), 69 FR
33966 (June 17, 2004) (SR-ISE-2004-21); 50060 (July 22, 2004), 69 FR
45864 (July 30, 2004) (SR-ISE-2004-26); 51769 (May 31, 2005), 70 FR
33232 (June 7, 2005) (SR-ISE-2005-22); 53806 (May 15, 2006), 71 FR
29694 (SR-ISE-2006-20); and 55715 (May 7, 2007), 72 FR 26854 (May
11, 2007) (SR-ISE-2007-26).
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The Exchange believes that market conditions have led to an
increase in the number of securities trading below $50 warranting the
proposed expansion of the $1 Strike Program. In addition, the Exchange
notes that this filing is based on a filing previously submitted by
NASDAQ OMX PHLX, Inc (``PHLX'') that the Commission recently
noticed.\9\ With regard to previous expansions of the $1 Strike
Program, the Commission has approved proposals from the options
exchanges that employ a $1 Strike Program in lockstep.
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\9\ See Securities Exchange Act Release No. 62151 (May 21,
2010), 75 FR 30078 (May 28, 2010) (SR-Phlx-2010-72).
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With regard to the impact of this proposal on system capacity, ISE
has analyzed its capacity and represents that it and OPRA have the
necessary systems capacity to handle the potential additional traffic
associated with the listing and trading of an expanded number of series
in the $1 Strike Program.
The Exchange believes that the $1 Strike Program has provided
investors with greater trading opportunities and flexibility and the
ability to more closely tailor their investment and risk management
strategies and decisions to the movement of the underlying security.
Furthermore, the Exchange has not detected any material proliferation
of illiquid options series resulting from the narrower strike price
intervals. For these reasons, the Exchange requests an expansion of the
current $1 Strike Program and the opportunity to provide investors with
additional strikes for investment, trading, and risk management
purposes.
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 thereunder and, in particular, the requirements of section
6(b) \10\ of the Act. Specifically, the Exchange believes the proposed
rule change is consistent with Section 6(b)(5) \11\ requirements that
the rules of an exchange be designed to promote just and equitable
principles of trade, to prevent fraudulent and manipulative acts, to
remove impediments to and perfect the mechanism for a free and open
market and a national market system, and, in general, to protect
investors and the public interest. The Exchange believes that expanding
the current $1 Strike Program will result in a continuing benefit to
investors by giving them more flexibility to closely tailor their
investment decisions in greater number of securities.
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\10\ 15 U.S.C. 78f(b).
\11\ 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
Because the foregoing proposed rule change does not significantly
affect the protection of investors or the public interest, does not
impose any significant burden on competition, and, by its terms, does
not 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 \12\ and Rule 19b-
4(f)(6) thereunder.\13\
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 C.F.R. 240.19b-4(f)(6). 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 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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The Exchange has requested that the Commission waive the 30-day
operative delay. The Commission believes that waiver of the operative
delay is consistent with the protection of investors and the public
interest because the proposal is substantially similar to a rule of
another exchange that has been approved by the Commission.\14\
Therefore, the Commission designates the proposal operative upon
filing.\15\
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\14\ See Securities Exchange Act Release No. 62420 (June 30,
2010) (SR-Phlx-2010-72) (order approving expansion of $1 Strike
Program to 150 classes).
\15\ 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).
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At any time within 60 days of the filing of the proposed rule
change, the
[[Page 39599]]
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-2010-64 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-2010-64. 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 Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street, NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-ISE-2010-64 and should be
submitted on or before July 30, 2010.
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\16\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010-16748 Filed 7-8-10; 8:45 am]
BILLING CODE 8010-01-P