Self-Regulatory Organizations; International Securities Exchange, LLC; Order Approving a Proposed Rule Change Relating to Legging Orders, 4852-4853 [2012-1986]

Download as PDF 4852 Federal Register / Vol. 77, No. 20 / Tuesday, January 31, 2012 / Notices SECURITIES AND EXCHANGE COMMISSION [Release No. 34–66234; File No. SR–ISE– 2011–82] Self-Regulatory Organizations; International Securities Exchange, LLC; Order Approving a Proposed Rule Change Relating to Legging Orders January 25, 2012. I. Introduction On November 29, 2011, the International Securities Exchange, LLC (the ‘‘Exchange’’ or ‘‘ISE’’) filed with the Securities and Exchange Commission (the ‘‘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 to amend ISE Rule 715, ‘‘Types of Orders,’’ to add a new order type, the legging order. The proposed rule change was published for comment in the Federal Register on December 12, 2011.3 The Commission received no comment letters regarding the proposed rule change. This order approves the proposed rule change. wreier-aviles on DSK5TPTVN1PROD with NOTICES II. Description A complex order resting on ISE’s complex order book may be executed either by: (i) Trading against an incoming complex order that is marketable against the resting complex order, or (ii) legging into the market when the net price of the complex order can be satisfied by executing all of the legs of the complex order against the best bids or offers on ISE for the individual options series. ISE’s new order type, the legging order, is designed to increase the opportunities for a complex order resting on ISE’s complex order book to leg into the market.4 Under the proposal, a legging order may be generated automatically on behalf of one leg of a complex order resting on ISE’s complex order book at a price: (i) That matches or improves the best displayed bid or offer on ISE’s regular limit order book; and (ii) at which the net price of the complex order can be achieved when the other leg of the complex order executes against the best displayed bid or offer on 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 65900 (December 6, 2011), 76 FR 77275 (‘‘Notice’’). 4 Legging orders will not be generated for market maker quotes on the complex order book because market maker quotes cannot leg into the market. See ISE Rule 722, Supplementary Material .03. 2 17 VerDate Mar<15>2010 15:20 Jan 30, 2012 Jkt 226001 ISE’s regular limit order book.5 When a legging order representing one leg of the complex order is executed, the other leg of the complex order will execute automatically against ISE’s displayed best bid or offer.6 A legging order will be removed automatically from ISE’s regular limit order book if: (i) The price of the legging order is no longer at the displayed best bid or offer on the Exchange’s regular limit order book; (ii) execution of the legging order would no longer achieve the net price of the complex order when the other leg is executed against the best displayed bid or offer on the regular limit order book; (iii) the complex order is executed in full or in part against another complex order on the complex order book; or (iv) the complex order is cancelled or modified.7 Legging orders are firm orders that will be included in ISE’s displayed best bid or offer.8 A legging order will be executed only after all other executable orders (including any non-displayed size) and quotes at the same price are executed in full.9 Accordingly, ISE notes that the generation of a legging order will not affect the existing priority, or execution opportunities, currently provided to participants in the regular market.10 The proposal limits the circumstances under which a legging order may be generated. A legging order may be generated only on behalf of a two-legged complex that has an equal number of contracts on both legs, and a legging order will not be created at a price that would lock or cross the best bid or offer of another exchange.11 There can be only one legging order to buy in a series.12 In addition to these limitations, ISE states that it will carefully manage and curtail the number of legging orders being generated so that they do not negatively impact system capacity and performance.13 Accordingly, legging orders may not be generated for all eligible complex orders resting on the complex order book.14 ISE represents that it will curtail the number of legging orders on an objective basis, such as by limiting the number of orders generated in a particular class.15 ISE represents, further, that it will not limit the generation of legging orders on the basis of the entering participant or the participant category of the order (i.e., professional, professional customer, or public customer).16 The following example illustrates the operation of legging orders: A complex order to buy 10 series 1 (S1) and 10 series 2 (S2) at a net price of $2.25 (buy S1/S2 10 @ $2.25) is entered into the complex order book and there is no offsetting complex order to sell. The complex order cannot leg into the regular market because the BBO net price available for the complex order on ISE’s regular order book is $2.40, as follows: ISE Bid S1 S2 10 @ $1.00 10 @ $1.00 ISE Rule 715(k)(1). 6 See ISE Rule 715(k)(2). 7 See ISE Rule 715(k)(3). 8 See ISE Rule 715(k). 9 See ISE Rule 715(k)(2). 10 See Notice, 76 FR at 77276. 11 See ISE Rule 715(k) and (k)(1). 12 See Notice, 76 FR at 77276. 13 See id. 14 See id. 15 See Notice, 76 FR at 77276, footnote 6. PO 00000 Frm 00096 Fmt 4703 Sfmt 4703 20 @ $1.20 20 @ $1.20 (buy S1 @ $1.20 + buy S2 @ $1.20 = $2.40 net) Legging orders to buy 10 S1 @ $1.05 and 10 S2 @ $1.05 may be generated automatically, improving ISE’s best bid for both S1 and S2 to $1.05: ISE Bid S1 10 @ $1.05 (legging order) S2 10 @ $1.05 (legging order) ISE Offer 20 @ $1.20 20 @ $1.20 If ISE receives a marketable order to sell 10 S1, it would execute against the legging order to buy S1 at $1.05, the other leg of the complex order would execute automatically against the displayed offer of $1.20 for S2, and the legging order to buy S2 at $1.05 would be cancelled automatically. This would achieve the net price of $2.25 for the complex order (buy S1 @ $1.05 + buy S2 @ $1.20 = $2.25 net).17 ISE notes that, in this example, the legging order enabled the execution of the complex order at a net price of $2.25 and enhanced the execution of the interest in the leg market because (i) the incoming marketable order to sell S1 received a better price ($1.05 instead of $1.00), and (ii) the complex order provided liquidity to execute the resting leg market interest to sell S2 at $1.20.18 16 See 5 See ISE Offer id. ISE received a marketable order to sell 10 S2, it would execute against the legging order to buy S2 at $1.05, the other leg of the complex order would execute automatically against the displayed offer of $1.20 for S1, and the legging order to buy S1 at $1.05 would be cancelled automatically. This would achieve the net price of $2.25 for the complex order (buy S1 @ $1.20 + buy S2 @ $1.05 = $2.25 net). For additional examples regarding the operation of legging orders, see Notice, 76 FR at 77275–77276. 18 See Notice, 76 FR at 77276. 17 If E:\FR\FM\31JAN1.SGM 31JAN1 Federal Register / Vol. 77, No. 20 / Tuesday, January 31, 2012 / Notices wreier-aviles on DSK5TPTVN1PROD with NOTICES 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.19 In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act,20 which requires, among other things, 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 believes that the proposed rule change could facilitate the execution of complex orders resting on ISE’s complex order book by increasing the opportunities for these orders to execute against interest in the leg market, thereby benefitting investors seeking to execute complex orders. In addition, the Commission believes that the proposal could benefit participants in the leg market by providing additional liquidity, and potentially more favorable executions, for orders and quotes in the leg market. A legging order is a firm order that will be included in ISE’s displayed best bid or offer.21 In addition, a legging order will not be created at a price that would lock or cross the best bid or offer of another exchange.22 The Commission notes that a legging order will be executed only after all other executable orders (including any non-displayed size) and quotes at the same price are executed in full.23 Accordingly, ISE states that legging orders will not affect the existing priority, or execution opportunities, of participants in the leg market.24 As noted above, ISE represents that it will carefully manage and curtail the number of legging orders being generated so that they do not negatively impact system capacity and performance.25 ISE represents, further, that it will curtail the number of legging orders on an objective basis, such as by limiting the number of orders generated 19 In approving this 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). 20 15 U.S.C. 78f(b)(5). 21 See ISE Rule 715(k). 22 See ISE Rule 715(k)(1). 23 See ISE Rule 715(k)(2). 24 See Notice, 76 FR at 77276. 25 See id. VerDate Mar<15>2010 15:20 Jan 30, 2012 Jkt 226001 in a particular class, and that it will not limit the generation of legging orders on the basis of the entering participant or the participant category of the order (i.e., professional, professional customer, or public customer).26 IV. Conclusion 4853 27, 2012, through 11:59 p.m. EST on February 9, 2012. By the Commission. Elizabeth M. Murphy, Secretary. [FR Doc. 2012–2161 Filed 1–27–12; 4:15 pm] BILLING CODE 8011–01–P It is therefore ordered, pursuant to Section 19(b)(2) of the Act,27 that the proposed rule change (SR–ISE–2011–82) is approved. SECURITIES AND EXCHANGE COMMISSION For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.28 Kevin M. O’Neill, Deputy Secretary. [File No. 500–1] [FR Doc. 2012–1986 Filed 1–30–12; 8:45 am] It appears to the Securities and Exchange Commission that there is a lack of current and accurate information concerning the securities of Onyx Service & Solutions, Inc. (‘‘ONYX’’) because of questions regarding the accuracy of assertions by ONYX in press releases concerning, among other things, the company’s business projects and prospects. The Commission is of the opinion that the public interest and the protection of investors require a suspension of trading in the securities of the above-listed company. Therefore, it is ordered, pursuant to Section 12(k) of the Securities Exchange Act of 1934, that trading in the securities of the above-listed company is suspended for the period from 9:30 a.m. EST, on January 27, 2012 through 11:59 p.m. EST, on February 9, 2012. BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [File No. 500–1] In the Matter of Airbee Wireless, Inc., Axial Vector Engine Corp. (n/k/a Avec Corporation), and Exploration Drilling International, Inc.; Order of Suspension of Trading January 27, 2012. It appears to the Securities and Exchange Commission that there is a lack of current and accurate information concerning the securities of Airbee Wireless, Inc. because it has not filed any periodic reports since the period ended September 30, 2008. It appears to the Securities and Exchange Commission that there is a lack of current and accurate information concerning the securities of Axial Vector Engine Corp. (n/k/a Avec Corporation) because it has not filed any periodic reports since the period ended March 31, 2007. It appears to the Securities and Exchange Commission that there is a lack of current and accurate information concerning the securities of Exploration Drilling International, Inc. because it has not filed any periodic reports since the period ended September 30, 2008. The Commission is of the opinion that the public interest and the protection of investors require a suspension of trading in the securities of the above-listed companies. Therefore, it is ordered, pursuant to Section 12(k) of the Securities Exchange Act of 1934, that trading in the securities of the abovelisted companies is suspended for the period from 9:30 a.m. EST on January 26 See id. U.S.C. 78s(b)(2). 28 17 CFR 200.30–3(a)(12). 27 15 PO 00000 Frm 00097 Fmt 4703 Sfmt 4703 Onyx Service & Solutions, Inc.; Order of Suspension of Trading January 27, 2012. By the Commission. Elizabeth M. Murphy, Secretary. [FR Doc. 2012–2160 Filed 1–27–12; 4:15 pm] BILLING CODE 8011–01–P SMALL BUSINESS ADMINISTRATION [Disaster Declaration #12990 and #12991] North Carolina Disaster #NC–00041 U.S. Small Business Administration. ACTION: Notice. AGENCY: This is a notice of an Administrative declaration of a disaster for the State of NORTH CAROLINA dated 01/19/2012. Incident: Tornadoes, High Wind and Severe Weather. Incident Period: 01/11/2012. Effective Date: 01/19/2012. Physical Loan Application Deadline Date: 03/19/2012. Economic Injury (EIDL) Loan Application Deadline Date: 10/19/2012. SUMMARY: E:\FR\FM\31JAN1.SGM 31JAN1

Agencies

[Federal Register Volume 77, Number 20 (Tuesday, January 31, 2012)]
[Notices]
[Pages 4852-4853]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-1986]



[[Page 4852]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66234; File No. SR-ISE-2011-82]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Order Approving a Proposed Rule Change Relating to Legging Orders

January 25, 2012.

I. Introduction

    On November 29, 2011, the International Securities Exchange, LLC 
(the ``Exchange'' or ``ISE'') filed with the Securities and Exchange 
Commission (the ``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 to amend ISE Rule 715, ``Types of 
Orders,'' to add a new order type, the legging order. The proposed rule 
change was published for comment in the Federal Register on December 
12, 2011.\3\ The Commission received no comment letters regarding the 
proposed rule change. 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. 65900 (December 6, 
2011), 76 FR 77275 (``Notice'').
---------------------------------------------------------------------------

II. Description

    A complex order resting on ISE's complex order book may be executed 
either by: (i) Trading against an incoming complex order that is 
marketable against the resting complex order, or (ii) legging into the 
market when the net price of the complex order can be satisfied by 
executing all of the legs of the complex order against the best bids or 
offers on ISE for the individual options series. ISE's new order type, 
the legging order, is designed to increase the opportunities for a 
complex order resting on ISE's complex order book to leg into the 
market.\4\
---------------------------------------------------------------------------

    \4\ Legging orders will not be generated for market maker quotes 
on the complex order book because market maker quotes cannot leg 
into the market. See ISE Rule 722, Supplementary Material .03.
---------------------------------------------------------------------------

    Under the proposal, a legging order may be generated automatically 
on behalf of one leg of a complex order resting on ISE's complex order 
book at a price: (i) That matches or improves the best displayed bid or 
offer on ISE's regular limit order book; and (ii) at which the net 
price of the complex order can be achieved when the other leg of the 
complex order executes against the best displayed bid or offer on ISE's 
regular limit order book.\5\ When a legging order representing one leg 
of the complex order is executed, the other leg of the complex order 
will execute automatically against ISE's displayed best bid or 
offer.\6\
---------------------------------------------------------------------------

    \5\ See ISE Rule 715(k)(1).
    \6\ See ISE Rule 715(k)(2).
---------------------------------------------------------------------------

    A legging order will be removed automatically from ISE's regular 
limit order book if: (i) The price of the legging order is no longer at 
the displayed best bid or offer on the Exchange's regular limit order 
book; (ii) execution of the legging order would no longer achieve the 
net price of the complex order when the other leg is executed against 
the best displayed bid or offer on the regular limit order book; (iii) 
the complex order is executed in full or in part against another 
complex order on the complex order book; or (iv) the complex order is 
cancelled or modified.\7\
---------------------------------------------------------------------------

    \7\ See ISE Rule 715(k)(3).
---------------------------------------------------------------------------

    Legging orders are firm orders that will be included in ISE's 
displayed best bid or offer.\8\ A legging order will be executed only 
after all other executable orders (including any non-displayed size) 
and quotes at the same price are executed in full.\9\ Accordingly, ISE 
notes that the generation of a legging order will not affect the 
existing priority, or execution opportunities, currently provided to 
participants in the regular market.\10\
---------------------------------------------------------------------------

    \8\ See ISE Rule 715(k).
    \9\ See ISE Rule 715(k)(2).
    \10\ See Notice, 76 FR at 77276.
---------------------------------------------------------------------------

    The proposal limits the circumstances under which a legging order 
may be generated. A legging order may be generated only on behalf of a 
two-legged complex that has an equal number of contracts on both legs, 
and a legging order will not be created at a price that would lock or 
cross the best bid or offer of another exchange.\11\ There can be only 
one legging order to buy in a series.\12\
---------------------------------------------------------------------------

    \11\ See ISE Rule 715(k) and (k)(1).
    \12\ See Notice, 76 FR at 77276.
---------------------------------------------------------------------------

    In addition to these limitations, ISE states that it will carefully 
manage and curtail the number of legging orders being generated so that 
they do not negatively impact system capacity and performance.\13\ 
Accordingly, legging orders may not be generated for all eligible 
complex orders resting on the complex order book.\14\ ISE represents 
that it will curtail the number of legging orders on an objective 
basis, such as by limiting the number of orders generated in a 
particular class.\15\ ISE represents, further, that it will not limit 
the generation of legging orders on the basis of the entering 
participant or the participant category of the order (i.e., 
professional, professional customer, or public customer).\16\
---------------------------------------------------------------------------

    \13\ See id.
    \14\ See id.
    \15\ See Notice, 76 FR at 77276, footnote 6.
    \16\ See id.
---------------------------------------------------------------------------

    The following example illustrates the operation of legging orders:

    A complex order to buy 10 series 1 (S1) and 10 series 2 (S2) at 
a net price of $2.25 (buy S1/S2 10 @ $2.25) is entered into the 
complex order book and there is no off-setting complex order to 
sell.
    The complex order cannot leg into the regular market because the 
BBO net price available for the complex order on ISE's regular order 
book is $2.40, as follows:

------------------------------------------------------------------------
              ISE Bid                             ISE Offer
------------------------------------------------------------------------
S1 10 @ $1.00                        20 @ $1.20
S2 10 @ $1.00                        20 @ $1.20
------------------------------------------------------------------------

    (buy S1 @ $1.20 + buy S2 @ $1.20 = $2.40 net)
    Legging orders to buy 10 S1 @ $1.05 and 10 S2 @ $1.05 may be 
generated automatically, improving ISE's best bid for both S1 and S2 
to $1.05:

------------------------------------------------------------------------
              ISE Bid                             ISE Offer
------------------------------------------------------------------------
S1 10 @ $1.05                        20 @ $1.20
 (legging order)
S2 10 @ $1.05                        20 @ $1.20
 (legging order)
------------------------------------------------------------------------

    If ISE receives a marketable order to sell 10 S1, it would 
execute against the legging order to buy S1 at $1.05, the other leg 
of the complex order would execute automatically against the 
displayed offer of $1.20 for S2, and the legging order to buy S2 at 
$1.05 would be cancelled automatically. This would achieve the net 
price of $2.25 for the complex order (buy S1 @ $1.05 + buy S2 @ 
$1.20 = $2.25 net).\17\
---------------------------------------------------------------------------

    \17\ If ISE received a marketable order to sell 10 S2, it would 
execute against the legging order to buy S2 at $1.05, the other leg 
of the complex order would execute automatically against the 
displayed offer of $1.20 for S1, and the legging order to buy S1 at 
$1.05 would be cancelled automatically. This would achieve the net 
price of $2.25 for the complex order (buy S1 @ $1.20 + buy S2 @ 
$1.05 = $2.25 net). For additional examples regarding the operation 
of legging orders, see Notice, 76 FR at 77275-77276.

    ISE notes that, in this example, the legging order enabled the 
execution of the complex order at a net price of $2.25 and enhanced the 
execution of the interest in the leg market because (i) the incoming 
marketable order to sell S1 received a better price ($1.05 instead of 
$1.00), and (ii) the complex order provided liquidity to execute the 
resting leg market interest to sell S2 at $1.20.\18\
---------------------------------------------------------------------------

    \18\ See Notice, 76 FR at 77276.

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[[Page 4853]]

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.\19\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act,\20\ which 
requires, among other things, 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.
---------------------------------------------------------------------------

    \19\ In approving this 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).
    \20\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission believes that the proposed rule change could 
facilitate the execution of complex orders resting on ISE's complex 
order book by increasing the opportunities for these orders to execute 
against interest in the leg market, thereby benefitting investors 
seeking to execute complex orders. In addition, the Commission believes 
that the proposal could benefit participants in the leg market by 
providing additional liquidity, and potentially more favorable 
executions, for orders and quotes in the leg market.
    A legging order is a firm order that will be included in ISE's 
displayed best bid or offer.\21\ In addition, a legging order will not 
be created at a price that would lock or cross the best bid or offer of 
another exchange.\22\ The Commission notes that a legging order will be 
executed only after all other executable orders (including any non-
displayed size) and quotes at the same price are executed in full.\23\ 
Accordingly, ISE states that legging orders will not affect the 
existing priority, or execution opportunities, of participants in the 
leg market.\24\
---------------------------------------------------------------------------

    \21\ See ISE Rule 715(k).
    \22\ See ISE Rule 715(k)(1).
    \23\ See ISE Rule 715(k)(2).
    \24\ See Notice, 76 FR at 77276.
---------------------------------------------------------------------------

    As noted above, ISE represents that it will carefully manage and 
curtail the number of legging orders being generated so that they do 
not negatively impact system capacity and performance.\25\ ISE 
represents, further, that it will curtail the number of legging orders 
on an objective basis, such as by limiting the number of orders 
generated in a particular class, and that it will not limit the 
generation of legging orders on the basis of the entering participant 
or the participant category of the order (i.e., professional, 
professional customer, or public customer).\26\
---------------------------------------------------------------------------

    \25\ See id.
    \26\ See id.
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\27\ that the proposed rule change (SR-ISE-2011-82) is approved.
---------------------------------------------------------------------------

    \27\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
---------------------------------------------------------------------------

    \28\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-1986 Filed 1-30-12; 8:45 am]
BILLING CODE 8011-01-P
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