Self-Regulatory Organizations; International Securities Exchange, LLC; Order Approving a Proposed Rule Change Relating to Procedures for Executing the Stock Leg(s) of Stock-Option Orders, 26590-26591 [2012-10753]
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Federal Register / Vol. 77, No. 87 / Friday, May 4, 2012 / Notices
printing in the Commission’s Public
Reference Room on official business
days between the hours of 10:00 a.m.
and 3:00 p.m. Copies of such filing will
also be available for inspection and
copying at the principal offices 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–BX–
2012–028 and should be submitted on
or before May 25, 2012.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.8
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–10752 Filed 5–3–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–66880; File No. SR–ISE–
2012–16]
Self-Regulatory Organizations;
International Securities Exchange,
LLC; Order Approving a Proposed
Rule Change Relating to Procedures
for Executing the Stock Leg(s) of
Stock-Option Orders
April 30, 2012.
erowe on DSK2VPTVN1PROD with NOTICES
I. Introduction
On February 29, 2012, the
International Securities Exchange, LLC
(‘‘Exchange’’ or ‘‘ISE’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
amend ISE Rule 722, ‘‘Complex
Orders,’’ to modify its procedures for
executing the stock leg(s) of stockoption orders. The proposed rule change
was published for comment in the
Federal Register on March 19, 2012.3
The Commission received no comment
letters regarding the proposed rule
change. This order approves the
proposed rule change.
II. Description of the Proposal
Currently, ISE Rule 722,
Supplementary Material .02 allows ISE
members to elect to have ISE
8 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 66582
(March 13, 2012), 77 FR 16106 (‘‘Notice’’).
1 15
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15:20 May 03, 2012
Jkt 226001
electronically transmit the stock leg(s) of
a stock-option transaction to a
designated broker-dealer for execution.
To participate in this automated
process, ISE members must enter into a
brokerage agreement with the
designated broker-dealer.4 Members
must enter into a brokerage agreement
with ISE’s designated broker-dealer to
ensure that there is at least one common
available broker-dealer through which
the matched stock leg(s) of a stockoption transaction may be executed.5
The proposal would allow ISE
members to enter into brokerage
agreements with one or more additional
broker-dealers to which ISE will be able
to route stock orders.6 ISE will
automatically transmit the stock leg(s) of
a stock-option trade on behalf of a
member to one or more broker-dealer(s)
with which the member has an
agreement for execution, using routing
logic that considers objective factors
such as execution cost, speed of
execution, and fill rates.7 Members may
indicate preferred execution brokers,
and these preferences will determine
order routing priority whenever
possible.8 ISE will have no financial
arrangements with the brokers with
respect to routing stock orders to them,9
and ISE receives no fees related to the
stock portion of a stock-option trade.10
As is the case currently, after ISE
routes the stock leg(s) of a stock-option
trade to a broker-dealer for execution,
the broker-dealer will be responsible for
determining whether the orders may be
executed in accordance with applicable
rules, including the Regulation NMS
trade-through rules.11
The proposal eliminates the manual
process for executing the stock leg(s) of
stock-option orders. ISE believes that it
4 ISE members also may choose to execute the
stock leg(s) of a stock-option trade manually, by
transmitting the stock leg(s) to a non-ISE market for
execution.
5 See Notice, 77 FR at 16107. ISE is not able to
execute the stock leg(s) of a stock-option transaction
unless both members on the trade have a brokerage
agreement with the broker-dealer to which the stock
leg(s) are routed. See Notice, 77 FR at footnote 3.
6 See ISE Rule 722, Supplementary Material .02.
7 See id. ISE’s routing logic will route the stock
leg(s) only to a broker-dealer with which a member
has a brokerage agreement. See Notice, 77 FR at
16107.
8 See ISE Rule 722, Supplementary Material .02.
9 See id.
10 See Notice, 77 FR at 16107.
11 See Notice, 77 FR at 16107. See also Securities
Exchange Act Release No. 49251 (February 13,
2004), 69 FR 8252 (February 23, 2004) (File No. SR–
ISE–2003–37) (stating that the designated brokerdealer will be responsible for determining whether
the stock leg(s) of a stock-option transaction may be
executed in accordance with all of the rules
applicable to the execution of equity orders,
including compliance with applicable short sale,
trade-through, and trade reporting rules).
PO 00000
Frm 00104
Fmt 4703
Sfmt 4703
is fair, reasonable, and not
discriminatory to eliminate the manual
procedure for executing the stock leg(s)
of stock option orders because,
according to ISE, there is no demand
from ISE members for the manual
execution alternative.12
III. Discussion and Commission’s
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.13 In particular, the
Commission finds that the proposed
rule change is consistent with Section
6(b)(5) of the Act,14 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
proposal should enhance the processing
of stock-option orders by facilitating the
automated processing of the stock
component of a stock-option
transaction. In addition, the
Commission notes that other options
exchanges have adopted similar
requirements in connection with the
processing of stock-option orders.15
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,16 that the
proposed rule change (SR–ISE–2012–16)
is approved.
12 See
Notice, 77 FR at 16107.
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).
14 15 U.S.C. 78f(b)(5).
15 See C2 Rule 6.13, Interpretation and Policy
.06(a) (requiring Permit Holders to enter into a
brokerage agreement with one or more designated
broker-dealers to participate in stock-option order
automated processing). See also CBOE Rule 6.53C,
Interpretation and Policy .06(a) (requiring Trading
Permit Holders to enter into a brokerage agreement
with one or more designated dealers to participate
in stock-option order automated processing); and
Phlx Rule 1080, Commentary .08(a)(i) (to trade
Complex Orders with a stock/ETF component,
members of FINRA or Nasdaq must have a Uniform
Service Bureau/Executing Broker Agreement with
Nasdaq Options Services LLC (‘‘NOS’’), the
exchange’s designated broker-dealer; firms that are
not members of FINRA or Nasdaq must have a
Qualified Special Representative arrangement with
NOS).
16 15 U.S.C. 78s(b)(2).
17 17 CFR 200.30–3(a)(12).
13 In
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26591
Federal Register / Vol. 77, No. 87 / Friday, May 4, 2012 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–10753 Filed 5–3–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–66883; File No. SR–Phlx–
2012–54]
Self-Regulatory Organizations;
NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Relating to
Complex Order Fees for Removing
Liquidity in Select Symbols
April 30, 2012.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that, on April 23,
2012, NASDAQ OMX PHLX LLC
(‘‘Phlx’’ 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.
Section I of the Exchange’s Pricing
Schedule titled ‘‘Rebates and Fees for
Adding and Removing Liquidity in
Select Symbols,’’ with this filing which
provides additional information
concerning the current Complex Order
Directed Participant and Market Maker
Fees for Removing Liquidity in Select
Symbols. Those fees became effective on
March 1, 2012 pursuant to SR–Phlx–
2012–27, and they will remain in effect,
unchanged by this filing.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://nasdaqtrader.com/
micro.aspx?id=PHLXfilings, 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 these
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 aspects of such
statements.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to replace a
portion of a previously filed rule
change. Specifically, PHLX is replacing
SR–Phlx–2012–27,3 which amended
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
This rule change seeks to replace a
portion of SR–Phlx–2012–27 to provide
Customer
Fee for Removing Liquidity ......................................................................
The Exchange is not amending any of
these prices in this proposal. Rather,
this proposal is intended to justify
further the differential between the fees
paid by different participants that trade
Complex Orders. Specifically, the filing
addresses the Directed Participant
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 66551
(March 9, 2012), 77 FR 15400 (March 15, 2012) (SR–
Phlx–2012–27). This rule proposal amended the
Customer Complex Order Rebate to Add Liquidity,
adopted a new category of Complex Order ‘‘Rebate
to Remove Liquidity,’’ amended various Complex
Order Fees for Removing Liquidity and created a
volume tier for certain market participants that
2 17
erowe on DSK2VPTVN1PROD with NOTICES
additional information concerning the
Directed Participant and Market Maker
Fees for Removing Liquidity in Complex
Orders.4 The Exchange filed SR–Phlx–
2012–27 in order to attract additional
Customer Complex Orders from
competing exchanges because increased
order flow benefits all market
participants and investors that trade on
the Exchange. This filing maintains the
fees adopted in SR–Phlx–2012–27
related to Directed Participants and
Market Makers because the evidence
(set forth below) demonstrates that
while those fees have been in effect,
since March 1, 2012 to the present, the
Exchange has experienced increased
Customer order flow. The Exchange
continues to believe such Customer
order flow will encourage Market
Makers to compete more aggressively to
trade against that order flow.
Specifically, the Exchange amended
certain fees in Section I of the
Exchange’s Pricing Schedule, entitled
‘‘Rebates and Fees for Adding and
Removing Liquidity in Select
Symbols.’’ 5 The Directed Participant
Complex Order Fee for Removing
Liquidity was increased from $0.30 per
contract to $0.32 per contract and the
Market Maker Complex Order Fee for
Removing Liquidity was increased from
$0.32 per contract to $0.37 per contract.
Today, the Complex Order Fees for
Removing Liquidity are as follows:
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$0.00
Directed
participant
$0.32
Market
maker
Firm
$0.37
$0.38
Brokerdealer
$0.38
Professional
$0.38
2. Statutory Basis
Complex Order Fee for Removing
Liquidity, which was increased from
$0.30 per contract to $0.32 per contract,
and the Market Maker Complex Order
Fee for Removing Liquidity, which was
increased from $0.32 per contract to
$0.37 per contract.
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act 6 in general, and furthers the
objectives of Section 6(b)(4) of the Act 7
in particular, in that it is an equitable
transact significant volumes of Complex Orders.
These fees became effective on March 1, 2012. The
Exchange does not intend to amend any pricing
changes that became effective in SR–Phlx–2012–27.
4 A Complex Order is any order involving the
simultaneous purchase and/or sale of two or more
different options series in the same underlying
security, priced at a net debit or credit based on the
relative prices of the individual components, for the
same account, for the purpose of executing a
particular investment strategy. Furthermore, a
Complex Order can also be a stock-option order,
which is an order to buy or sell a stated number
of units of an underlying stock or exchange-traded
fund (‘‘ETF’’) coupled with the purchase or sale of
options contract(s). See Exchange Rule 1080,
Commentary .08(a)(i).
5 The Select Symbols are listed in Section I of the
Pricing Schedule.
6 15 U.S.C. 78f(b).
7 15 U.S.C. 78f(b)(4).
PO 00000
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]]>Agencies
[Federal Register Volume 77, Number 87 (Friday, May 4, 2012)]
[Notices]
[Pages 26590-26591]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-10753]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-66880; File No. SR-ISE-2012-16]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Order Approving a Proposed Rule Change Relating to Procedures for
Executing the Stock Leg(s) of Stock-Option Orders
April 30, 2012.
I. Introduction
On February 29, 2012, the International Securities Exchange, LLC
(``Exchange'' or ``ISE'') filed with the Securities and Exchange
Commission (``Commission''), pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to amend ISE Rule 722, ``Complex
Orders,'' to modify its procedures for executing the stock leg(s) of
stock-option orders. The proposed rule change was published for comment
in the Federal Register on March 19, 2012.\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. 66582 (March 13,
2012), 77 FR 16106 (``Notice'').
---------------------------------------------------------------------------
II. Description of the Proposal
Currently, ISE Rule 722, Supplementary Material .02 allows ISE
members to elect to have ISE electronically transmit the stock leg(s)
of a stock-option transaction to a designated broker-dealer for
execution. To participate in this automated process, ISE members must
enter into a brokerage agreement with the designated broker-dealer.\4\
Members must enter into a brokerage agreement with ISE's designated
broker-dealer to ensure that there is at least one common available
broker-dealer through which the matched stock leg(s) of a stock-option
transaction may be executed.\5\
---------------------------------------------------------------------------
\4\ ISE members also may choose to execute the stock leg(s) of a
stock-option trade manually, by transmitting the stock leg(s) to a
non-ISE market for execution.
\5\ See Notice, 77 FR at 16107. ISE is not able to execute the
stock leg(s) of a stock-option transaction unless both members on
the trade have a brokerage agreement with the broker-dealer to which
the stock leg(s) are routed. See Notice, 77 FR at footnote 3.
---------------------------------------------------------------------------
The proposal would allow ISE members to enter into brokerage
agreements with one or more additional broker-dealers to which ISE will
be able to route stock orders.\6\ ISE will automatically transmit the
stock leg(s) of a stock-option trade on behalf of a member to one or
more broker-dealer(s) with which the member has an agreement for
execution, using routing logic that considers objective factors such as
execution cost, speed of execution, and fill rates.\7\ Members may
indicate preferred execution brokers, and these preferences will
determine order routing priority whenever possible.\8\ ISE will have no
financial arrangements with the brokers with respect to routing stock
orders to them,\9\ and ISE receives no fees related to the stock
portion of a stock-option trade.\10\
---------------------------------------------------------------------------
\6\ See ISE Rule 722, Supplementary Material .02.
\7\ See id. ISE's routing logic will route the stock leg(s) only
to a broker-dealer with which a member has a brokerage agreement.
See Notice, 77 FR at 16107.
\8\ See ISE Rule 722, Supplementary Material .02.
\9\ See id.
\10\ See Notice, 77 FR at 16107.
---------------------------------------------------------------------------
As is the case currently, after ISE routes the stock leg(s) of a
stock-option trade to a broker-dealer for execution, the broker-dealer
will be responsible for determining whether the orders may be executed
in accordance with applicable rules, including the Regulation NMS
trade-through rules.\11\
---------------------------------------------------------------------------
\11\ See Notice, 77 FR at 16107. See also Securities Exchange
Act Release No. 49251 (February 13, 2004), 69 FR 8252 (February 23,
2004) (File No. SR-ISE-2003-37) (stating that the designated broker-
dealer will be responsible for determining whether the stock leg(s)
of a stock-option transaction may be executed in accordance with all
of the rules applicable to the execution of equity orders, including
compliance with applicable short sale, trade-through, and trade
reporting rules).
---------------------------------------------------------------------------
The proposal eliminates the manual process for executing the stock
leg(s) of stock-option orders. ISE believes that it is fair,
reasonable, and not discriminatory to eliminate the manual procedure
for executing the stock leg(s) of stock option orders because,
according to ISE, there is no demand from ISE members for the manual
execution alternative.\12\
---------------------------------------------------------------------------
\12\ See Notice, 77 FR at 16107.
---------------------------------------------------------------------------
III. Discussion and Commission's 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.\13\ In particular, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act,\14\ 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.
---------------------------------------------------------------------------
\13\ 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).
\14\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Commission believes that the proposal should enhance the
processing of stock-option orders by facilitating the automated
processing of the stock component of a stock-option transaction. In
addition, the Commission notes that other options exchanges have
adopted similar requirements in connection with the processing of
stock-option orders.\15\
---------------------------------------------------------------------------
\15\ See C2 Rule 6.13, Interpretation and Policy .06(a)
(requiring Permit Holders to enter into a brokerage agreement with
one or more designated broker-dealers to participate in stock-option
order automated processing). See also CBOE Rule 6.53C,
Interpretation and Policy .06(a) (requiring Trading Permit Holders
to enter into a brokerage agreement with one or more designated
dealers to participate in stock-option order automated processing);
and Phlx Rule 1080, Commentary .08(a)(i) (to trade Complex Orders
with a stock/ETF component, members of FINRA or Nasdaq must have a
Uniform Service Bureau/Executing Broker Agreement with Nasdaq
Options Services LLC (``NOS''), the exchange's designated broker-
dealer; firms that are not members of FINRA or Nasdaq must have a
Qualified Special Representative arrangement with NOS).
---------------------------------------------------------------------------
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\16\ that the proposed rule change (SR-ISE-2012-16) is approved.
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78s(b)(2).
\17\ 17 CFR 200.30-3(a)(12).
[[Page 26591]]
---------------------------------------------------------------------------
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-10753 Filed 5-3-12; 8:45 am]
BILLING CODE 8011-01-P
