Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Address the Treatment of Certain Stop Orders During a Limit State or Straddle State, 69923-69925 [2013-27899]
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Federal Register / Vol. 78, No. 225 / Thursday, November 21, 2013 / Notices
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:
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
TOPAZ–2013–11 on the subject line.
Paper Comments
tkelley on DSK3SPTVN1PROD with NOTICES
• 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–TOPAZ–2013–11. This file
number should be included on the
subject line if email 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 20549–1090, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for
inspection and copying at the principal
offices of Topaz. 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–
TOPAZ–2013–11, and should be
submitted on or before December 12,
2013.
17:17 Nov 20, 2013
[FR Doc. 2013–27900 Filed 11–20–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
VerDate Mar<15>2010
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Kevin M. O’Neill,
Deputy Secretary.
Jkt 232001
[Release No. 34–70884; File No. SR–ISE–
2013–59]
Self-Regulatory Organizations;
International Securities Exchange,
LLC; Notice of Filing and Immediate
Effectiveness of Proposed Rule
Change To Address the Treatment of
Certain Stop Orders During a Limit
State or Straddle State
November 15, 2013.
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 November
7, 2013, the International Securities
Exchange, LLC (the ‘‘Exchange’’ or the
‘‘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 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 the Substance
of the Proposed Rule Change
The Exchange proposes to amend its
rules to address how certain stop orders
are handled during a Limit State or
Straddle State.
The text of the proposed rule change
is available on the Exchange’s Internet
Web site at 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 these
statements may be examined at the
places specified in Item IV below. The
16 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
PO 00000
Frm 00110
Fmt 4703
Sfmt 4703
69923
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 amend Exchange rules to
address how stop orders are handled
during a Limit State 3 or Straddle State.4
On May 31, 2012, the Commission
approved the Plan to Address
Extraordinary Market Volatility (the
‘‘Plan’’),5 which establishes procedures
to address extraordinary volatility in
NMS Stocks. The procedures provide
for market-wide limit up-limit down
requirements that prevent trades in
individual NMS Stocks from occurring
outside of specified Price Bands. These
limit up-limit down requirements are
coupled with Trading Pauses to
accommodate more fundamental price
moves. The Plan procedures are
designed, among other things, to protect
investors and promote fair and orderly
markets.6 The Plan has been
implemented, as a one year pilot
program, in two phases.7 Phase I of the
Plan became effective on April 18, 2013
and applies to Tier I NMS Stocks per
Appendix A of the Plan, with Phase II,
which would apply to all NMS Stocks,
scheduled to become effective six
months later.
ISE is not a participant in the Plan
because it does not trade NMS Stocks.
However, the ISE trades options
contracts overlying NMS Stocks.
Because options pricing models are
highly dependent on the price of the
underlying security and the ability of
options traders to effect hedging
transactions in the underlying security,
the implementation of the Plan impacts
the trading of options classes traded on
the Exchange.
When the national best bid (offer) for
a security underlying an options class is
3 Limit State means the condition when the
national best bid or national best offer for an
underlying security equals an applicable price
band, as determined by the primary listing
exchange for the underlying security. See ISE Rule
703A(a)(2).
4 Straddle State means the condition when the
national best bid or national best offer for an
underlying security in non-executable, as
determined by the primary listing exchange for the
underlying security, but the security is not in a
Limit State. See ISE Rule 703A(a)(3).
5 See Securities Exchange Act Release No. 67091
(May 31, 2012), 77 FR 33498 (June 6, 2012) (File
No. 4–631) (‘‘Plan Approval Order’’).
6 Id.
7 Id.
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21NON1
tkelley on DSK3SPTVN1PROD with NOTICES
69924
Federal Register / Vol. 78, No. 225 / Thursday, November 21, 2013 / Notices
send stop orders because they do not
want to continuously monitor them and
expect that the order will execute once
the stop price has been reached. The
Exchange believes it is onerous for
investors to have these orders cancelled
back to them when they expect these
orders to trade at their stopped price.
The Exchange is not proposing any
change to how unexecuted market
orders are treated and, per Rule
703A(b)(1), these orders will continue to
be canceled upon the initiation of a
Limit State or Straddle State in the
underlying security. The Exchange
believes that holding unexecuted market
orders until the underlying security
comes out of a Limit State or Straddle
State could result in these orders being
executed at prices drastically different
from the time when these orders were
first sent to the Exchange for execution.
As noted above, orders that do not
contain a limit price are at risk of being
executed at inferior prices if the
Exchange were to hold such orders in
the system until the underlying security
comes out of a Limit State or Straddle
State. Canceling such orders therefore
provides investors the opportunity to
submit their orders for execution at their
expected price.
While the proposed treatment of
unexecuted stop orders is a departure
from how these orders are currently
addressed, the Exchange believes this
rule change will promote fair and
orderly markets as investors will have
greater certainty that these orders will
be executed once they become eligible
rather than be cancelled. The proposed
rule change is also consistent with how
such orders are treated on other
exchanges.11
non-executable, the ability for options
market participants to purchase (sell)
shares of the underlying security and
the price at which they may be able to
purchase (sell) shares becomes
uncertain, as there is a lack of
transparency regarding the availability
of liquidity for the security. This
uncertainty is factored into the options
pricing models of market professionals,
such as options market makers, which
then results in wider spreads and less
liquidity at the best bid and offer for the
options class. To address trading during
limit up-limit down states, the Exchange
adopted rules to govern the handling of
market orders and stop orders.8
Specifically, the Exchange currently
automatically rejects all incoming
orders that do not contain a limit price
to protect them from being executed at
prices that may be vastly inferior to the
prices available immediately prior to or
following a Limit State or Straddle
State.9 Such un-priced orders include
market orders and stop orders, which
become market orders when the stop
price is elected.10 The Exchange also
currently cancels any unexecuted
market orders and unexecuted stop
orders.
After discussions with, and at the
request of members, the Exchange now
proposes to amend the treatment of
unexecuted stop orders. Specifically,
the Exchange proposes to hold, rather
than cancel, all unexecuted stop orders
pending in the trading system until the
end of a Limit State or Straddle State,
at which point the order will become
eligible to be elected if the market for
the particular option contract has
reached the specified contract price.
The Exchange believes that it is unduly
burdensome for members to have stop
orders cancelled back to them without
their affirmatively choosing to do so,
particularly when these orders have not
become eligible to be elected and
therefore are not at risk of being
executed at inferior prices. The
Exchange further believes it is
appropriate, in the interests of
promoting fair and orderly markets, to
hold unexecuted stop orders rather than
cancel them, until the end of a Limit
State or Straddle State. The Exchange
believes that when investors enter a stop
order, they have an expectation that the
stop order will be traded at the elected
price once a Limit State or Straddle
State has ended, and that the order will
not be cancelled back to them. Investors
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Securities Exchange Act of 1934
(the ‘‘Act’’) 12 in general, and furthers
the objectives of Section 6(b)(5) of the
Act 13 in particular, in that it is designed
to promote just and equitable principles
of trade, 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.
As discussed above, when an
underlying security enters a Limit State
or Straddle State, the best bid and offer
in the options class is likely to widen
considerably, and the liquidity available
8 See Securities Exchange Act Release No. 69148
(March 15, 2013), 78 FR 17462 (March 21, 2013
(SR–ISE–2013–20).
9 See ISE Rules 703A(b)(1) and (2).
10 See ISE Rule 715(e).
11 See Chicago Board Options Exchange, Inc.
(‘‘CBOE’’) Rule 6.53, Interpretation and Policies
.01(C).
12 15 U.S.C. 78f(b).
13 15 U.S.C. 78f(b)(5).
VerDate Mar<15>2010
17:17 Nov 20, 2013
Jkt 232001
2. Statutory Basis
PO 00000
Frm 00111
Fmt 4703
Sfmt 4703
at those prices may be greatly reduced.
Given that a Limit State or a Straddle
State may be resolved very quickly, the
Exchange believes holding unexecuted
stop orders in the trading system until
the end of a Limit State or a Straddle
State, rather than canceling them, will
provide market participants a greater
opportunity to have their orders
executed when the market for the
particular option contract reaches its
specified price.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposal will impose any burden on
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act. Specifically, the
Exchange believes the proposed rule
change will not impose any burden on
intramarket competition because it will
apply to all market makers equally. The
Exchange does not believe the proposed
rule change will impose any burden on
intermarket competition as the proposed
change is made for the protection of
investors.
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 believes that the
foregoing proposed rule change may
take effect upon filing with the
Commission pursuant to
Section19(b)(3)(A) 14 of the Act and Rule
19b–4(f)(6) thereunder 15 because the
foregoing 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
for 30 days after its filing date, or such
shorter time as the Commission may
designate.
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is: (i) Necessary or appropriate in
the public interest; (ii) for the protection
of investors; or (iii) otherwise in
14 15
15 17
E:\FR\FM\21NON1.SGM
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
21NON1
Federal Register / Vol. 78, No. 225 / Thursday, November 21, 2013 / Notices
furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
[FR Doc. 2013–27899 Filed 11–20–13; 8:45 am]
IV. Solicitation of Comments
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
ISE–2013–59 on the subject line.
tkelley on DSK3SPTVN1PROD with NOTICES
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–2013–59. This file
number should be included on the
subject line if email 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 20549–1090, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for
inspection and copying at the principal
offices of ISE. All comments received
will be posted without change; the
Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–ISE–
2013–59, and should be submitted on or
before December 12, 2013.
17:17 Nov 20, 2013
Jkt 232001
By the Commission.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013–28025 Filed 11–19–13; 11:15 am]
BILLING CODE 8011–01–P
BILLING CODE 8011–01–P
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:
VerDate Mar<15>2010
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Kevin M. O’Neill,
Deputy Secretary.
69925
SOCIAL SECURITY ADMINISTRATION
SECURITIES AND EXCHANGE
COMMISSION
[File No. 500–1]
Order of Suspension of Trading; In the
Matter of HouseRaising, Inc., iElement
Corporation, InforMedix Holdings, Inc.,
Nortia Capital Partners, Inc., and PC
Universe, Inc.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of
HouseRaising, Inc. because it has not
filed any periodic reports since the
period ended September 30, 2007.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of iElement
Corporation because it has not filed any
periodic reports since the period ended
December 31, 2008.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of InforMedix
Holdings, 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 Nortia
Capital Partners, Inc. because it has not
filed any periodic reports since the
period ended January 31, 2009.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of PC
Universe, Inc. because it has not filed
any periodic reports since the period
ended June 30, 2009.
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 November
19, 2013, through 11:59 p.m. EST on
December 3, 2013.
PO 00000
CFR 200.30–3(a)(12).
Frm 00112
Fmt 4703
Privacy Act of 1974, as Amended;
Computer Matching Program (SSA/
Bureau of the Fiscal Service,
Department of the Treasury (Fiscal
Service))—Match Number 1038
AGENCY:
Social Security Administration
(SSA).
Notice of a renewal of an
existing computer matching program
that will expire on December 25, 2013.
ACTION:
November 19, 2013.
16 17
[Docket No. SSA 2013–0058]
Sfmt 4703
In accordance with the
provisions of the Privacy Act, as
amended, this notice announces a
renewal of an existing computer
matching program that we are currently
conducting with Fiscal Service.
DATES: We will file a report of the
subject matching program with the
Committee on Homeland Security and
Governmental Affairs of the Senate; the
Committee on Oversight and
Government Reform of the House of
Representatives; and the Office of
Information and Regulatory Affairs,
Office of Management and Budget
(OMB). The matching program will be
effective as indicated below.
ADDRESSES: Interested parties may
comment on this notice by either
telefaxing to (410) 966–0869 or writing
to the Executive Director, Office of
Privacy and Disclosure, Office of the
General Counsel, Social Security
Administration, 617 Altmeyer Building,
6401 Security Boulevard, Baltimore, MD
21235–6401. All comments received
will be available for public inspection at
this address.
FOR FURTHER INFORMATION CONTACT: The
Executive Director, Office of Privacy
and Disclosure, Office of the General
Counsel, as shown above.
SUPPLEMENTARY INFORMATION:
SUMMARY:
A. General
The Computer Matching and Privacy
Protection Act of 1988 (Pub. L. 100–
503), amended the Privacy Act (5 U.S.C.
552a) by describing the conditions
under which computer matching
involving the Federal government could
be performed and adding certain
protections for persons applying for,
and receiving, Federal benefits. Section
7201 of the Omnibus Budget
Reconciliation Act of 1990 (Pub. L. 101–
E:\FR\FM\21NON1.SGM
21NON1
]]>Agencies
[Federal Register Volume 78, Number 225 (Thursday, November 21, 2013)]
[Notices]
[Pages 69923-69925]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-27899]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70884; File No. SR-ISE-2013-59]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change To Address the Treatment of Certain Stop Orders During a Limit
State or Straddle State
November 15, 2013.
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 November 7, 2013, the International Securities Exchange, LLC
(the ``Exchange'' or the ``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 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 the
Substance of the Proposed Rule Change
The Exchange proposes to amend its rules to address how certain
stop orders are handled during a Limit State or Straddle State.
The text of the proposed rule change is available on the Exchange's
Internet Web site at 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 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 amend Exchange rules
to address how stop orders are handled during a Limit State \3\ or
Straddle State.\4\ On May 31, 2012, the Commission approved the Plan to
Address Extraordinary Market Volatility (the ``Plan''),\5\ which
establishes procedures to address extraordinary volatility in NMS
Stocks. The procedures provide for market-wide limit up-limit down
requirements that prevent trades in individual NMS Stocks from
occurring outside of specified Price Bands. These limit up-limit down
requirements are coupled with Trading Pauses to accommodate more
fundamental price moves. The Plan procedures are designed, among other
things, to protect investors and promote fair and orderly markets.\6\
The Plan has been implemented, as a one year pilot program, in two
phases.\7\ Phase I of the Plan became effective on April 18, 2013 and
applies to Tier I NMS Stocks per Appendix A of the Plan, with Phase II,
which would apply to all NMS Stocks, scheduled to become effective six
months later.
---------------------------------------------------------------------------
\3\ Limit State means the condition when the national best bid
or national best offer for an underlying security equals an
applicable price band, as determined by the primary listing exchange
for the underlying security. See ISE Rule 703A(a)(2).
\4\ Straddle State means the condition when the national best
bid or national best offer for an underlying security in non-
executable, as determined by the primary listing exchange for the
underlying security, but the security is not in a Limit State. See
ISE Rule 703A(a)(3).
\5\ See Securities Exchange Act Release No. 67091 (May 31,
2012), 77 FR 33498 (June 6, 2012) (File No. 4-631) (``Plan Approval
Order'').
\6\ Id.
\7\ Id.
---------------------------------------------------------------------------
ISE is not a participant in the Plan because it does not trade NMS
Stocks. However, the ISE trades options contracts overlying NMS Stocks.
Because options pricing models are highly dependent on the price of the
underlying security and the ability of options traders to effect
hedging transactions in the underlying security, the implementation of
the Plan impacts the trading of options classes traded on the Exchange.
When the national best bid (offer) for a security underlying an
options class is
[[Page 69924]]
non-executable, the ability for options market participants to purchase
(sell) shares of the underlying security and the price at which they
may be able to purchase (sell) shares becomes uncertain, as there is a
lack of transparency regarding the availability of liquidity for the
security. This uncertainty is factored into the options pricing models
of market professionals, such as options market makers, which then
results in wider spreads and less liquidity at the best bid and offer
for the options class. To address trading during limit up-limit down
states, the Exchange adopted rules to govern the handling of market
orders and stop orders.\8\ Specifically, the Exchange currently
automatically rejects all incoming orders that do not contain a limit
price to protect them from being executed at prices that may be vastly
inferior to the prices available immediately prior to or following a
Limit State or Straddle State.\9\ Such un-priced orders include market
orders and stop orders, which become market orders when the stop price
is elected.\10\ The Exchange also currently cancels any unexecuted
market orders and unexecuted stop orders.
---------------------------------------------------------------------------
\8\ See Securities Exchange Act Release No. 69148 (March 15,
2013), 78 FR 17462 (March 21, 2013 (SR-ISE-2013-20).
\9\ See ISE Rules 703A(b)(1) and (2).
\10\ See ISE Rule 715(e).
---------------------------------------------------------------------------
After discussions with, and at the request of members, the Exchange
now proposes to amend the treatment of unexecuted stop orders.
Specifically, the Exchange proposes to hold, rather than cancel, all
unexecuted stop orders pending in the trading system until the end of a
Limit State or Straddle State, at which point the order will become
eligible to be elected if the market for the particular option contract
has reached the specified contract price. The Exchange believes that it
is unduly burdensome for members to have stop orders cancelled back to
them without their affirmatively choosing to do so, particularly when
these orders have not become eligible to be elected and therefore are
not at risk of being executed at inferior prices. The Exchange further
believes it is appropriate, in the interests of promoting fair and
orderly markets, to hold unexecuted stop orders rather than cancel
them, until the end of a Limit State or Straddle State. The Exchange
believes that when investors enter a stop order, they have an
expectation that the stop order will be traded at the elected price
once a Limit State or Straddle State has ended, and that the order will
not be cancelled back to them. Investors send stop orders because they
do not want to continuously monitor them and expect that the order will
execute once the stop price has been reached. The Exchange believes it
is onerous for investors to have these orders cancelled back to them
when they expect these orders to trade at their stopped price. The
Exchange is not proposing any change to how unexecuted market orders
are treated and, per Rule 703A(b)(1), these orders will continue to be
canceled upon the initiation of a Limit State or Straddle State in the
underlying security. The Exchange believes that holding unexecuted
market orders until the underlying security comes out of a Limit State
or Straddle State could result in these orders being executed at prices
drastically different from the time when these orders were first sent
to the Exchange for execution. As noted above, orders that do not
contain a limit price are at risk of being executed at inferior prices
if the Exchange were to hold such orders in the system until the
underlying security comes out of a Limit State or Straddle State.
Canceling such orders therefore provides investors the opportunity to
submit their orders for execution at their expected price.
While the proposed treatment of unexecuted stop orders is a
departure from how these orders are currently addressed, the Exchange
believes this rule change will promote fair and orderly markets as
investors will have greater certainty that these orders will be
executed once they become eligible rather than be cancelled. The
proposed rule change is also consistent with how such orders are
treated on other exchanges.\11\
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\11\ See Chicago Board Options Exchange, Inc. (``CBOE'') Rule
6.53, Interpretation and Policies .01(C).
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Securities Exchange Act of 1934 (the ``Act'') \12\ in
general, and furthers the objectives of Section 6(b)(5) of the Act \13\
in particular, in that it is designed to promote just and equitable
principles of trade, 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.
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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(5).
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As discussed above, when an underlying security enters a Limit
State or Straddle State, the best bid and offer in the options class is
likely to widen considerably, and the liquidity available at those
prices may be greatly reduced. Given that a Limit State or a Straddle
State may be resolved very quickly, the Exchange believes holding
unexecuted stop orders in the trading system until the end of a Limit
State or a Straddle State, rather than canceling them, will provide
market participants a greater opportunity to have their orders executed
when the market for the particular option contract reaches its
specified price.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposal will impose any
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. Specifically, the Exchange
believes the proposed rule change will not impose any burden on
intramarket competition because it will apply to all market makers
equally. The Exchange does not believe the proposed rule change will
impose any burden on intermarket competition as the proposed change is
made for the protection of investors.
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 believes that the foregoing proposed rule change may
take effect upon filing with the Commission pursuant to
Section19(b)(3)(A) \14\ of the Act and Rule 19b-4(f)(6) thereunder \15\
because the foregoing 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 for
30 days after its filing date, or such shorter time as the Commission
may designate.
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\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 17 CFR 240.19b-4(f)(6).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in
[[Page 69925]]
furtherance of the purposes of the Act. If the Commission takes such
action, the Commission shall institute proceedings to determine whether
the proposed rule should be approved or disapproved.
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 email to rule-comments@sec.gov. Please include
File Number SR-ISE-2013-59 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-2013-59. This file
number should be included on the subject line if email 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 20549-1090, on official business days between the hours
of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be
available for inspection and copying at the principal offices of ISE.
All comments received will be posted without change; the Commission
does not edit personal identifying information from submissions. You
should submit only information that you wish to make available
publicly. All submissions should refer to File Number SR-ISE-2013-59,
and should be submitted on or before December 12, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-27899 Filed 11-20-13; 8:45 am]
BILLING CODE 8011-01-P
