Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Back-Up Trading Arrangements, 77519-77523 [2013-30443]
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Federal Register / Vol. 78, No. 246 / Monday, December 23, 2013 / Notices
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not:
A. Significantly affect the protection
of investors or the public interest;
B. impose any significant burden on
competition; and
C. 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 6 and Rule 19b–4(f)(6) 7 thereunder.
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 necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission will institute proceedings
to determine whether the proposed rule
change 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:
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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–
C2–2013–039 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–C2–2013–039. 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, 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 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–C2–
2013–039, and should be submitted on
or before January 13, 2014.
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The Exchange proposes to adopt a
rule that will permit ISE to enter into
arrangements with one or more other
exchanges that would provide trading
facilities for ISE listed options at
another exchange in the event that the
functions of ISE are severely and
adversely affected by an emergency or
extraordinary circumstances (a
‘‘Disabling Event’’), and similarly
provide trading facilities at ISE for
another exchange to trade its listed
options if that exchange’s facility
experiences a Disabling Event. The
Exchange also proposes to adopt a rule
addressing general Exchange procedures
under emergency conditions.
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.
[FR Doc. 2013–30499 Filed 12–20–13; 8:45 am]
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.
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–71092; File No. SR–ISE–
2013–61]
Self-Regulatory Organizations;
International Securities Exchange,
LLC; Notice of Filing and Immediate
Effectiveness of Proposed Rule
Change Relating to Back-Up Trading
Arrangements
December 17, 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 December
5, 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
1 15
Jkt 232001
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
U.S.C. 78s(b)(3)(A).
7 17 CFR 240.19b–4(f)(6).
in Items I and II below, which items
have been prepared by the selfregulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.8
Kevin M. O’Neill,
Deputy Secretary.
8 17
6 15
77519
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Introduction
The Exchange proposes to adopt new
Rule 508 (Back-Up Trading
Arrangements), which would permit ISE
to enter into arrangements with one or
more other exchanges (each a ‘‘Back-up
Exchange’’) to permit ISE and its
members to use a portion of a Back-up
Exchange’s facilities to conduct the
trading of ISE exclusively listed
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options 3 in the event of a Disabling
Event, and similarly to will [sic] permit
ISE to provide trading facilities at ISE
for another exchange’s exclusively listed
options if that exchange (a ‘‘Disabled
Exchange’’) is prevented from trading
due to a Disabling Event. Proposed Rule
508 would also permit ISE to enter into
arrangements with a Back-up Exchange
to provide for the listing and trading of
ISE singly listed options 4 by the Backup Exchange if ISE’s facility becomes
disabled, and conversely provide for the
listing and trading by ISE of the singly
listed options of a Disabled Exchange.
The Exchange also proposes an
amendment to its Fee Schedule to
address the fees that shall apply to
transactions in options of a Disabled
Exchange effected on a Back-up
Exchange. Additionally, the Exchange
proposes to adopt a new Rule 509,
which addresses Exchange procedures
under emergency conditions and is
similar to rules that have been adopted
by another exchange.5
Background
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The back-up trading arrangements
contemplated by proposed Rule 508
represent ISE’s immediate plan to
ensure that ISE’s exclusively listed and
singly listed options will have a trading
venue if a catastrophe renders its
primary facility inaccessible or
inoperable. The Commission has
suggested measures that ISE should
undertake to expedite reopening of ISE’s
exclusively listed securities if a
catastrophic event prevents trading at
ISE for an extended period of time.
Proposed Rule 508 would permit ISE to
enter into back-up trading arrangements
with other exchanges that would
address the measures suggested by the
Commission.
The ISE is currently working with the
Philadelphia Stock Exchange (‘‘Phlx’’)
to develop a bi-lateral back-up trading
arrangement in the event that trading is
prevented at one of the exchanges. Once
the parties execute the finalized
agreement governing the back-up
trading arrangement, they will enter into
an operational plan for those
arrangements.
3 For purposes of ISE Rule 508, the term
‘‘exclusively listed option’’ means an option that is
listed exclusively by an exchange (because the
exchange has an exclusive license to use, or has
proprietary rights in, the interest underlying the
option).
4 For purposes of proposed Rule 508, the term
‘‘singly listed option’’ means an option that is not
an ‘‘exclusively listed option’’ but that is listed by
an exchange and not by any other national
securities exchange.
5 See Chicago Board Options Exchange (‘‘CBOE’’)
Rule 6.17.
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Proposed Rule 508
If ISE Is the Disabled Exchange
The Exchange proposes to adopt Rule
508 to make effective its back-up trading
arrangement with another exchange.
Section (a) of proposed Rule 508
describes the back-up trading
arrangements that would apply if ISE
were the Disabled Exchange. Under the
proposed paragraph (a)(1)(ii), the facility
of the Back-up Exchange used by ISE to
trade some or all of ISE’s exclusively
listed options will be deemed to be a
facility of ISE, and such option classes
shall trade as listings of ISE. This
approach of deeming a portion of the
Back-up Exchange’s facilities to be a
facility of the Disabled Exchange is an
approach previously approved by the
Commission.6
Since the trading of ISE exclusively
listed options will be conducted using
the systems of the Back-up Exchange,
proposed paragraph (a)(1)(iii) provides
that the trading of ISE listed options on
ISE’s facility at the Back-up Exchange
shall be conducted in accordance with
the rules of the Back-up Exchange, and
proposed paragraph (a)(1)(iv) provides
that the Back-up Exchange has agreed to
perform the related regulatory functions
with respect to such trading, in each
case except as ISE and the Back-up
Exchange may specifically agree
otherwise.7 The Back-up Exchange rules
that govern trading on ISE’s facility at
the Back-up Exchange shall be deemed
to be ISE rules for purposes of such
trading.
Under proposed paragraph (a)(1)(v),
ISE shall have the right to designate its
members that will be authorized to trade
ISE exclusively listed options on ISE’s
facility at the Back-up Exchange and, if
applicable, its member(s) that will be a
Primary Market Maker (‘‘PMM’’) or
Competitive Market Maker (‘‘CMM’’) in
those options. If the Back-up Exchange
6 See Securities and Exchange Commission
Release Nos. 51717 (May 19, 2005), 70 FR 30160
(May 25, 2005) (SR–CBOE–2004–59); 51926 (June
27, 2005), 70 FR 38232 (July 1, 2005) (SR–PHLX–
2004–65).
7 ISE’s proposed back-up trading arrangements
contemplate that the operation of the Disabled
Exchange’s facility at the Back-up Exchange will be
conducted in accordance with the rules of the Backup Exchange except that (i) the rules of the Disabled
Exchange will apply with respect to doing business
with the public, margin requirements, net capital
requirements and listing requirements, and (ii) the
members of the Disabled Exchange that are trading
on the facility of the Disabled Exchange at the Backup Exchange (not including members of the Backup Exchange who become temporary members of
the Disabled Exchange) will be subject to the rules
of the Disabled Exchange governing or applying to
the maintenance of a person’s or a firm’s status as
a member of the Disabled Exchange. The
Commission approved a similar arrangement
between CBOE and Phlx. See supra note 4.
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is unable to accommodate all ISE
members that desire to trade on ISE’s
facility at the Back-up Exchange, ISE
may determine which members shall be
eligible to trade at that facility by
considering factors such as whether the
member is a PMM or CMM in the
applicable product(s), the number of
contracts traded by the member in the
applicable product(s), market
performance, and other factors relating
to a member’s contribution to the
market in the applicable product(s).
Under proposed paragraph (a)(1)(vi),
members of the Back-up Exchange shall
not be authorized to trade in any ISE
exclusively listed options, except that (i)
ISE may deputize willing brokers of the
Back-up Exchange as temporary ISE
members to permit them to execute
orders as Electronic Access Members
(‘‘EAMs’’) in ISE exclusively listed
options traded on ISE’s facility at the
Back-up Exchange,8 and (ii) the Back-up
Exchange has agreed that it will, at the
instruction of ISE, select members of the
Back-up Exchange that are willing to be
deputized by ISE as temporary ISE
members authorized to trade ISE
exclusively listed options on ISE’s
facility at the Back-up Exchange for
such period of time following a
Disabling Event as ISE determines to be
appropriate, and ISE may deputize such
members of the Back-up Exchange as
temporary ISE members for that
purpose. The foregoing exceptions
would permit members of the Back-up
Exchange to trade ISE exclusively listed
options on the ISE facility on the Backup Exchange, if, for example,
circumstances surrounding a Disabling
Event result in ISE members being
delayed in connecting to the Back-up
Exchange in time for prompt
resumption of trading.
Section (a)(2) of the proposed rule
provides for the continued trading of
ISE singly listed options at the Back-up
Exchange in the event of a Disabling
Event at ISE. Proposed paragraph
(a)(2)(ii) provides that ISE may enter
into arrangements with a Back-up
Exchange under which the Back-up
Exchange will agree, in the event of a
Disabling Event, to list for trading
option classes that are then singly listed
only by ISE. Such option classes would
trade on the Back-up Exchange as
listings of the Back-up Exchange and in
accordance with the rules of the Backup Exchange. Under proposed
paragraph (a)(2)(iii), any such options
class listed by the Back-up Exchange
that does not satisfy the standard listing
and maintenance criteria of the Back-up
8 CBOE and Phlx received approval to deputize
its brokers in this manner. See supra note 6.
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Exchange will be subject, upon listing
by the Back-up Exchange, to delisting
(and, thus, restrictions on opening new
series, and engaging in opening
transactions in those series with open
interest, as may be provided in the rules
of the Back-up Exchange).
ISE singly listed option classes would
be traded by members of the Back-up
Exchange and by ISE members selected
by ISE to the extent the Back-up
Exchange can accommodate ISE
members in the capacity of temporary
members of the Back-up Exchange. If
the Back-up Exchange is unable to
accommodate all ISE members that
desire to trade ISE singly listed options
at the Back-up Exchange, ISE may
determine which members shall be
eligible to trade such options at the
Back-up Exchange by considering the
same factors used to determine which
ISE members are eligible to trade ISE
exclusively listed options at the ISE
facility at the Back-up Exchange.
Proposed Section (a)(3) provides that
ISE may enter into arrangements with a
Back-up Exchange to permit ISE
members to conduct trading on a Backup Exchange of some or all of ISE’s
multiply listed options in the event of
a Disabling Event. While continued
trading of multiply listed options upon
the occurrence of a Disabling Event is
not likely to be as great a concern as the
continued trading of exclusively and
singly listed options, ISE nonetheless
believes a provision for multiply listed
options should be included in the rule
so that the exchanges involved will have
the option to permit members of the
Disabled Exchange to trade multiply
listed options on the Back-up Exchange.
Such options shall trade as a listing of
the Back-up Exchange in accordance
with the rules of the Back-up Exchange.
If ISE is the Back-up Exchange
Section (b) of proposed Rule 508
describes the back-up trading
arrangements that would apply if ISE
were the Back-up Exchange. In general,
the provisions in Section (b) are the
converse of the provisions in Section
(a). With respect to the exclusively
listed options of the Disabled Exchange,
the facility of ISE used by the Disabled
Exchange to trade some or all of the
Disabled Exchange’s exclusively listed
options will be deemed to be a facility
of the Disabled Exchange, and such
option classes shall trade as listings of
the Disabled Exchange. Trading of the
Disabled Exchange’s exclusively listed
options on the Disabled Exchange’s
facility at ISE shall be conducted in
accordance with ISE rules, and ISE will
perform the related regulatory functions
with respect to such trading, in each
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case except as the Disabled Exchange
and ISE may specifically agree
otherwise. ISE rules that govern trading
on the Disabled Exchange’s facility at
ISE shall be deemed to be rules of the
Disabled Exchange for purposes of such
trading.
Sections (b)(2) and (b)(3) describe the
arrangements applicable to trading of
the Disabled Exchange’s singly and
multiply listed options at ISE, and are
the converse of Sections (a)(2) and
(a)(3). One difference is in paragraph
(b)(2)(i), which includes a provision that
would permit ISE to allocate singly
listed option classes of the Disabled
Exchange to an ISE PMM in advance of
a Disabling Event, without utilizing the
allocation process under ISE Rule 802,
to enable ISE to quickly list such option
classes upon the occurrence of a
Disabling Event.
Member Obligations
Section (c) describes the obligations of
members and member organizations
with respect to the trading by
‘‘temporary members’’ on the facilities
of another exchange pursuant to Rule
508. Section (c)(1) sets forth the
obligations applicable to members of a
Back-up Exchange who act in the
capacity of temporary members of the
Disabled Exchange on the facility of the
Disabled Exchange at the Back-up
Exchange.
Section (c)(1) provides that a
temporary member of the Disabled
Exchange shall be subject to, and
obligated to comply with, the rules that
govern the operation of the facility of
the Disabled Exchange at the Back-up
Exchange. This would include the rules
of the Disabled Exchange to the extent
applicable during the period of such
trading, including the rules of the
Disabled Exchange limiting its liability
for the use of its facilities that apply to
members of the Disabled Exchange.
Additionally, (i) such temporary
member shall be deemed to have
satisfied, and the Disabled Exchange has
agreed to waive specific compliance
with, rules governing or applying to the
maintenance of a person’s or a firm’s
status as a member of the Disabled
Exchange, including all dues, fees and
charges imposed generally upon
members of the Disabled Exchange
based on their status as such, (ii) such
temporary member shall have none of
the rights of a member of the Disabled
Exchange except the right to conduct
business on the facility of the Disabled
Exchange at the Back-up Exchange to
the extent described in the Rule, (iii) the
member organization associated with
such temporary member, if any, shall be
responsible for all obligations arising
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77521
out of that temporary member’s
activities on or relating to the Disabled
Exchange, and (iv) the clearing member
of such temporary member shall
guarantee and clear the transactions of
such temporary member on the Disabled
Exchange.
Section (c)(2) sets forth the obligations
applicable to members of a Disabled
Exchange who act in the capacity of
temporary members of the Back-up
Exchange for the purpose of trading
singly listed and multiply listed options
of the Disabled Exchange. Such
temporary members shall be subject to,
and obligated to comply with, the rules
of the Back-up Exchange that are
applicable to the Back-up Exchange’s
own members, including the rules of the
Back-up Exchange limiting its liability
for the use of its facilities that apply to
members of the Back-up Exchange.
Temporary members of the Back-up
Exchange have the same obligations as
those set forth in Section (c)(1) that
apply to temporary members of the
Disabled Exchange, except that, in
addition, temporary members of the
Back-up Exchange shall only be
permitted (i) to act in those capacities
on the Back-up Exchange that are
authorized by the Back-up Exchange
and that are comparable to capacities in
which the temporary member has been
authorized to act on the Disabled
Exchange, and (ii) to trade in those
option classes in which the temporary
member is authorized to trade on the
Disabled Exchange.
Member Proceedings
As noted above, proposed Rule 508
provides that the rules of the Back-up
Exchange shall apply to the trading of
the singly and multiply listed options of
the Disabled Exchange traded on the
Back-up Exchange’s facilities, and (with
certain limited exceptions) the trading
of exclusively listed options of the
Disabled Exchange traded on the facility
of the Disabled Exchange at the Back-up
Exchange. The Back-up Exchange has
agreed to perform the related regulatory
functions with respect to such trading
(except as the Back-up Exchange and
the Disabled Exchange may specifically
agree otherwise).
Section (d) of proposed Rule 508
provides that if a Back-up Exchange
initiates an enforcement proceeding
with respect to the trading during a
back-up period of singly or multiply
listed options of the Disabled Exchange
by a temporary member of the Back-up
Exchange, or exclusively listed options
of the Disabled Exchange by a member
of the Disabled Exchange (other than a
member of the Back-up Exchange who
is a temporary member of the Disabled
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Exchange), and such proceeding is in
process upon the conclusion of the
back-up period, the Back-up Exchange
may transfer responsibility for such
proceeding to the Disabled Exchange
following the conclusion of the back-up
period. This approach to the exercise of
enforcement jurisdiction is also
consistent with past precedent.9
With respect to arbitration
jurisdiction, proposed Section (d)
provides that arbitration of any disputes
with respect to any trading during a
back-up period of singly or multiply
listed options of the Disabled Exchange
or of exclusively listed options of the
Disabled Exchange on the Disabled
Exchange’s facility at the Back-up
Exchange will be conducted in
accordance with the rules of the Backup Exchange, unless the parties to an
arbitration agree that it shall be
conducted in accordance with the rules
of the Disabled Exchange.
Member Preparations
To ensure that members are prepared
to implement ISE’s back-up trading
arrangements, proposed Section (e)
requires ISE members to take
appropriate actions as instructed by ISE
to accommodate ISE’s back-up trading
arrangements with other exchanges and
ISE’s own back-up trading
arrangements.
Supplementary Material
Proposed Supplementary Material .01
to Rule 508 clarifies that to the extent
Rule 508 provides that another
exchange will take certain action, the
Rule is reflecting what that exchange
has agreed to do by contractual
agreement with ISE, but Rule 508 is not
binding on the other exchange.
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Fee Schedule
The Exchange proposes to add a new
section to its fee schedule to inform its
members regarding what fees will apply
to transactions in the listed options of
a Disabled Exchange effected on a Backup Exchange under Rule 508. The new
section provides that if ISE is the
Disabled Exchange, the Back-up
Exchange has agreed to apply the per
contract and per contract side fees in the
ISE fee schedule to transactions in ISE
exclusively listed options trading on the
ISE facility on the Back-up Exchange. If
any other ISE listed options are traded
on the Back-up Exchange (such as ISE
singly listed options that are listed by
the Back-up Exchange) pursuant to ISE
Rule 508, the fee schedule of the Back9 CBOE and Phlx received approval to handle
enforcement jurisdiction in this manner. See supra
note 6.
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up Exchange shall apply to such trades.
The new section contains a second
paragraph stating the converse if ISE is
the Back-up Exchange under Rule 508.
Proposed Rule 509
The Exchange proposes to adopt a
general emergency rule in proposed
Rule 509. Although not directly
required for the implementation of the
back-up trading arrangements, the
Exchange believes that it is appropriate
to adopt such a rule in conjunction with
implementing the back-up trading
arrangements. Currently, there is no
Exchange rule that grants specific
authority in an emergency to any person
or persons to take all actions necessary
or appropriate for the maintenance of a
fair and orderly market or the protection
of investors.
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the Act
and the rules and regulations
thereunder, including the requirements
of Section 6(b) of the Act. In particular,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) of the Act,10 in that it is designed
to perfect the mechanism of a free and
open market and to protect investors
and the public interest.
The ISE believes that it is important
that it develop back-up trading
arrangements in order to minimize the
potential disruption and market impact
that a Disabling Event could cause. The
proposed rule changes are designed to
address the key elements necessary to
mitigate the effects of a Disabling Event
affecting the Exchange, minimize the
impact of such an event on market
participants, and provide for a liquid
and orderly marketplace for securities
listed and traded on the Exchange if a
Disabling Event occurs. In particular,
the proposed rule change is intended to
ensure that ISE’s exclusively listed and
singly listed products will have a
trading venue in the event that trading
at ISE is prevented due to a Disabling
Event. The Exchange believes that
having these back-up trading
arrangements in place will minimize
potential disruptions to the markets and
investors if a catastrophe occurs that
requires the Exchange’s primary facility
to be closed for an extended period.
Other options exchanges, such as the
CBOE and Phlx, have similar
arrangements in place,11 and the
Exchange believes that it is important to
the protection of investors and the
public interest that it also adopt rules
10 15
U.S.C. 78f(b)(5).
supra notes 5 and 6.
11 See
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that allow ISE exclusively and singly
listed options to continue to trade in the
event of a Disabling Event. The
proposed rule change also provides
authority for the ISE to provide a backup trading venue should another
exchange be affected by a Disabling
Event, which will benefit the markets
and investors if a Disabling Event were
to happen on another exchange that has
entered into a back-up trading
arrangement with the ISE. Finally, the
proposed rule change grants authority to
Exchange officials to take action under
emergency conditions, which should
enable key actions to be taken by ISE
representatives in the event of a
Disabling Event, and clarifies the fees
that will apply if these back-up trading
arrangements are invoked, which will
reduce investor confusion and minimize
the disruption to investors associated
with a Disabling Event.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
This proposed rule change does not
impose any burden on intermarket or
intramarket competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. As explained
above, the Exchange believes that it is
important that it have back-up trading
arrangements in place in order to
minimize the potential disruption and
market impact that a Disabling Event
could cause. The proposed back-up
trading arrangements are not designed
to have any competitive impact.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange has not solicited, and
does not intend to solicit, comments on
this proposed rule change. The
Exchange has not received any
unsolicited written comments from
members or other interested parties.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed
rule change pursuant to Section
19(b)(3)(A)(iii) of the Act 12 and Rule
19b–4(f)(6) thereunder.13 Because the
proposed rule change does not (i)
significantly affect the protection of
12 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) 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 this requirement.
13 17
E:\FR\FM\23DEN1.SGM
23DEN1
Federal Register / Vol. 78, No. 246 / Monday, December 23, 2013 / Notices
investors or the public interest; (ii)
impose any significant burden on
competition; and (iii) become operative
for 30 days from the date on which it
was filed, or such shorter time as the
Commission may designate, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act and Rule 19b–4(f)(6)
thereunder.14
A proposed rule change filed under
Rule 19b–4(f)(6)15 normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b–4(f)(6)(iii),16 the
Commission may designate a shorter
time if such action is consistent with the
protection of investors and the public
interest.
The Exchange has asked the
Commission to waive the 30-day
operative delay so that the proposal may
become operative immediately upon
filing. The Exchange stated that waiver
of this requirement will allow it to
immediately enter into a back-up
trading arrangement with another
exchange, which will enable market
participants to continue to trade
exclusively and singly listed options of
the ISE in the event of a Disabling
Event. The Exchange also stated that
having this back-up trading arrangement
in place is important for the protection
of investors and the public interest
because it will minimize potential
disruptions to the markets and investors
that might otherwise occur if the ISE
experiences a Disabling Event. Based on
the Exchange representations above, and
since the proposal is based, in part, on
a proposal submitted by the CBOE and
approved by the Commission,17 the
Commission waives the 30-day
operative delay requirement and
designates the proposed rule change as
operative upon filing.18
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
furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission shall institute proceedings
under Section 19(b)(2)(B) 19 of the Act to
tkelley on DSK3SPTVN1PROD with NOTICES
14 17
CFR 240.19b–4(f)(6)(iii).
CFR 240.19b–4(f)(6).
16 17 CFR 240.19b–4(f)(6)(iii).
17 See supra note 5 and 6.
18 For purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
19 15 U.S.C. 78s(b)(2)(B).
15 17
VerDate Mar<15>2010
18:12 Dec 20, 2013
Jkt 232001
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:
• 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–2013–61 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–2013–61. 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, on official
business days between the hours of
10:00 a.m. and 3:00 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–
2013–61 and should be submitted on or
before January 13, 2014.
Frm 00107
Fmt 4703
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–30443 Filed 12–20–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–71095; File No. SR–
NYSEMKT–2013–100]
Electronic Comments
PO 00000
77523
Sfmt 4703
Self-Regulatory Organizations; NYSE
MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Extending Its Program
That Allows Transactions To Take
Place at a Price That Is Below $1 Per
Option Contract Until January 5, 2015
December 17, 2013.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that on December
5, 2013, NYSE MKT LLC (the
‘‘Exchange’’ or ‘‘NYSE MKT’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the selfregulatory organization. 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 extend its
program that allows transactions to take
place at a price that is below $1 per
option contract until January 5, 2015.
The text of the proposed rule change is
available on the Exchange’s Web site at
www.nyse.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
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.
20 17
CFR 200.30–3(a)(12).
U.S.C.78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
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23DEN1
]]>Agencies
[Federal Register Volume 78, Number 246 (Monday, December 23, 2013)]
[Notices]
[Pages 77519-77523]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-30443]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71092; File No. SR-ISE-2013-61]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change Relating to Back-Up Trading Arrangements
December 17, 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 December 5, 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 and II below, which items have been prepared by
the self-regulatory organization. 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 Exchange proposes to adopt a rule that will permit ISE to enter
into arrangements with one or more other exchanges that would provide
trading facilities for ISE listed options at another exchange in the
event that the functions of ISE are severely and adversely affected by
an emergency or extraordinary circumstances (a ``Disabling Event''),
and similarly provide trading facilities at ISE for another exchange to
trade its listed options if that exchange's facility experiences a
Disabling Event. The Exchange also proposes to adopt a rule addressing
general Exchange procedures under emergency conditions.
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 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
Introduction
The Exchange proposes to adopt new Rule 508 (Back-Up Trading
Arrangements), which would permit ISE to enter into arrangements with
one or more other exchanges (each a ``Back-up Exchange'') to permit ISE
and its members to use a portion of a Back-up Exchange's facilities to
conduct the trading of ISE exclusively listed
[[Page 77520]]
options \3\ in the event of a Disabling Event, and similarly to will
[sic] permit ISE to provide trading facilities at ISE for another
exchange's exclusively listed options if that exchange (a ``Disabled
Exchange'') is prevented from trading due to a Disabling Event.
Proposed Rule 508 would also permit ISE to enter into arrangements with
a Back-up Exchange to provide for the listing and trading of ISE singly
listed options \4\ by the Back-up Exchange if ISE's facility becomes
disabled, and conversely provide for the listing and trading by ISE of
the singly listed options of a Disabled Exchange.
---------------------------------------------------------------------------
\3\ For purposes of ISE Rule 508, the term ``exclusively listed
option'' means an option that is listed exclusively by an exchange
(because the exchange has an exclusive license to use, or has
proprietary rights in, the interest underlying the option).
\4\ For purposes of proposed Rule 508, the term ``singly listed
option'' means an option that is not an ``exclusively listed
option'' but that is listed by an exchange and not by any other
national securities exchange.
---------------------------------------------------------------------------
The Exchange also proposes an amendment to its Fee Schedule to
address the fees that shall apply to transactions in options of a
Disabled Exchange effected on a Back-up Exchange. Additionally, the
Exchange proposes to adopt a new Rule 509, which addresses Exchange
procedures under emergency conditions and is similar to rules that have
been adopted by another exchange.\5\
---------------------------------------------------------------------------
\5\ See Chicago Board Options Exchange (``CBOE'') Rule 6.17.
---------------------------------------------------------------------------
Background
The back-up trading arrangements contemplated by proposed Rule 508
represent ISE's immediate plan to ensure that ISE's exclusively listed
and singly listed options will have a trading venue if a catastrophe
renders its primary facility inaccessible or inoperable. The Commission
has suggested measures that ISE should undertake to expedite reopening
of ISE's exclusively listed securities if a catastrophic event prevents
trading at ISE for an extended period of time. Proposed Rule 508 would
permit ISE to enter into back-up trading arrangements with other
exchanges that would address the measures suggested by the Commission.
The ISE is currently working with the Philadelphia Stock Exchange
(``Phlx'') to develop a bi-lateral back-up trading arrangement in the
event that trading is prevented at one of the exchanges. Once the
parties execute the finalized agreement governing the back-up trading
arrangement, they will enter into an operational plan for those
arrangements.
Proposed Rule 508
If ISE Is the Disabled Exchange
The Exchange proposes to adopt Rule 508 to make effective its back-
up trading arrangement with another exchange. Section (a) of proposed
Rule 508 describes the back-up trading arrangements that would apply if
ISE were the Disabled Exchange. Under the proposed paragraph
(a)(1)(ii), the facility of the Back-up Exchange used by ISE to trade
some or all of ISE's exclusively listed options will be deemed to be a
facility of ISE, and such option classes shall trade as listings of
ISE. This approach of deeming a portion of the Back-up Exchange's
facilities to be a facility of the Disabled Exchange is an approach
previously approved by the Commission.\6\
---------------------------------------------------------------------------
\6\ See Securities and Exchange Commission Release Nos. 51717
(May 19, 2005), 70 FR 30160 (May 25, 2005) (SR-CBOE-2004-59); 51926
(June 27, 2005), 70 FR 38232 (July 1, 2005) (SR-PHLX-2004-65).
---------------------------------------------------------------------------
Since the trading of ISE exclusively listed options will be
conducted using the systems of the Back-up Exchange, proposed paragraph
(a)(1)(iii) provides that the trading of ISE listed options on ISE's
facility at the Back-up Exchange shall be conducted in accordance with
the rules of the Back-up Exchange, and proposed paragraph (a)(1)(iv)
provides that the Back-up Exchange has agreed to perform the related
regulatory functions with respect to such trading, in each case except
as ISE and the Back-up Exchange may specifically agree otherwise.\7\
The Back-up Exchange rules that govern trading on ISE's facility at the
Back-up Exchange shall be deemed to be ISE rules for purposes of such
trading.
---------------------------------------------------------------------------
\7\ ISE's proposed back-up trading arrangements contemplate that
the operation of the Disabled Exchange's facility at the Back-up
Exchange will be conducted in accordance with the rules of the Back-
up Exchange except that (i) the rules of the Disabled Exchange will
apply with respect to doing business with the public, margin
requirements, net capital requirements and listing requirements, and
(ii) the members of the Disabled Exchange that are trading on the
facility of the Disabled Exchange at the Back-up Exchange (not
including members of the Back-up Exchange who become temporary
members of the Disabled Exchange) will be subject to the rules of
the Disabled Exchange governing or applying to the maintenance of a
person's or a firm's status as a member of the Disabled Exchange.
The Commission approved a similar arrangement between CBOE and Phlx.
See supra note 4.
---------------------------------------------------------------------------
Under proposed paragraph (a)(1)(v), ISE shall have the right to
designate its members that will be authorized to trade ISE exclusively
listed options on ISE's facility at the Back-up Exchange and, if
applicable, its member(s) that will be a Primary Market Maker (``PMM'')
or Competitive Market Maker (``CMM'') in those options. If the Back-up
Exchange is unable to accommodate all ISE members that desire to trade
on ISE's facility at the Back-up Exchange, ISE may determine which
members shall be eligible to trade at that facility by considering
factors such as whether the member is a PMM or CMM in the applicable
product(s), the number of contracts traded by the member in the
applicable product(s), market performance, and other factors relating
to a member's contribution to the market in the applicable product(s).
Under proposed paragraph (a)(1)(vi), members of the Back-up
Exchange shall not be authorized to trade in any ISE exclusively listed
options, except that (i) ISE may deputize willing brokers of the Back-
up Exchange as temporary ISE members to permit them to execute orders
as Electronic Access Members (``EAMs'') in ISE exclusively listed
options traded on ISE's facility at the Back-up Exchange,\8\ and (ii)
the Back-up Exchange has agreed that it will, at the instruction of
ISE, select members of the Back-up Exchange that are willing to be
deputized by ISE as temporary ISE members authorized to trade ISE
exclusively listed options on ISE's facility at the Back-up Exchange
for such period of time following a Disabling Event as ISE determines
to be appropriate, and ISE may deputize such members of the Back-up
Exchange as temporary ISE members for that purpose. The foregoing
exceptions would permit members of the Back-up Exchange to trade ISE
exclusively listed options on the ISE facility on the Back-up Exchange,
if, for example, circumstances surrounding a Disabling Event result in
ISE members being delayed in connecting to the Back-up Exchange in time
for prompt resumption of trading.
---------------------------------------------------------------------------
\8\ CBOE and Phlx received approval to deputize its brokers in
this manner. See supra note 6.
---------------------------------------------------------------------------
Section (a)(2) of the proposed rule provides for the continued
trading of ISE singly listed options at the Back-up Exchange in the
event of a Disabling Event at ISE. Proposed paragraph (a)(2)(ii)
provides that ISE may enter into arrangements with a Back-up Exchange
under which the Back-up Exchange will agree, in the event of a
Disabling Event, to list for trading option classes that are then
singly listed only by ISE. Such option classes would trade on the Back-
up Exchange as listings of the Back-up Exchange and in accordance with
the rules of the Back-up Exchange. Under proposed paragraph
(a)(2)(iii), any such options class listed by the Back-up Exchange that
does not satisfy the standard listing and maintenance criteria of the
Back-up
[[Page 77521]]
Exchange will be subject, upon listing by the Back-up Exchange, to
delisting (and, thus, restrictions on opening new series, and engaging
in opening transactions in those series with open interest, as may be
provided in the rules of the Back-up Exchange).
ISE singly listed option classes would be traded by members of the
Back-up Exchange and by ISE members selected by ISE to the extent the
Back-up Exchange can accommodate ISE members in the capacity of
temporary members of the Back-up Exchange. If the Back-up Exchange is
unable to accommodate all ISE members that desire to trade ISE singly
listed options at the Back-up Exchange, ISE may determine which members
shall be eligible to trade such options at the Back-up Exchange by
considering the same factors used to determine which ISE members are
eligible to trade ISE exclusively listed options at the ISE facility at
the Back-up Exchange.
Proposed Section (a)(3) provides that ISE may enter into
arrangements with a Back-up Exchange to permit ISE members to conduct
trading on a Back-up Exchange of some or all of ISE's multiply listed
options in the event of a Disabling Event. While continued trading of
multiply listed options upon the occurrence of a Disabling Event is not
likely to be as great a concern as the continued trading of exclusively
and singly listed options, ISE nonetheless believes a provision for
multiply listed options should be included in the rule so that the
exchanges involved will have the option to permit members of the
Disabled Exchange to trade multiply listed options on the Back-up
Exchange. Such options shall trade as a listing of the Back-up Exchange
in accordance with the rules of the Back-up Exchange.
If ISE is the Back-up Exchange
Section (b) of proposed Rule 508 describes the back-up trading
arrangements that would apply if ISE were the Back-up Exchange. In
general, the provisions in Section (b) are the converse of the
provisions in Section (a). With respect to the exclusively listed
options of the Disabled Exchange, the facility of ISE used by the
Disabled Exchange to trade some or all of the Disabled Exchange's
exclusively listed options will be deemed to be a facility of the
Disabled Exchange, and such option classes shall trade as listings of
the Disabled Exchange. Trading of the Disabled Exchange's exclusively
listed options on the Disabled Exchange's facility at ISE shall be
conducted in accordance with ISE rules, and ISE will perform the
related regulatory functions with respect to such trading, in each case
except as the Disabled Exchange and ISE may specifically agree
otherwise. ISE rules that govern trading on the Disabled Exchange's
facility at ISE shall be deemed to be rules of the Disabled Exchange
for purposes of such trading.
Sections (b)(2) and (b)(3) describe the arrangements applicable to
trading of the Disabled Exchange's singly and multiply listed options
at ISE, and are the converse of Sections (a)(2) and (a)(3). One
difference is in paragraph (b)(2)(i), which includes a provision that
would permit ISE to allocate singly listed option classes of the
Disabled Exchange to an ISE PMM in advance of a Disabling Event,
without utilizing the allocation process under ISE Rule 802, to enable
ISE to quickly list such option classes upon the occurrence of a
Disabling Event.
Member Obligations
Section (c) describes the obligations of members and member
organizations with respect to the trading by ``temporary members'' on
the facilities of another exchange pursuant to Rule 508. Section (c)(1)
sets forth the obligations applicable to members of a Back-up Exchange
who act in the capacity of temporary members of the Disabled Exchange
on the facility of the Disabled Exchange at the Back-up Exchange.
Section (c)(1) provides that a temporary member of the Disabled
Exchange shall be subject to, and obligated to comply with, the rules
that govern the operation of the facility of the Disabled Exchange at
the Back-up Exchange. This would include the rules of the Disabled
Exchange to the extent applicable during the period of such trading,
including the rules of the Disabled Exchange limiting its liability for
the use of its facilities that apply to members of the Disabled
Exchange. Additionally, (i) such temporary member shall be deemed to
have satisfied, and the Disabled Exchange has agreed to waive specific
compliance with, rules governing or applying to the maintenance of a
person's or a firm's status as a member of the Disabled Exchange,
including all dues, fees and charges imposed generally upon members of
the Disabled Exchange based on their status as such, (ii) such
temporary member shall have none of the rights of a member of the
Disabled Exchange except the right to conduct business on the facility
of the Disabled Exchange at the Back-up Exchange to the extent
described in the Rule, (iii) the member organization associated with
such temporary member, if any, shall be responsible for all obligations
arising out of that temporary member's activities on or relating to the
Disabled Exchange, and (iv) the clearing member of such temporary
member shall guarantee and clear the transactions of such temporary
member on the Disabled Exchange.
Section (c)(2) sets forth the obligations applicable to members of
a Disabled Exchange who act in the capacity of temporary members of the
Back-up Exchange for the purpose of trading singly listed and multiply
listed options of the Disabled Exchange. Such temporary members shall
be subject to, and obligated to comply with, the rules of the Back-up
Exchange that are applicable to the Back-up Exchange's own members,
including the rules of the Back-up Exchange limiting its liability for
the use of its facilities that apply to members of the Back-up
Exchange. Temporary members of the Back-up Exchange have the same
obligations as those set forth in Section (c)(1) that apply to
temporary members of the Disabled Exchange, except that, in addition,
temporary members of the Back-up Exchange shall only be permitted (i)
to act in those capacities on the Back-up Exchange that are authorized
by the Back-up Exchange and that are comparable to capacities in which
the temporary member has been authorized to act on the Disabled
Exchange, and (ii) to trade in those option classes in which the
temporary member is authorized to trade on the Disabled Exchange.
Member Proceedings
As noted above, proposed Rule 508 provides that the rules of the
Back-up Exchange shall apply to the trading of the singly and multiply
listed options of the Disabled Exchange traded on the Back-up
Exchange's facilities, and (with certain limited exceptions) the
trading of exclusively listed options of the Disabled Exchange traded
on the facility of the Disabled Exchange at the Back-up Exchange. The
Back-up Exchange has agreed to perform the related regulatory functions
with respect to such trading (except as the Back-up Exchange and the
Disabled Exchange may specifically agree otherwise).
Section (d) of proposed Rule 508 provides that if a Back-up
Exchange initiates an enforcement proceeding with respect to the
trading during a back-up period of singly or multiply listed options of
the Disabled Exchange by a temporary member of the Back-up Exchange, or
exclusively listed options of the Disabled Exchange by a member of the
Disabled Exchange (other than a member of the Back-up Exchange who is a
temporary member of the Disabled
[[Page 77522]]
Exchange), and such proceeding is in process upon the conclusion of the
back-up period, the Back-up Exchange may transfer responsibility for
such proceeding to the Disabled Exchange following the conclusion of
the back-up period. This approach to the exercise of enforcement
jurisdiction is also consistent with past precedent.\9\
---------------------------------------------------------------------------
\9\ CBOE and Phlx received approval to handle enforcement
jurisdiction in this manner. See supra note 6.
---------------------------------------------------------------------------
With respect to arbitration jurisdiction, proposed Section (d)
provides that arbitration of any disputes with respect to any trading
during a back-up period of singly or multiply listed options of the
Disabled Exchange or of exclusively listed options of the Disabled
Exchange on the Disabled Exchange's facility at the Back-up Exchange
will be conducted in accordance with the rules of the Back-up Exchange,
unless the parties to an arbitration agree that it shall be conducted
in accordance with the rules of the Disabled Exchange.
Member Preparations
To ensure that members are prepared to implement ISE's back-up
trading arrangements, proposed Section (e) requires ISE members to take
appropriate actions as instructed by ISE to accommodate ISE's back-up
trading arrangements with other exchanges and ISE's own back-up trading
arrangements.
Supplementary Material
Proposed Supplementary Material .01 to Rule 508 clarifies that to
the extent Rule 508 provides that another exchange will take certain
action, the Rule is reflecting what that exchange has agreed to do by
contractual agreement with ISE, but Rule 508 is not binding on the
other exchange.
Fee Schedule
The Exchange proposes to add a new section to its fee schedule to
inform its members regarding what fees will apply to transactions in
the listed options of a Disabled Exchange effected on a Back-up
Exchange under Rule 508. The new section provides that if ISE is the
Disabled Exchange, the Back-up Exchange has agreed to apply the per
contract and per contract side fees in the ISE fee schedule to
transactions in ISE exclusively listed options trading on the ISE
facility on the Back-up Exchange. If any other ISE listed options are
traded on the Back-up Exchange (such as ISE singly listed options that
are listed by the Back-up Exchange) pursuant to ISE Rule 508, the fee
schedule of the Back-up Exchange shall apply to such trades. The new
section contains a second paragraph stating the converse if ISE is the
Back-up Exchange under Rule 508.
Proposed Rule 509
The Exchange proposes to adopt a general emergency rule in proposed
Rule 509. Although not directly required for the implementation of the
back-up trading arrangements, the Exchange believes that it is
appropriate to adopt such a rule in conjunction with implementing the
back-up trading arrangements. Currently, there is no Exchange rule that
grants specific authority in an emergency to any person or persons to
take all actions necessary or appropriate for the maintenance of a fair
and orderly market or the protection of investors.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder, including the
requirements of Section 6(b) of the Act. In particular, the Exchange
believes the proposed rule change is consistent with the Section
6(b)(5) of the Act,\10\ in that it is designed to perfect the mechanism
of a free and open market and to protect investors and the public
interest.
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The ISE believes that it is important that it develop back-up
trading arrangements in order to minimize the potential disruption and
market impact that a Disabling Event could cause. The proposed rule
changes are designed to address the key elements necessary to mitigate
the effects of a Disabling Event affecting the Exchange, minimize the
impact of such an event on market participants, and provide for a
liquid and orderly marketplace for securities listed and traded on the
Exchange if a Disabling Event occurs. In particular, the proposed rule
change is intended to ensure that ISE's exclusively listed and singly
listed products will have a trading venue in the event that trading at
ISE is prevented due to a Disabling Event. The Exchange believes that
having these back-up trading arrangements in place will minimize
potential disruptions to the markets and investors if a catastrophe
occurs that requires the Exchange's primary facility to be closed for
an extended period. Other options exchanges, such as the CBOE and Phlx,
have similar arrangements in place,\11\ and the Exchange believes that
it is important to the protection of investors and the public interest
that it also adopt rules that allow ISE exclusively and singly listed
options to continue to trade in the event of a Disabling Event. The
proposed rule change also provides authority for the ISE to provide a
back-up trading venue should another exchange be affected by a
Disabling Event, which will benefit the markets and investors if a
Disabling Event were to happen on another exchange that has entered
into a back-up trading arrangement with the ISE. Finally, the proposed
rule change grants authority to Exchange officials to take action under
emergency conditions, which should enable key actions to be taken by
ISE representatives in the event of a Disabling Event, and clarifies
the fees that will apply if these back-up trading arrangements are
invoked, which will reduce investor confusion and minimize the
disruption to investors associated with a Disabling Event.
---------------------------------------------------------------------------
\11\ See supra notes 5 and 6.
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
This proposed rule change does not impose any burden on intermarket
or intramarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act. As explained above, the
Exchange believes that it is important that it have back-up trading
arrangements in place in order to minimize the potential disruption and
market impact that a Disabling Event could cause. The proposed back-up
trading arrangements are not designed to have any competitive impact.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange has not solicited, and does not intend to solicit,
comments on this proposed rule change. The Exchange has not received
any unsolicited written comments from members or other interested
parties.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \12\ and Rule 19b-4(f)(6) thereunder.\13\
Because the proposed rule change does not (i) significantly affect the
protection of
[[Page 77523]]
investors or the public interest; (ii) impose any significant burden on
competition; and (iii) become operative for 30 days from the date on
which it was filed, or such shorter time as the Commission may
designate, the proposed rule change has become effective pursuant to
Section 19(b)(3)(A) of the Act and Rule 19b-4(f)(6) thereunder.\14\
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\12\ 15 U.S.C. 78s(b)(3)(A)(iii).
\13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
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 this requirement.
\14\ 17 CFR 240.19b-4(f)(6)(iii).
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A proposed rule change filed under Rule 19b-4(f)(6)\15\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\16\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest.
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\15\ 17 CFR 240.19b-4(f)(6).
\16\ 17 CFR 240.19b-4(f)(6)(iii).
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The Exchange has asked the Commission to waive the 30-day operative
delay so that the proposal may become operative immediately upon
filing. The Exchange stated that waiver of this requirement will allow
it to immediately enter into a back-up trading arrangement with another
exchange, which will enable market participants to continue to trade
exclusively and singly listed options of the ISE in the event of a
Disabling Event. The Exchange also stated that having this back-up
trading arrangement in place is important for the protection of
investors and the public interest because it will minimize potential
disruptions to the markets and investors that might otherwise occur if
the ISE experiences a Disabling Event. Based on the Exchange
representations above, and since the proposal is based, in part, on a
proposal submitted by the CBOE and approved by the Commission,\17\ the
Commission waives the 30-day operative delay requirement and designates
the proposed rule change as operative upon filing.\18\
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\17\ See supra note 5 and 6.
\18\ For purposes only of waiving the 30-day operative delay,
the Commission has also 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 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 furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings under Section 19(b)(2)(B) \19\
of the Act to determine whether the proposed rule should be approved or
disapproved.
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\19\ 15 U.S.C. 78s(b)(2)(B).
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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-2013-61 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-2013-61. 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, on official business days between the hours of
10:00 a.m. and 3:00 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-2013-61 and should be
submitted on or before January 13, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
Kevin M. O'Neill,
Deputy Secretary.
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\20\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2013-30443 Filed 12-20-13; 8:45 am]
BILLING CODE 8011-01-P
