Federal Register / Vol. 76, No. 159 / Wednesday, August 17, 2011 / Notices 51075 

1 15 U.S.C. 78s(b)(1). 

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4See Securities Exchange Act Release No. 64719 

(June 22, 2011), 76 FR 37863 (‘‘Notice’’). 

5Under the proposal, CMMs can select the 

options classes to which they seek appointment, but 

the Exchange retains the authority to make such 

appointments and to remove appointments from 

CMMs based on their performance. Under the 

proposal, either the Exchange or a committee 

designated by the Board will be permitted to make 

appointments. 

6The Exchange will notify CMMs of the 

procedure for requesting changes to their 

appointments, including the length of advance 

notification required. The Exchange will establish 

the shortest advance notification period that is 

operationally feasible, such as a specific time on the 

day prior to the intended effectiveness of a change 

in a CMM’s appointments, or by a specified time 

prior to the opening on the same trading day. 

relying on section 3(c)(1) or 3(c)(7) of 

the Act in excess of the limits contained 

in section 12(d)(1)(A) of the Act, except 

to the extent permitted by exemptive 

relief from the Commission permitting 

the Fund to purchase shares of other 

investment companies for short-term 

cash management purposes. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–20870 Filed 8–16–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–65047; File No. SR– 

NYSEAmex–2011–56] 

Self-Regulatory Organizations; NYSE 

Amex LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Amending NYSE Amex 

Options Rule 985NY To Permit 

Qualified Contingent Cross Orders To 

Be Electronically Submitted to the 

NYSE Amex System From the Floor of 

the Exchange for Potential Execution 

August 5, 2011. 

Correction 

In notice document 2011–20388 

appearing on pages 49812–49815 in the 

issue of August 11, 2011, make the 

following correction: 

On page 49815, in the third column, 

in the first full paragraph, in the last 

line, ‘‘August 31, 2011’’ should read 

‘‘September 1, 2011.’’ 

[FR Doc. C1–2011–20388 Filed 8–16–11; 8:45 am] 

BILLING CODE 1505–01–D 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–65100; File No. SR–ISE– 

2011–33] 

Self-Regulatory Organizations; 

International Securities Exchange, 

LLC; Order Granting Approval to a 

Proposed Rule Change Relating to 

Appointments to Competitive Market 

Makers 

August 11, 2011. 

I. Introduction 

On June 10, 2011, the International 

Securities Exchange, LLC (the 

‘‘Exchange’’ or the ‘‘ISE’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

19(b)(1) 1 of the Securities Exchange Act 

of 1934 (‘‘Act’’) 2 and Rule 19b–4 

thereunder,3 a proposed rule change to 

revise the manner in which Competitive 

Market Makers are appointed to options 

classes. The proposed rule change was 

published for comment in the Federal 

Register on June 28, 2011.4 The 

Commission received no comments 

regarding the proposal. This order 

approves the proposed rule change. 

II. Description of the Proposal 

The ISE’s membership is divided into 

three categories, Primary Market Makers 

(‘‘PMMs’’), Competitive Market Makers 

(‘‘CMMs’’) and Electronic Access 

Members. There are 10 PMM trading 

rights and 160 CMM trading rights 

(collectively ‘‘market maker rights’’). In 

order to access the Exchange as a market 

maker, a member must own or lease one 

or more market maker rights. EAMs are 

not required to purchase such a right in 

order to access the Exchange. Under the 

current structure, options traded on the 

Exchange are divided into 10 groups, 

with one of the 10 PMM trading rights 

and 16 of the 160 CMM trading rights 

appointed to each group. Thus, each 

PMM and CMM trading right is 

associated with a specific group of 

options. Under the existing structure, a 

member is required to own and/or lease 

10 CMM trading rights (one in each of 

the 10 options groups) in order to have 

the ability to make markets in all of the 

options classes traded on the Exchange. 

Moreover, because the number of 

options classes contained in each group 

varies, CMM trading rights currently 

represent 10 different levels of 

participation. 

The Exchange proposes to change the 

structure of CMM appointments to 

allow CMMs to seek appointment in the 

options classes listed on the Exchange 

across the groups of options assigned to 

particular PMMs. Under the proposal, 

the Exchange will assign points to each 

options class equal to its percentage of 

overall industry volume (not including 

exclusively-traded index options), 

rounded down to the nearest tenth of a 

percentage. A CMM will be able to seek 

appointments to options classes that 

total: (i) 20 points for the first CMM 

trading right it owns or leases; and (ii) 

10 points for the second and each 

subsequent CMM trading right it owns 

or leases.5 CMMs will be able to change 

their appointments at any time upon 

advance notification to the Exchange.6

The Exchange will provide members 

with a transition period of 30 to 60 days 

following approval of the proposed rule 

change. During the transition period, the 

Exchange will work with existing 

market makers to restructure their 

appointments within the new pointbased structure. 

The proposal seeks to standardize the 

level of access gained by owning or 

leasing a CMM trading right. In 

addition, the proposal will make 

additional memberships available. 

Specifically, by assigning 20 points to 

the first CMM trading right owned or 

leased by a member and 10 points to 

each subsequent CMM trading right 

owned or leased by the same member, 

only 9 CMM trading rights (instead of 

10) will be required to cover the entire 

ISE market. 

The Exchange also proposes to adjust 

its CMM quotation requirements to 

reflect the proposed elimination of 

specified groups of options associated 

with CMM trading rights. Under the 

current structure, CMMs are required to 

participate in the opening and provide 

continuous quotations in a minimum 

number of options classes in each of 

their assigned groups. Since CMMs will 

have the flexibility to choose the 

options classes to which they are 

appointed, rather than being appointed 

to a pre-determined group of options, 

the Exchange proposes to modify this 

requirement to limit the number of 

appointed options classes in which a 

CMM can initiate intraday quoting to 

the number of options classes in which 

it participates in the opening rotation. 

Under the current rules, a CMM is 

required to participate in the opening in 

60% of the options classes in its 

appointed group of options or 40 

options classes, whichever is lesser. If, 

for example, a CMM is appointed to a 

group with 100 options classes, then it 

must participate in the opening for 40 

options classes and may initiate intraday quoting in 60 options classes. Under 

the proposed structure, a CMM 

appointed to 100 options classes that 

participates in the opening in 40 options 


Emcdonald on DSK2BSOYB1PROD with NOTICES
51076 Federal Register / Vol. 76, No. 159 / Wednesday, August 17, 2011 / Notices 

7For example, under the current structure, a 

CMM that owns or leases three CMM trading rights 

is obligated to continuously quote a minimum of 

120 options classes. Under the new structure, a 

CMM with three trading rights could seek 

appointment for only three options classes (one for 

each trading right), thus making the inactivity fee 

ineffective. 

8 In approving this proposed rule change the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

formation. 15 U.S.C. 78c(f). 

9 15 U.S.C. 78f. 

10 15 U.S.C. 78f(b)(5). 11 15 U.S.C. 78f(b)(4). 12The Commission also notes that the new 

structure is similar to the Chicago Board Options 

Exchange’s (‘‘CBOE’’) rules, which permit its 

market makers to choose the options to which they 

are appointed. See CBOE Rule 8.3. 13 ISE Rule 802(e)–(f). 14Pursuant to Rule 804(a)(2), PMMs have the 

obligation to provide continuous quotations in all 

of the series of all of the options to which they are 

appointed. 

15 ISE Rule 804(e)(2)(iii). 

16 ISE Rule 804(e)(2)(iii). 

17 ISE Rule 802(e)(2)(iv). 

18 15 U.S.C. 78f(b)(4). 

19 15 U.S.C. 78s(b)(2). 

20 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

classes may only initiate intra-day 

quoting in 40 additional classes. 

Additionally, under the proposal the 

Exchange will retain the current 

requirement that once a CMM enters a 

quotation in an appointed options class, 

it must maintain continuous quotations 

for that series and at least 60% of the 

series of the options class until the close 

of trading that day. CMMs will also 

continue to be subject to the quotation 

requirements contained in Rule 803 and 

804. If a CMM receives Preferenced 

Orders in an options class, it will 

continue to be required to maintain 

continuous quotations in at least 90% of 

the series in that class. The Exchange 

will continue to have the ability under 

its rules to call upon a CMM to submit 

quotations in one or more series of an 

options class to which the CMM is 

appointed. 

Finally, the Exchange proposes to 

terminate its current CMM inactivity 

fee. That fee currently imposes a charge 

of $25,000 a month for CMM trading 

rights that are not active. The purpose 

of the fee is to help recoup a portion of 

the income that the Exchange loses 

when market makers do not operate 

their trading rights and generate 

transaction-based revenue. Under the 

proposed CMM trading rights structure, 

the Exchange does not believe that the 

inactivity fee is appropriate or 

necessary, as CMMs will now be able to 

manage the number of options classes to 

which they are appointed.7 Moreover, 

the Exchange believes that there will be 

increased demand for CMM trading 

rights, and that owners of such rights 

will have a financial incentive to sell or 

lease any unused trading rights. If this 

does not turn out to be the case, the 

Exchange states that it will consider 

reinstituting some form of inactivity fee 

that is appropriate for the new structure. 

III. Discussion and Commission 

Findings 

The Commission finds that the 

proposed rule change is consistent with 

the requirements of the Act and the 

rules and regulations thereunder 

applicable to a national securities 

exchange 8 and, in particular, the 

requirements of Section 6 of the Act.9

Specifically, the Commission finds that 

the proposed rule change is consistent 

with Section 6(b)(5) of the Act,10 which 

requires, among other things, that the 

rules of a national securities exchange 

be designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, to foster cooperation and 

coordination with persons engaged in 

regulating, clearing, settling, processing 

information with respect to, and 

facilitating transactions in securities, to 

remove impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general, to protect investors and the 

public interest and are not designed to 

permit unfair discrimination between 

customers, issuers, brokers or dealers. 

The Commission also believes that the 

proposal is consistent with Section 

6(b)(4) of the Act,11 which requires that 

the rules of a national securities 

exchange provide for the equitable 

allocation of reasonable fees and other 

charges among the Exchange’s members 

and issuers and other persons using its 

facilities. 

In particular, the Commission 

believes that the proposal should allow 

CMMs additional flexibility to choosing 

their appointed classes.12 The 

Commission notes that potential market 

makers will be able to purchase or lease 

newly-available CMM trading rights. 

Under the proposal, CMMs can select 

the options classes to which they seek 

appointment, but the Exchange retains 

the authority to make such 

appointments and to remove 

appointments from CMMs based on 

their performance.13 In addition, 

because a PMM will continue to be 

appointed to each options class, there 

will continue to be continuous, twosided quotations in all options listed on 

the Exchange.14

The Exchange proposes to limit the 

number of appointed options classes in 

which a CMM can initiate intraday 

quoting to the number of options classes 

in which it participates in the opening 

rotation. The Commission notes that 

CMMs will also continue to be subject 

to the quotation requirements contained 

in Rules 803 and 804. In addition, once 

a CMM enters a quotation in an 

appointed options class, it must 

maintain continuous quotations for that 

series and at least 60% of the series of 

the options class until the close of 

trading that day.15 If a CMM receives 

Preferenced Orders in an options class, 

it will continue to be required to 

maintain continuous quotations in at 

least 90% of the series in that class.16

Also, the Exchange will continue to 

have the ability under its rules to call 

upon a CMM to submit quotations in 

one or more series of an options class 

to which the CMM is appointed.17

Finally, the Exchange proposes to 

eliminate its current charge of $25,000 

a month for CMM trading rights that are 

not active. The Exchange states that the 

inactivity fee is not appropriate or 

necessary, as CMMs will now be able to 

manage the number of options classes to 

which they are appointed. The 

Commission believes that the proposal 

is consistent with Section 6(b)(4) of the 

Act.18

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,19 that the 

proposed rule change (SR–ISE–2011– 

33), be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.20

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–20901 Filed 8–16–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–65104; File No. SR– 

NASDAQ–2011–116] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Amend the 

Clearly Erroneous Rule in Light of 

Changes to the Single Stock Trading 

Pause Process 

August 11, 2011. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on August 8, 

2011, The NASDAQ Stock Market LLC 

(‘‘Exchange’’), filed with the Securities 


Emcdonald on DSK2BSOYB1PROD with NOTICES