Federal Register / Vol. 80, No. 7 / Monday, January 12, 2015 / Notices 1565 

26See supra note 24. 

27 15 U.S.C. 78s(b)(3)(A)(ii). 

28 17 CFR 240.19b–4(f)(2). 29 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

Tradebook, Island, RediBook, Attain, 

TrackECN, BATS Trading and Direct 

Edge. As noted above, BATS launched 

as an ATS in 2006 and became an 

exchange in 2008, while Direct Edge 

began operations in 2007 and obtained 

exchange status in 2010. As noted 

above, LavaFlow ECN provides market 

data to its subscribers at no charge.26

In setting the proposed fees, the 

Exchange considered the 

competitiveness of the market for 

proprietary data and all of the 

implications of that competition. The 

Exchange believes that it has considered 

all relevant factors and has not 

considered irrelevant factors in order to 

establish fair, reasonable, and not 

unreasonably discriminatory fees and an 

equitable allocation of fees among all 

users. The existence of numerous 

alternatives to the Exchange’s products, 

including proprietary data from other 

sources, ensures that the Exchange 

cannot set unreasonable fees, or fees 

that are unreasonably discriminatory, 

when vendors and subscribers can elect 

these alternatives or choose not to 

purchase a specific proprietary data 

product if the attendant fees are not 

justified by the returns that any 

particular vendor or data recipient 

would achieve through the purchase. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

No written comments were solicited 

or received with respect to the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A)(ii) of the Act27 and 

paragraph (f)(2) of Rule 19b–4 

thereunder.28 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. 

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 (http://www.sec.gov/

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

NYSEMKT–2014–114 on the subject 

line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–NYSEMKT–2014–114. 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 (http://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 NYSE MKT. 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– 

NYSEMKT–2014–114 and should be 

submitted on or before February 2, 2015. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.29

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–00214 Filed 1–9–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74004; File No. SR–ISE– 

2014–56] 

Self-Regulatory Organizations; 

International Securities Exchange, 

LLC; Notice of Filing and Immediate 

Effectiveness of a Proposed Rule 

Change Regarding Complex Orders 

January 6, 2015. 

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 

23, 2014 the International Securities 

Exchange, LLC (the ‘‘Exchange’’ or the 

‘‘ISE’’) filed with the Securities and 

Exchange 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The ISE proposes to amend its rules 

to permit a greater number of complex 

orders to leg into the regular market. 

The text of the proposed rule change is 

available on the Exchange’s Web site 

(http://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 

The purpose of this proposed rule 

change is to permit a greater number of 

complex orders to leg into the regular 

market. The Exchange currently 


tkelley on DSK3SPTVN1PROD with NOTICES
1566 Federal Register / Vol. 80, No. 7 / Monday, January 12, 2015 / Notices 

3See ISE Rules 722 and 804. 

4See Securities Exchange Act Release No. 70132 

(August 7, 2013), 78 FR 49311 (August 13, 2013) 

(SR–ISE–2013–38) (the ‘‘Legging Filing’’). 

5The box spread, or long box, is a common 

strategy that involves buying a call spread together 

with the corresponding put spread with both 

spreads having the same strike prices and 

expiration dates. A box spread can be constructed 

by buying one in-the-money call, selling one outof-the-money call, buying one in-the-money put and 

selling one out-of-the-money put. The long box is 

used when the spreads are underpriced in relation 

to their expiration values. 

6The condor option strategy is a limited risk, 

non-directional option trading strategy that is 

structured to earn a limited profit when the 

underlying security is perceived to have little 

volatility. To establish this position, a options 

trader sells an in-the-money call, buys an in-themoney call (lower strike), sells an out-of-the-money 

call and buys an out-of-the-money call (higher 

strike). Using call options expiring on the same 

month, the trader can implement a long condor 

option spread by writing a lower strike in-themoney call, buying an even lower striking in-themoney call, writing a higher strike out-of-the-money 

call and buying another even higher striking out-ofthe-money call. A total of 4 legs are involved in the 

condor options strategy and a net debit is required 

to establish the position. 

7See Securities Exchange Act Release No. 73023 

(September 9, 2014), 79 FR 55033 (September 15, 

2014) (SR–ISE–2014–10). 

8See Rule 722(b)(3)(ii)(A)–(B). 

9The Exchange will issue a circular to members 

identifying the options classes for which legging is 

limited to complex orders and the associated 

number of legs. The Exchange will provide 

members with reasonable notice prior to changing 

the limit to allow members to make any necessary 

system changes. 

10See www.theoptionsguide.com for a more 

comprehensive list of complex order strategies. 

11 15 U.S.C. 78f(b). 

12 15 U.S.C. 78f(b)(5). 

provides functionality that 

automatically removes a market maker’s 

quotes in all series of an options class 

when certain parameter settings are 

triggered.3 The purpose of this 

functionality is to allow market makers 

to provide liquidity across hundreds of 

options series without being at risk of 

executing the full cumulative size of all 

such quotes before being given the 

opportunity to adjust their quotes. By 

checking the risk parameters following 

each execution in an options series, the 

risk parameters allow market makers to 

manage their risk. This is not the case, 

however, when a complex order legs 

into the regular market. Because the 

execution of each leg is contingent on 

the execution of the other legs, the 

execution of all the legs in the regular 

market is processed as a single 

transaction, not as a series of individual 

transactions. The legging-in of complex 

orders therefore presents a higher risk to 

market makers as compared to regular 

orders being entered in multiple series 

of an options class in the regular market 

as it can result in market makers 

exceeding their parameters by a greater 

number of contracts. Because this risk is 

directly proportional to the number of 

legs associated with a complex order, 

the Exchange amended Rule 722 to limit 

the legging functionality to complex 

orders with no more than either two or 

three legs, as determined by the 

Exchange on a class basis.4 The Legging 

Filing effectively limited certain 

legitimate complex order strategies, 

such as a Box Spread 5 or a Condor,6

from legging into the regular market. 

These strategies are limited to trading 

with other complex orders in the 

complex order book. 

Despite the limitation adopted in the 

Legging Filing, certain market 

participants continued to use atypical 

multi-leg strategies to trade with 

multiple quotes from a single market 

maker that caused single leg market 

makers to trade far more than their risk 

limits allowed. To minimize this risk, 

the Exchange recently amended its rules 

to prevent these atypical multi-leg 

strategies from legging into the regular 

market. These atypical multi-leg 

strategies are complex orders with two 

option legs where both legs are buying 

or both legs are selling and both legs are 

calls or both legs are puts, and complex 

orders with three options legs, where all 

legs are buying or all legs are selling 

regardless of whether the option is a call 

or a put (‘‘Non-Standard Strategies’’).7

Non-Standard Strategies are permitted 

to trade only in the complex order book 

and are prevented from legging into the 

regular market.8

With rules limiting Non-Standard 

Strategies from legging into the regular 

market firmly in place, the risk of 

market makers trading more than the 

limitations they have set has greatly 

diminished. The Exchange therefore 

proposes to amend Rule 722 to allow 

complex orders with two, three or four 

legs (determined by the Exchange on a 

class basis) to leg into the regular 

market.9

The proposed rule change will allow 

the Exchange to permit complex order 

strategies with three or four legs to leg 

into the regular market as long as all 

legs are not buying or all legs are not 

selling. To ensure that such orders do 

not leg into the regular market, the 

Exchange proposes to amend Rule 

722(b)(3)(ii)(B) to extend the current 

limitation found in that rule to complex 

orders with 3 or 4 legs, where all legs 

are buying or all legs are selling 

regardless of whether the option is a call 

or a put. Such orders will only be 

permitted to trade against other complex 

orders in the complex order book, as is 

the case today. The Exchange expects 

this proposal to loosen the current 

restriction to result in a number of other 

legitimate complex order strategies to 

also be executed on the Exchange.10

The Exchange previously permitted 

complex orders that are the subject of 

this proposal to leg into the regular 

market and only recently limited that 

activity to better address the risk posed 

to market makers. The market maker 

risk that the Exchange sought to address 

in the Legging Filing was further 

strengthened when ISE amended its 

rules to prevent Non-Standard Strategies 

from legging into the regular market. 

With this proposed rule change, 

complex order strategies, such as Box 

Spreads and Condors, for example, will 

once again be permitted to leg into the 

regular market and thereby increase the 

likelihood that these orders are executed 

on the Exchange rather than on a 

competing market without posing any 

unintended risk to market makers. In 

the Legging Filing, the Exchange noted 

that over 85% of all complex orders 

have only two legs. The Exchange notes 

that current data continues to support 

that assertion in that even today, over 

85% of all complex orders have only 

two legs and that very few complex 

orders are entered with more than three 

legs. The proposed rule change will 

therefore impact only a small portion of 

all complex orders traded on the 

Exchange. These orders, however, are 

comprised of legitimate trading 

strategies that have an economic 

purpose and are not submitted as means 

to bypass a market maker’s risk setting. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act 11 in general, and furthers the 

objectives of Section 6(b)(5) of the Act 12

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. 

The Exchange believes it is reasonable 

to permit complex orders that are 

subject of this rule change to leg into the 

regular market. ISE has codified into its 

rules the specific complex order 

strategies that pose the greatest amount 

of risk to market makers and therefore, 

the Exchange believes the proposed rule 

change to permit legitimate multi-legged 

complex orders to interact with the 

regular market will promote just and 

equitable principles of trade. The 

proposed rule change will facilitate the 


tkelley on DSK3SPTVN1PROD with NOTICES
Federal Register / Vol. 80, No. 7 / Monday, January 12, 2015 / Notices 1567 

13 17 CFR 200.30–3(a)(12). 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

execution of complex order strategies, 

such as Box Spreads and Condors, 

which consist of four legs. The proposed 

rule change is designed to protect 

investors and the public interest in that 

the proposal amends a current rule to 

ensure that complex orders with three 

or four option legs where all legs are 

buying or all legs are selling only trade 

against other complex orders in the 

complex order book. The Exchange 

notes that prior to the Legging Filing 

and before the Non-Standard Strategies 

were codified into the Exchange’s rules, 

the complex order strategies affected by 

this proposal were permitted to trade 

and leg into the regular market. 

Therefore, this proposed rule change 

simply adjusts Exchange rules to once 

again permit the execution such 

complex order strategies. The proposed 

rule change will also benefit investors 

and the general public because multilegged strategies will have a greater 

chance of execution when they are 

allowed to leg into the regular market 

and thereby increase the execution rate 

for these orders thus, providing market 

participants with an increased 

opportunity to execute these orders on 

ISE rather than on a competing 

exchange. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The proposed rule change does not 

impose any burden on competition. The 

proposed change to amend the 

restriction against complex order 

strategies, such as Box Spreads and 

Condors, from legging into the regular 

market will allow a greater number of 

complex orders to be executed on the 

Exchange without adversely impacting 

risk to market makers that are quoting 

in the regular market. 

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 

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 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 and Rule 19b– 

4(f)(6) 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. 

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 (http://www.sec.gov/

rules/sro.shtml); or 

• Send an Email to rule-comments@

sec.gov. Please include File No. SR–ISE– 

2014–56 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Brent J. Fields, Secretary, Securities 

and Exchange Commission, 100 F Street 

NE., Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–ISE–2014–56. 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 (http://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 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– 

2014–56 and should be submitted on or 

before February 2, 2015. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.13

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–00221 Filed 1–9–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 74006; File No. SR–NYSE– 

2014–73] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Amending Rule 

123C To Specify That Exchange 

Systems May Close One or More 

Securities Electronically 

January 6, 2015. 

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 December 23, 

2014, New York Stock Exchange LLC 

(‘‘NYSE’’ or the ‘‘Exchange’’) 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 amend 

Rule 123C to specify that Exchange 

systems may close one or more 

securities electronically if a Designated 

Market Maker (‘‘DMM’’) registered in a 

security or securities cannot facilitate 

the close of trading as required by 

Exchange rules. 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, 

on the Commission’s Web site at 

www.sec.gov, and at the Commission’s 

Public Reference Room. 


tkelley on DSK3SPTVN1PROD with NOTICES