27222 Federal Register / Vol. 74, No. 108 / Monday, June 8, 2009 / Notices 

11The Exchange has fulfilled this requirement. 

12 15 U.S.C. 78s(b)(3)(A). 

13 17 CFR 240.19b–4(f)(6). 

14 Id. 

15 For purposes only of waiving the operative 

date of this proposal, the Commission has 

considered the proposed rule’s impact on 

efficiency, competition, and capital formation. See 

15 U.S.C. 78c(f). See also 17 CFR 200.30–3(a)(59). 

16 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

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

4 17 CFR 240.19b–4(f)(6)(iii). 

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 proposal. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing rule 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 if consistent 

with the protection of investors and the 

public interest, provided that the selfregulatory organization has given the 

Commission written notice of its intent 

to file 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,11 the proposed rule 

change has become effective pursuant to 

Section 19(b)(3)(A) of the Act 12 and 

Rule 19b–4(f)(6) thereunder.13

Under Rule 19b–4(f)(6) of the Act,14 a 

proposal does not become operative for 

30 days after the date of its filing, or 

such shorter time as the Commission 

may designate if consistent with the 

protection of investors and the public 

interest. The Exchange has requested 

that the Commission waive the 30-day 

operative date so that the pilot may 

continue without interruption while the 

Exchange considers whether to seek 

permanent approval of the temporary 

procedures. The Exchange believes that 

acceleration of the operative date will 

continue to allow for the orderly closing 

of option positions that are worthless or 

not actively traded. The Commission 

believes that waiving the 30-day 

operative delay is consistent with the 

protection of investors and the public 

interest, and thus designates the 

proposal as operative upon filing.15

At any time within 60 days of the 

filing of such proposed rule change, the 

Commission may summarily abrogate 

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 e-mail to rulecomments@sec.gov. Please include File 

Number SR–CBOE–2009–034 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–CBOE–2009–034. This file 

number should be included on the 

subject line if e-mail 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 inspection and copying in 

the Commission’s Public Reference 

Room, 100 F Street, NE., Washington, 

DC 20549, on official business days 

between the hours of 10 a.m. and 3 p.m. 

Copies of such filing also will be 

available for inspection and copying at 

the principal office of the CBOE. 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–CBOE–2009–034 and 

should be submitted on or before June 

29, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.16

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–13209 Filed 6–5–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60019; File No. SR–BATS– 

2009–018] 

Self-Regulatory Organizations; BATS 

Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Change the Criteria 

for Becoming a Member of the 

Nominating Committee 

June 1, 2009. 

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 May 28, 

2009, BATS Exchange, Inc. (‘‘BATS’’ or 

the ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II and III 

below, which Items have been prepared 

by the Exchange. The Exchange has 

designated this proposal as a ‘‘noncontroversial’’ proposed rule change 

pursuant to Section 19(b)(3)(A) of the 

Act 3 and Rule 19b–4(f)(6)(iii) 

thereunder,4 which renders it effective 

upon filing with the Commission. 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 

Article VI, Section 2 of the Amended 

and Restated By-Laws of BATS 

Exchange, Inc. (the ‘‘By-Laws’’). 

The text of the proposed rule change 

is available at the Exchange’s Web site 

at http://www.batstrading.com, at the 

principal office of the Exchange, and at 

the Commission’s Public Reference 

Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 


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Federal Register / Vol. 74, No. 108 / Monday, June 8, 2009 / Notices 27223 

5As described in Article III, Section 3(b) of the 

By-Laws, Directors are divided into three classes 

and serve staggered terms. 

6The proposed rule change would have no effect 

on the process of selecting Member Representative 

Directors as described in Article III, Section 4 and 

Article VI, Sections 1 and 3 of the By-Laws. 

7 15 U.S.C. 78f(b). 

8 15 U.S.C. 78(b)(1). 

9 15 U.S.C. 78(b)(3). 

10 15 U.S.C. 78f(b)(5). 

11 15 U.S.C. 78s(b)(3)(A). 

12 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6)(iii) requires a self-regulatory organization to 

provide the Commission with written notice of its 

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. 

BATS has met this requirement. 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

forth in Sections A, B, and C below, of 

the most significant parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend the 

Exchange’s By-Laws, specifically Article 

VI, Section 2, for the purpose of 

allowing additional Directors to serve 

on the Nominating Committee. As 

currently written, the By-Laws allow 

only one Director in his or her final year 

of service on the Board to serve on the 

Nominating Committee, and that 

Director must be a Non-Industry 

Director. The Exchange proposes an 

amendment to Article VI, Section 2 to 

allow any Director whose class 5 is not 

being considered for nomination and 

election in the coming year to serve on 

the Nominating Committee. The 

proposed amendment would expand the 

number of current Directors eligible for 

participation on the Nominating 

Committee, and allow more Directors to 

participate in the Nominating 

Committee and thereby be more closely 

involved in the process of identifying 

candidates to serve as Directors.6

The Exchange believes that more than 

one Director, including Industry 

Directors, should be permitted to serve 

on the Nominating Committee and that 

the current By-Laws, which allow only 

a single Non-Industry Director to serve 

on the Nominating Committee in his or 

her last year of service, is unduly 

restrictive. The Exchange is proposing 

to retain the requirement that the 

number of Non-Industry members of the 

Nominating Committee shall equal or 

exceed the number of Industry members 

on the Nominating Committee and 

believes that this requirement is 

sufficient to ensure adequate 

representation of Industry and NonIndustry interests. 

In addition, as proposed, the 

Exchange would prohibit any Director 

from serving on the Nominating 

Committee if that Director’s class is up 

for reelection, unless that Director is in 

his or her final year of service and is not 

standing for reelection. The Exchange 

believes that this prohibition would 

sufficiently prevent a Director from 

participating in nominating himself or 

herself to the Board. At the same time, 

the Exchange’s proposal is less 

restrictive than the current prohibition 

and would, therefore, enable a larger 

number of current Directors to consider 

participation on the Nominating 

Committee. 

The Exchange has proposed these 

changes because it believes that 

Directors are particularly well-suited to 

nominate Director candidates due to the 

first-hand knowledge they gain through 

service on the Board. In particular, 

Directors serving on the Nominating 

Committee will be qualified to evaluate 

the strengths and weaknesses of the 

Board and find other candidates for 

Director that best fit the needs of the 

Board. Additionally, the experience 

brought by Directors to the Nominating 

Committee will be an asset to any nonDirector members of the Nominating 

Committee through the sharing of 

knowledge and information about the 

operations of the Exchange and the 

Board. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act 7 in general, and furthers the 

objectives of: (1) Section 6(b)(1) of the 

Act,8 which requires a national 

securities exchange to be so organized 

and have the capacity to carry out 

purposes of the Act and to enforce 

compliance by its members and persons 

associated with its members with the 

provisions of the Act; (2) Section 6(b)(3) 

of the Act,9 which requires that the rules 

of a national securities exchange assure 

the fair representation of its members in 

the selection of its directors and 

administration of its affairs, and 

provides that one or more directors shall 

be representative of issuers and 

investors and not be associated with a 

member of the exchange, broker or 

dealer (the ‘‘fair representation 

requirement’’); and Section 6(b)(5) of the 

Act,10 in that it is designed, among other 

things, to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, to remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system, and, in general, to protect 

investors and the public interest. 

Specifically, Members will continue 

to be represented on the Board and on 

key standing committees. Further, the 

Exchange’s proposal does not alter the 

existing compositional requirements of 

the Board, which provide a balance 

between Industry, Member, NonIndustry, and Independent 

representatives, nor does the proposal 

alter the existing compositional balance 

between Industry and Non-Industry 

representatives on the Nominating 

Committee. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change imposes any 

burden on competition. 

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. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

change is non-controversial and 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 11 and Rule 19b– 

4(f)(6) thereunder.12

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission may summarily abrogate 

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 proposal is 

consistent with the Act. Comments may 


cprice-sewell on PRODPC61 with NOTICES
27224 Federal Register / Vol. 74, No. 108 / Monday, June 8, 2009 / Notices 

13 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3The November 7th filing was Amendment No. 

3 to the Plan. The ISE initially filed the Plan on 

September 12, 2007, filed Amendment No. 1 on 

December 10, 2007, and filed Amendment No. 2 on 

April 16, 2008. 

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 e-mail to rulecomments@sec.gov. Please include File 

No. SR–BATS–2009–018 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 No. 

SR–BATS–2009–018. This file number 

should be included on the subject line 

if e-mail 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 inspection and copying in 

the Commission’s Public Reference 

Room, 100 F Street, NE., Washington, 

DC 20549, on official business days 

between the hours of 10 a.m. and 3 p.m. 

Copies of such filing will also 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 No. 

SR–BATS–2009–018 and should be 

submitted on or before June 29, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.13

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–13208 Filed 6–5–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60014; File No. SR–ISE– 

2009–27] 

Self-Regulatory Organizations; 

International Securities Exchange, 

LLC; Notice of Filing of Proposed Rule 

Change To Adopt Rules To Implement 

the Options Order Protection and 

Locked/Crossed Market Plan 

June 1, 2009. 

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 May 11, 

2009, the International Securities 

Exchange, LLC (‘‘ISE’’ or ‘‘Exchange’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I, II, and III below, which Items 

have been prepared by the Exchange. 

The Commission is publishing this 

notice to solicit comments on the 

proposed rule change from interested 

persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The ISE proposes to adopt rules to 

implement the Options Order Protection 

and Locked/Crossed Market Plan (the 

‘‘Plan’’). The text of the proposed rule 

change is available on the ISE’s Web site 

(http://www.ise.com), at the principal 

office of the ISE, 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. 

The Exchange has prepared summaries, 

set forth in sections A, B, and C below, 

of the most significant parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to adopt rules 

to implement the Plan. These rules will 

replace current Chapter 19 of the ISE’s 

rules in their entirety. The proposed 

rules also will amend various other 

rules to accommodate the Plan. 

Background to the Plan and the 

Implementing Rules 

The ISE filed the current version of 

the Plan on November 7, 2008.3 The 

Plan would replace the current Plan for 

the Purpose of Creating and Operating 

an Intermarket Option Linkage (‘‘Old 

Plan’’). The Old Plan requires its 

participant exchanges to operate a 

stand-alone system or ‘‘Linkage’’ for 

sending order-flow between exchanges 

to limit trade-throughs. The Options 

Clearing Corporation (‘‘OCC’’) operates 

the Linkage system. The Linkage rules 

provide for unique types of Linkage 

orders, with a complicated set of 

requirements as to who may send such 

orders and under what conditions. 

While the Linkage largely has 

operated satisfactorily, it is under 

significant strain. When the 

Commission approved the Linkage Plan 

in 2000, average daily volume (‘‘ADV’’) 

in the options market was 

approximately 2.6 million contracts 

across all exchanges. Now the ADV has 

increased to more than 10 million 

contracts, putting added strain on the 

ability of market makers to comply with 

the complex Linkage rules. At the same 

time, the options markets have been 

moving towards quoting in pennies, and 

are quoting in pennies options 

representing over half the total industry 

volume. This greatly increases the 

number of price changes in an option, 

giving rise to greater chances of tradethroughs and missing markets as market 

makers send Linkage orders and have to 

wait for a response. 

Experience in the equities markets 

shows that there is a more efficient way 

to provide price protection in options. 

When first implemented, the Linkage 

represented a vast improvement over 

the then-current equities priceprotection system, which depended on 

the operation of the Intermarket Trading 

System (‘‘ITS’’). The plan governing ITS 

imposed long waiting times for filling 

ITS commitments and a cumbersome 

method for satisfying trade-throughs. 

Learning from the shortcomings of ITS, 

the options Linkage has shorter waiting 

periods and more efficient trade-through 

protections. 

The equity price-protection 

mechanisms have now leapfrogged the 

options Linkage. By adopting Regulation 

NMS in 2005 the Commission 


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