Document ID: SEC-2009-1650-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing of Proposed Rule Change Relating to Foreign Currency Options
Posted Date: 2009-11-24T05:00Z

[Federal Register: November 24, 2009 (Volume 74, Number 225)]
[Notices]               
[Page 61400-61402]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24no09-91]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61010; File No. SR-ISE-2009-87]

 
Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing of Proposed Rule Change Relating to Foreign 
Currency Options

November 16, 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 October 27, 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its rules regarding Foreign Currency 
Options (``FX Options'').\3\ 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.
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    \3\ ISE began trading FX options on April 17, 2007. See 
Securities Exchange Act Release No. 55575 (April 3, 2007), 72 FR 
17963 (April 10, 2007) (SR-ISE-2006-59) (the ``FX Options Filing'').
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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.

[[Page 61401]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    ISE proposes to amend its rules regarding FX Options. Specifically, 
the Exchange proposes to amend ISE Rule 2205 by adding a provision that 
permits the Exchange to list a single strike price of one cent ($0.01) 
for each expiration month for FX Options opened for trading on the 
Exchange.\4\ The proposed one cent strike would be in addition to the 
strike prices listed by the Exchange pursuant to ISE Rule 2205.
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    \4\ The Commission notes that the proposed text for ISE Rule 
2205 is as follows:
    Rule 2205. Series of Foreign Currency Options Open for Trading
    (a)-(b) No Change.
    (c) For each expiration month opened for trading, in addition to 
the strike prices listed by the Exchange pursuant to this Rule 2205, 
the Exchange shall also list a single strike price of one cent 
($0.01).
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    Currently, pursuant to ISE Rule 2205, after a class of options 
contracts on any underlying currency pair has been approved for listing 
and trading, the Exchange may open for trading series of FX Options 
that expire in consecutive monthly intervals (ISE Rule 2205(a)(1)(A)), 
in three or ``cycle'' month intervals (ISE Rule 2205(a)(1)(B)), or that 
have up to 36 months to expiration (ISE Rule 2205(a)(1)(C)). For 
example, pursuant to ISE Rule 2205(a)(1)(A), with respect to each class 
of FX Options, the Exchange may open for trading series of options 
having up to four consecutive expiration months, with the shortest term 
series having no more than two months to expiration. The Exchange may 
also open additional consecutive month series of the same class for 
trading at or about the time a prior consecutive month series expires, 
and the expiration month of each such new series shall normally be the 
month immediately succeeding the expiration month of the then 
outstanding consecutive month series of the same class of options 
having the longest remaining time to expiration. Under this proposed 
rule change, for each such month opened for trading, the Exchange would 
list an additional strike price of one cent.
    The Exchange notes that adding a one cent strike for FX Options 
will result in a single deep in the money call option to provide 
investors with exposure similar to that of spot. The Exchange believes 
creating such exposure provides an opportunity to attract a broader 
range of market participants by offering a product that, in particular, 
accommodates retail spot foreign currency traders.
    The Exchange also believes that a $0.01 strike price would enable 
certain trading strategies that were previously unavailable to 
investors. Specifically, investors would be able to engage in 
strategies that offer similar exposure to a tied-to-spot trade, such as 
a buy-write trade. The proposed new strike would also appeal to 
securities brokers that do not currently offer spot foreign currency 
trading. Many online securities brokers have not offered spot foreign 
currency trading to their customers because it is not a listed and 
centrally-cleared product. ISE's proposed rule change offers such 
brokers an opportunity to expand their offering beyond equities and 
retain customer assets that may otherwise go to spot foreign currency 
trading venues that operate outside of U.S. regulatory jurisdiction.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations under the Act applicable to a national securities exchange 
and, in particular, the requirements of Section 6(b) of the Act.\5\ 
Specifically, the Exchange believes the proposed rule change is 
consistent with Section 6(b)(5) of the Act's \6\ requirements that the 
rules of a national securities exchange be designed to promote just and 
equitable principles of trade, to prevent fraudulent and manipulative 
acts and, in general, to protect investors and the public interest. In 
particular, the proposed rule change will allow the Exchange to list a 
single one cent strike for each expiration month of FX Options opened 
for trading and thereby provide investors with the ability to engage in 
previously unavailable spot foreign currency trading strategies.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The proposed rule change does not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act.

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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will:
    (A) By order approve the proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File No. SR-ISE-2009-87 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-ISE-2009-87. 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, on official business 
days between

[[Page 61402]]

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 
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-
2009-87 and should be submitted on or before December 15, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-28096 Filed 11-23-09; 8:45 am]

BILLING CODE 8011-01-P