Document ID: SEC-2012-0326-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2012-02-27T05:00Z

[Federal Register Volume 77, Number 38 (Monday, February 27, 2012)]
[Notices]
[Pages 11614-11615]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-4420]

[[Page 11614]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66432; File No. SR-ISE-2012-08]

Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule 
Change To Expand the Short Term Option Series Program

February 21, 2012.
    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 February 8, 2012, the International Securities Exchange, LLC 
(the ``Exchange'' or the ``ISE'') filed with the Securities and 
Exchange Commission (the ``Commission'') the proposed rule change as 
described in Items I and II 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 to expand the Short Term 
Option Series Program. The text of the proposed rule change is 
available on the Exchange's Web site 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 Exchange 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 amend ISE Rules 504 
and 2009 to expand the Short Term Option Series Program (``STOS 
Program'').\3\ Currently, ISE may select up to 25 currently listed 
option classes on which short term option series may be opened in the 
STOS Program. The Exchange proposes to increase this to thirty option 
classes to participate in the STOS Program. This is a competitive 
filing and is based on recently approved filings submitted by The 
NASDAQ Stock Market LLC for the NASDAQ Options Market (``NOM'') and 
NASDAQ OMX PHLX, Inc. (``PHLX'').\4\
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    \3\ The Exchange adopted the STOS Program on a pilot basis in 
2005. See Securities Exchange Act Release No. 52012 (July 12, 2005), 
70 FR 41246 (July 18, 2005) (SR-ISE-2005-17). The STOS Program was 
approved on a permanent basis in 2010. See Securities Exchange Act 
Release No. 62444 (July 2, 2010), 75 FR 39595 (July 9, 2010) (SR-
ISE-2010-72).
    \4\ See Securities Exchange Act Release Nos. 65775 (November 17, 
2011), 76 FR 72473 (November 23, 2011) (SR-NASDAQ-2011-138) and 
65776 (November 17, 2011), 76 FR 72482 (November 23, 2011) (SR-PHLX-
2011-131).
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    On November 17, 2011, the Exchange amended the STOS Program by 
increasing the number of strikes that may be listed per class (from 20 
to 30) that participates in the STOS Program, and by increasing the 
number of classes (from 15 to 25) that are eligible to participate in 
the STOS.\5\ On that same day, NOM and PHLX each increased the number 
of classes that are eligible to participate in their STOS Programs from 
15 classes to 30 classes. As a result, ISE is competitively 
disadvantaged since it operates a substantially similar STOS Program as 
NOM and PHLX but is limited to selecting only 25 classes that may 
participate in its STOS Program (whereas PHLX and NOM may each select 
30 classes).\6\
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    \5\ See Securities Exchange Act Release No. 65771 (November 17, 
2011), 76 FR 72472 (November 23, 2011) (SR-ISE-2011-60).
    \6\ ISE is permitted to list short term options ``on any option 
classes that are selected by other securities exchanges that employ 
a similar program under their respective rules.'' See Supplementary 
Material .02 to ISE Rule 504, and Supplementary Material .01 to ISE 
Rule 2009.
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    The Exchange is not proposing any changes to these additional STOS 
Program limitations other than to increase from 25 to 30 the number of 
option classes that may participate in the STOS Program.
    ISE notes that the STOS Program has been well-received by market 
participants, in particular by retail investors. ISE believes a modest 
increase to the number of classes that may participate in the STOS 
Program, such as the one proposed in this rule filing, will permit ISE 
to meet increased customer demand and provide market participants with 
the ability to hedge in a greater number of option classes.
    With regard to the impact of this proposal on system capacity, ISE 
has analyzed its capacity and represents that it and the Options Price 
Reporting Authority (``OPRA'') have the necessary systems capacity to 
handle the potential additional traffic associated with trading of an 
expanded number of classes that participate in the STOS Program.
    The proposed increase to the number of classes eligible to 
participate in the STOS Program is required for competitive purposes as 
well as to ensure consistency and uniformity among the competing 
options exchanges that have adopted similar STOS Programs.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Securities Exchange Act of 1934 \7\ (the 
``Act'') in general, and furthers the objectives of Section 6(b)(5) of 
the Act \8\ in particular, in that it is 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 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. The Exchange believes that expanding the current short 
term options program will result in a continuing benefit to investors 
by giving them more flexibility to closely tailor their investment 
decisions and hedging decisions in greater number of securities. The 
Exchange believes that expanding the current program would provide the 
investing public and other market participants increased opportunities 
because an expanded program would provide market participants 
additional opportunities to hedge their investment thus allowing these 
investors to better manage their risk exposure. While the expansion of 
the STOS Program will generate additional quote traffic, the Exchange 
does not believe that this increased traffic will become unmanageable 
since the proposal remains limited to a fixed number of classes. 
Further, the Exchange does not believe that the proposed rule change 
will result in a material proliferation of additional series because 
the number of series per class remains limited, and the Exchange does 
not believe that the additional

[[Page 11615]]

price points will result in fractured liquidity.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 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

    Because the foregoing proposed rule change does not significantly 
affect the protection of investors or the public interest, does not 
impose any significant burden on competition, and, by its terms, does 
not 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 \9\ and Rule 19b-
4(f)(6) thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
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.
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    The Exchange has requested that the Commission waive the 30-day 
operative delay. The Commission believes that waiver of the operative 
delay is consistent with the protection of investors and the public 
interest because the proposal is substantially similar to those of 
other exchanges that have been approved by the Commission that permit 
such exchanges to select up to 30 classes to participate in their 
respective short term option series programs.\11\ Therefore, the 
Commission designates the proposal operative upon filing.\12\
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    \11\ See supra note 4.
    \12\ For purposes only of waiving the 30-day operative delay, 
the Commission has 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 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-ISE-2012-08 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-2012-08. 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 
a.m. and 3 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-2012-08 and should be 
submitted on or before March 19, 2012.
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    \13\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-4420 Filed 2-24-12; 8:45 am]
BILLING CODE 8011-01-P