Document ID: SEC-2015-0069-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2015-01-12T05:00Z

[Federal Register Volume 80, Number 7 (Monday, January 12, 2015)]
[Notices]
[Pages 1559-1560]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-00218]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73999; File No. SR-ISE-2014-52]

Self-Regulatory Organizations; International Securities Exchange, 
LLC; Order Granting Approval of Proposed Rule Change Regarding the 
Short Term Option Series Program

January 6, 2015.

I. Introduction

    On November 6, 2014, 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 extend the current $0.50 
strike price intervals in non-index options to short term options with 
strike prices less than $100. The proposed rule change was published 
for comment in the Federal Register on November 24, 2014.\4\ The 
Commission received no comment letters on the proposal. This order 
approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
    \4\ See Securities Exchange Act Release No. 73633 (November 18, 
2014), 79 FR 69974 (``Notice'').
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II. Description of the Proposed Rule Change

    On any Thursday or Friday that is a business day, the Exchange 
currently may list short term option series in designated option 
classes that expire at the close of business on each of the next five 
Fridays that are business days and

[[Page 1560]]

are not Fridays in which monthly or quarterly options expire.\5\ These 
short term option series may be listed in strike price intervals of 
$0.50, $1, or $2.50 depending on the strike price and whether the 
option trades in dollar increments in the related monthly 
expiration.\6\ Specifically, the Exchange may list short term option 
series at strike price intervals of $0.50 or greater where the strike 
price is less than $75, or for option classes that trade in one dollar 
increments in the related non-short term option, $1 or greater where 
the strike price is between $75 and $150, and $2.50 or greater where 
the strike price is above $150.\7\ During the month prior to expiration 
of an option class that is selected for the Short Term Option Series 
Program, the strike price intervals for the related non-short term 
option shall be the same as the strike price intervals for the short 
term option.\8\
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    \5\ See Supplementary Material .02 to ISE Rule 504.
    \6\ See Supplementary Material .12 to ISE Rule 504.
    \7\ Id.
    \8\ See Supplementary Material .02(e) to ISE Rule 504.
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    The Exchange also currently operates a $2.50 Strike Price Program 
that permits monthly expiration options in classes admitted to the 
$2.50 Strike Price Program to trade in $2.50 intervals where the strike 
price is greater than $25 but less than $50; or between $50 and $100 if 
the strikes are no more than $10 from the closing price of the 
underlying stock in its primary market on the preceding day.\9\ In 
certain instances, these strike price parameters conflict with the 
strike prices allowed for related non-short term options as dollar 
strikes between $75 and $100 otherwise allowed under the Short Term 
Option Series Program may be within $0.50 of strikes listed pursuant to 
the $2.50 Strike Price Program. As a result, the Exchange has proposed 
to amend Supplementary Material .12 to Rule 504 to extend the $0.50 
strike price intervals currently allowed for short term options with 
strike prices less than $75 to short term options with strike prices 
less than $100. With this proposed change, short term options in non-
index option classes will trade in: (1) $0.50 or greater intervals for 
strike prices less than $100, or for option classes that trade in one 
dollar increments in the related non-short term option; (2) $1 or 
greater intervals for strike prices that are between $100 and $150; and 
(3) $2.50 or greater intervals for strike prices above $150.
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    \9\ See ISE Rule 504(g). The term ``primary market'' is defined 
in ISE Rule 100(a)(37) as the principal market in which an 
underlying security is traded.
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    With regard to the impact of the proposal on system capacity, the 
Exchange states that it has analyzed its capacity and represents that 
it and the Options Price Reporting Authority (``OPRA'') have the 
necessary systems capacity to handle any potential additional traffic 
associated with this proposed rule change.\10\ In addition, the 
Exchange states that it believes that its members will not experience a 
capacity issue as a result of this proposal.\11\ Furthermore, the 
Exchange states that it does not believe the proposed rule change will 
cause fragmentation of liquidity.\12\
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    \10\ See Notice, supra note 4, at 69975.
    \11\ Id.
    \12\ Id.
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III. Discussion and Commission Findings

    After careful review, 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.\13\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act,\14\ which 
requires, among other things, that the rules of a national securities 
exchange be designed to promote just and equitable principles of trade, 
to prevent fraudulent and manipulative acts, 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 Commission believes that the proposed change may provide 
the investing public and other market participants more flexibility to 
closely tailor their investment and hedging decisions in short term 
options, as well as in related non-short term options, thus allowing 
them to better manage their risk exposure.
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    \13\ In approving the proposed rule change, the Commission has 
considered its impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \14\ 15 U.S.C. 78f(b)(5).
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    In approving this proposal, the Commission notes that the Exchange 
has represented that it and OPRA have the necessary systems capacity to 
handle the potential additional traffic associated with this proposed 
rule change.\15\ The Exchange further stated that it believes its 
members will not have a capacity issue as a result of the proposal and 
that it does not believe this expansion will cause fragmentation of 
liquidity.\16\
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    \15\ See Notice, supra note 4, at 69975.
    \16\ Id.
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act 
\17\ that the proposed rule change (SR-ISE-2014-52) be, and hereby is, 
approved.
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    \17\ 15 U.S.C. 78f(b)(2).
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    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).

Brent J. Fields,
Secretary.
[FR Doc. 2015-00218 Filed 1-9-15; 8:45 am]
BILLING CODE 8011-01-P