Document ID: SEC-2008-1563-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2008-11-19T05:00Z

[Federal Register: November 19, 2008 (Volume 73, Number 224)]
[Notices]               
[Page 69701-69703]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19no08-126]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58926; File No. SR-ISE-2008-82]

 
Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change To Temporarily Increase the Number of Additional Quarterly 
Options Series

November 10, 2008.
    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 November 6, 2008, the International Securities Exchange, LLC 
(``Exchange'' or ``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 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 Supplementary Material .03 to Rule 504, 
Quarterly Options Series Pilot Program, to temporarily increase the 
number of additional Quarterly Options Series (``QOS'') in exchange-
traded fund (``ETF'') options from sixty (60) to one hundred (100) that 
may be added by the Exchange. The text of the proposed rule change is 
as follows, with deletions in [brackets] and additions in italics.
Rule 504. Series of Options Contracts Open for Trading
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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* * * * *
Supplementary Material to Rule 504
    .01-.02 No change.
    .03 Quarterly Options Series Pilot Program: The Exchange may list 
and trade options series that expire at the close of business on the 
last business day of a calendar quarter (``Quarterly Options Series''). 
The Exchange may list Quarterly Options Series for up to five (5) 
currently listed options classes that are either index options or 
options on exchange traded funds (``ETF''). In addition, the Exchange 
may also list Quarterly Options Series on any options classes that are 
selected by other securities exchanges that employ a similar pilot 
program under their respective rules.
    (a)-(g) No change.
    (h) During the last quarter of 2008 (and for the new expiration 
month being added after December Quarterly Options Series expiration), 
the Exchange may list up to one hundred (100) additional series per 
expiration month for each Quarterly Options Series in ETF options.
* * * * *

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 temporarily increase 
the number of additional QOS in ETF options from sixty (60) to one 
hundred (100) that may be added by the Exchange. To effect this change, 
the Exchange is proposing to add new subparagraph (h) to Supplementary 
Material .03 to Rule 504.
    Because of the current, unprecedented market conditions, the 
Exchange has received requests from market participants to add lower 
priced strikes for QOS in the Energy Select Sector SPDR (``XLE''), the 
DIAMONDS Trust, Series 1 (``DIA'') and the Standard and Poor's 
Depositary Receipts/SPDRs (``SPY''). For example, for December 2008 
expiration, there is demand for strikes (a) ranging from $20 up through 
and including $40 for XLE, (b) ranging from $60 up through and 
including $75 for DIA, and (c) ranging from $74 up through and 
including $85 for SPY. These strikes are much lower than those 
currently listed for which there is open interest.
    However, under current Rule 504, the Exchange cannot honor these 
requests because the maximum number of additional series, sixty (60), 
has already been listed. The Exchange is therefore seeking to 
temporarily increase the number of additional QOS that may be added to 
one hundred (100). The increase of additional series would be permitted 
immediately for expiration months currently listed and for expiration 
months added throughout the last quarter of 2008, including the new 
expiration month added after December 2008 expiration.
    The Exchange believes that this proposal is reasonable and will 
allow for more efficient risk management. The Exchange believes this 
proposal will facilitate the functioning of the Exchange's market and 
will not harm investors or the public interest. The Exchange believes 
that user demand and the recent downward price movements in the 
underlying ETFs warrants a temporary increase in the number of strikes 
for all QOS in ETF options. Currently, the Exchange list QOS in five 
ETF options: (1) Nasdaq-100 Index Tracking Stock (``QQQQ''); (2) 
iShares Russell 2000 Index Fund (``IWM''); (3) DIA; (4) SPY; and (5) 
XLE. The below chart provides the historical closing prices of these 
ETFs over the past couple of months:

[[Page 69702]]

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                ETF                   10/27/08     10/13/08     10/6/08      9/30/08      8/29/08      7/31/08
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QQQQ..............................        28.69        35.13        34.86        38.91        46.12        45.46
IWM...............................        44.86        56.98        59.72        68.00        73.87        71.32
DIA...............................        80.26        95.03        99.90       108.36       115.45       113.70
SPY...............................        83.95       101.35       104.72       115.99       128.79       126.83
XLE...............................        40.86        50.55        54.89        63.30        74.65        74.40
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    The additional series will enable the Exchange to list in-demand, 
lower priced strikes.
    The Exchange represents that it has the necessary systems capacity 
to support the new options series that will result from this proposal. 
Further, as proposed, the Exchange notes that these series would 
temporarily become part of the pilot program and will be considered by 
the Commission when the Exchange seeks to renew or make permanent the 
pilot program in the future. In addition, the Exchange states that in 
the event that current market volatility continues, it may seek to 
continue (through a rule filing) the time period during which the 
additional series proposed by this filing may be added.
2. Statutory Basis
    Because the current rule proposal is responsive to the current, 
unprecedented market conditions, is limited in scope as to QOS in ETF 
options and as to time, and because the additional new series can be 
added without presenting capacity problems, the Exchange believes the 
rule proposal is consistent with 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.\3\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with the Section 6(b)(5) Act \4\ requirements that the rules 
of an 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.
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    \3\ 15 U.S.C. 78f(b).
    \4\ 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 rule does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; or (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, the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \5\ and Rule 19b-4(f)(6) 
thereunder.\6\
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    \5\ 15 U.S.C. 78s(b)(3)(A).
    \6\ 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. The Commission deems this requirement to be met.
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    The Exchange has asked the Commission to waive the operative delay 
to permit the proposed rule change to become operative prior to the 
30th day after filing. The Commission has determined that waiving the 
30-day operative delay of the Exchange's proposal is consistent with 
the protection of investors and the public interest because such waiver 
will enable ISE to better meet customer demand in light of recent 
increased volatility in the marketplace.\7\ Therefore, the Commission 
designates the proposal operative upon filing.
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    \7\ 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 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 rule-comments@sec.gov. Please include 
File No. SR-ISE-2008-82 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-ISE-2008-82. 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 Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying

[[Page 69703]]

information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File No. SR-ISE-2008-82 and should be submitted on or before December 
10, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-27421 Filed 11-18-08; 8:45 am]

BILLING CODE 8011-01-P