Document ID: SEC-2009-0087-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2009-01-22T05:00Z

[Federal Register: January 22, 2009 (Volume 74, Number 13)]
[Notices]               
[Page 4062-4063]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22ja09-81]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59250; File No. SR-ISE-2008-90]

 
Self-Regulatory Organizations; International Securities Exchange, 
LLC; Order Approving Proposed Rule Change Relating to Alternative 
Primary Market Makers

January 14, 2009.

I. Introduction

    On November 21, 2008, the International Securities Exchange, LLC 
(``ISE'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (the ``Act''),\1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change relating to the introduction of 
Alternative Primary Market Makers (``Alternative PMMs'') on the 
Exchange. The proposed rule change was published for comment in the 
Federal Register on December 15, 2008.\3\ The Commission received no 
comments on the proposal. This order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 59053 (December 4, 
2008), 73 FR 76078 (the ``Notice'').
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II. Description of the Proposal

    The Exchange proposes to amend ISE Rule 802 to provide for 
Alternative PMMs. Currently, when the ISE lists new options classes, it 
allocates them to one of its Primary Market Makers (``PMMs'') under ISE 
Rule 802. Pursuant to power delegated to the Board, an Allocation 
Committee, which consists of representatives of Electronic Access 
Members, makes allocation decisions according to the guidelines 
contained in ISE Rule 802. Under ISE Rule 802, allocations are 
voluntary.\4\ To better enable the Exchange to list and retain options 
classes that PMMs do not wish to trade, ISE proposes to appoint 
Competitive Market Makers (``CMMs'') that meet certain qualifications 
as Alternative PMMs when none of the PMMs want an allocation.\5\
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    \4\ According to ISE, at times, the Exchange is unable to list 
new products because existing PMMs are not interested in trading the 
options class. At other times, ISE must delist certain products due 
to lack of PMM interest. ISE represents that this occurs most 
frequently with respect to options on stocks that have pending 
corporate actions and options products that are not listed at any 
other options exchange. ISE believes that despite the lack of PMM 
interest, these products may be of interest to other market making 
firms at the Exchange.
    \5\ Only CMMs that own or lease CMM Rights shall be eligible to 
be appointed as an Alternative PMM. That is, Electronic Access 
Members acting as market makers in the Second Market will not be 
eligible to be appointed as Alternative PMMs.
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    Under the proposal, if no PMMs or Second Market PMMs (as 
applicable) want the allocation, the Alternative PMMs would be offered 
the opportunity to serve as PMM in the options class in accordance with 
the Exchange's regular allocation procedures. Once appointed to an 
options class, the Alternative PMM would have all of the 
responsibilities and privileges of a PMM under the ISE Rules with 
respect to all appointed options classes.\6\ If an Alternative PMM 
ceases trading of an options class, that options class will be 
reallocated by the Exchange. An Alternative PMM will not have any 
transferable rights in options classes to which it is appointed nor 
will it have any PMM voting rights.
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    \6\ For example, Alternative PMMs would enjoy privileges that 
include, among other things, participation rights and small order 
execution preference while accepting responsibilities that include, 
among other things, the obligation to provide continuous quotations 
in the options class to which the Alternative PMM is appointed, and 
the obligation to conduct the opening rotation on a daily basis for 
as long as the Alternative PMM is appointed to that options class.
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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.\7\ 
In particular, the Commission finds that the proposal is consistent 
with Section 6(b)(5) of the Act,\8\ which requires that an exchange 
have rules designed 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.
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    \7\ In approving this proposed rule change, the Commission notes 
that it has considered the proposed rule's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that the proposed rule change, which is 
intended to allow the Exchange to allocate more new products and to 
facilitate the continued listing of existing products, is consistent 
with the Act. The Commission believes that the introduction of 
Alternative PMMs on

[[Page 4063]]

the Exchange should add liquidity to the market in the options classes 
that PMMs on the Exchange decline to seek an allocation, and therefore 
should provide trading opportunities that should benefit all market 
participants. In addition, the Commission notes that Alternative PMMs 
will have all of the responsibilities and all of the privileges of a 
PMM under the ISE's rules with respect to all appointed options 
classes.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\9\ that the proposed rule change (SR-ISE-2008-90) be, and hereby 
is, approved.
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    \9\ 15 U.S.C. 78s(b)(2).
    \10\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-1230 Filed 1-21-09; 8:45 am]

BILLING CODE 8011-01-P