Document ID: SEC-2011-1595-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2011-10-18T04:00Z

[Federal Register Volume 76, Number 201 (Tuesday, October 18, 2011)]
[Notices]
[Pages 64417-64419]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-26853]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65534; File No. SR-ISE-2011-58]

Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change Relating to Competitive Market Maker Trading Rights

October 12, 2011.
    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 3, 2011, the International Securities Exchange, LLC 
(the ``Exchange'' or the ``ISE'') filed with the Securities and 
Exchange Commission (``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 refine how it assigns point values to 
options classes for purposes of Competitive Market Maker trading 
rights. The text of the proposed rule change is as follows, with 
deletions marked in [brackets] and additions in italics:

 Rule 802. Appointment of Market Makers

    (a) No change.
    (b) No change.
    (c) Appointments to Competitive Market Makers. Competitive 
market makers may request appointments to options classes traded on 
the Exchange, subject to the trading licensing requirements of Rule 
2013 with respect to index options and Rule 2213 with respect to 
foreign currency options.
    (1) On a quarterly basis, the Exchange shall assign points to 
each options class equal to its percentage of overall industry 
volume (not including exclusively traded index options), rounded 
down to the nearest [tenth] one hundredth of a percentage with a 
maximum of 15 points. New listings [with no industry volume in the 
previous quarter] will be assigned a point value of zero for the 
remainder of the quarter in which it was listed.
    (2) No change.
    (3) No change.
    (d) The Exchange may suspend or terminate any appointment of a 
market maker under this Rule and may make additional appointments 
whenever, in the Exchange's judgment, the interests of a fair and 
orderly market are best served by such action. In the case of an 
Index-Based Product, during the term of that appointment, the 
Exchange may also base a decision to suspend or terminate a Primary 
Market Maker's appointment on the failure of the Primary Market 
Maker to meet the terms of its commitments under paragraph (b)(1) 
above.
    (e) Market Maker Performance. In making appointments to market 
makers, the Exchange may evaluate the performance of market makers 
relating to, among other things, quality of markets, competition 
among market makers, observance of ethical standards, and 
administrative factors. The Exchange may consider any relevant 
information, including but not limited to the results of a market 
maker evaluation questionnaire, trading data, a market maker's 
regulatory history and such other factors and data as may be 
pertinent in the circumstances. Moreover, failure by a market maker 
to meet minimum performance standards may result in, among other 
things: (1) suspension, termination or restriction of an appointment 
to one or more of the options classes appointed to the market maker 
[within the market maker's appointed Group]; (2) restriction of 
appointments to

[[Page 64418]]

additional options classes [in the market maker's appointed Group]; 
or (3) suspension, termination, or restriction of the market makers 
registration.

Supplementary Material to Rule 802

    .01-.02 No change.
* * * * *

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 Exchange recently changed the structure of Competitive Market 
Maker (``CMM'') appointments to give market makers flexibility to 
choose the options classes to which they are appointed.\3\ Under this 
structure, the Exchange assigns points to each options class equal to 
its percentage of overall industry volume (not including exclusively-
traded index options), rounded down to the nearest tenth of a 
percentage. A CMM is then permitted to seek appointments to options 
classes that total twenty points for the first CMM trading right owned 
or leased by a member, and ten points for each subsequent CMM trading 
right owned or leased by the same member.\4\
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    \3\ See Securities Exchange Act Release No. 65100 (Aug. 11, 
2011), 76 FR 51075 (Aug. 17, 2011) (order approving SR-ISE-2011-33).
    \4\ CMMs can select the options classes to which they seek 
appointment, but the Exchange retains the authority to make such 
appointments and to remove appointments from CMMs based on their 
performance. See ISE Rule 802.
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    The Exchange proposes to make three refinements to the point values 
assigned to certain options classes. First, to prevent any one symbol 
from having a disproportionate weight with respect to CMM trading 
rights, the Exchange seeks to cap the total number of points an options 
class is assigned to 15 (equivalent to 15 percent of industry volume). 
Second, since point values are refreshed on a quarterly basis, we seek 
to clarify that any new ISE listings during a quarter will have a point 
value of zero until a point value is determined at the end of the 
quarter. Finally, when assigning point values, the Exchange proposes to 
round down to the nearest hundredth of a percentage, rather than a 
tenth of a percentage, to more precisely reflect an options class' 
percentage of industry volume.
    Finally, the Exchange proposes to make four changes to Rule 802. 
First, the Exchange proposes to add the words `whenever, in the' to 
Rule 802(d). Second, the Exchange proposes to add the words `appointed 
to the market maker' to Rule 802(e)(1). Third, the Exchange proposes to 
delete the words `within the market maker's appointed Group' from Rule 
802(e)(1). Fourth, the Exchange proposes to delete the words `in the 
market maker's appointed Group' from Rule 802(e)(2). The Exchange 
inadvertently failed to make these rule text changes when it recently 
amended Rule 802.\5\
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    \5\ See supra note 3.
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2. Basis
    The basis under the Securities Exchange Act of 1934 (``Exchange 
Act'') for this proposed rule change is the requirement under Section 
6(b)(5) that an exchange have rules that are designed to promote just 
and equitable principles of trade, and to remove impediments to and 
perfect the mechanism for a free and open market and a national market 
system, and in general, to protect investors and the public interest. 
In particular, the proposal will provide clarity to members regarding 
how points are assigned to options classes for purposes of CMM trading 
rights, and assure that the process is administered in an efficient 
manner.

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: (1) Does not 
significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
and (3) by its terms does not become operative for 30 days after the 
date of this filing, 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) \6\ of the Act and Rule 19b-4(f)(6) thereunder.\7\
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    \6\ 15 U.S.C. 78s(b)(3)(A). In addition, Rule 19b-4(f)(6) 
requires the Exchange to give the Commission written notice of the 
Exchange's intent to file 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.
    \7\ 17 CFR 240.19b-4(f)(6).
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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. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule change should be approved or 
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 Exchange 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-2011-58 in 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-2011-58. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your

[[Page 64419]]

comments more efficiently, please use only one method. The Commission 
will post all comments on the Commissions 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 such 
filing also will be available for inspection and copying at the 
principal office of the ISE. 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-2011-58 and should be submitted by November 8, 2011.

    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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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-26853 Filed 10-17-11; 8:45 am]
BILLING CODE 8011-01-P