Document ID: SEC-2012-0354-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2012-03-02T05:00Z

[Federal Register Volume 77, Number 42 (Friday, March 2, 2012)]
[Notices]
[Pages 12900-12901]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-5082]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66471; File No. SR-ISE-2012-10]

Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change To Amend the Exchange's Obvious Error Rule

February 27, 2012.
    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 February 22, 2012, 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, II, and III 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 Rule 720 regarding Obvious Errors. 
The proposed rule change will re-define theoretical price 
(``Theoretical Price'') for the purposes of determining whether an 
execution price constitutes an obvious error (``Obvious Error''). 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 Obvious Error rules and procedures in the ISE Rules provide 
objective criteria by which certain transactions may be analyzed if 
believed to have been executed at erroneously high or low prices. ISE 
Rule 720 currently defines the Theoretical Price of an options series, 
if the series is traded on at least one other options exchange, as 
``the last bid price with respect to an erroneous sell transaction, and 
last offer price with respect to an erroneous buy transaction, just 
prior to the trade disseminated by the competing options exchange that 
has the most liquidity in that option; or if there are no quotes for 
comparison purposes, as determined by designated personnel in the 
Exchange's market control center.''
    The proposed rule change would re-define Theoretical Price to mean, 
with respect to options series traded on at least one other options 
exchange, either the last National Best Bid price (with respect to an 
erroneous sell transaction) or the last National Best Offer price (with 
respect to an erroneous buy transaction), just prior to the trade in 
question. The proposed new definition of Theoretical Price will provide 
the Exchange's market control center with a clearly defined measure of 
the price on which to base their determination as to whether or not a 
particular transaction resulted from an erroneous price thus [sic] was 
an obvious error.\3\ This proposed rule change would continue to permit 
the Exchange's market control center to establish the Theoretical Price 
when there are no quotes available for comparison purposes.
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    \3\ The Exchange notes that Boston Options Exchange (``BOX'') 
uses the NBBO to determine the theoretical price of an option. See 
BOX Chapter V, Sec. 20.
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    As this proposed rule change will eliminate any comparison to the 
``competing options exchange that has the most liquidity in that 
option,'' the Exchange proposes to remove Supplementary Material .06 to 
ISE Rule 720.
2. Basis
    The Exchange believes that this proposed rule change is consistent 
with the requirements of Section 6(b) of the Securities Exchange Act of 
1934 (``Exchange Act''),\4\ in general, and Section 6(b)(5) of the 
Exchange Act,\5\ in particular, in that it is designed to promote just 
and equitable principles of trade, to prevent fraudulent and 
manipulative acts, 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 proposed rule change will establish an objective definition of 
Theoretical Price when determining whether a particular transaction was 
or was not an Obvious Error.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 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

[[Page 12901]]

19(b)(3)(A) \6\ of the Act and Rule 19b-4(f)(6) \7\ thereunder. The 
Exchange provided 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 the proposed rule change.
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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4(f)(6).
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    The proposed rule change will offer Exchange Members the same 
potential for relief that is available at other options exchanges for 
certain obvious errors. Further, the proposed rule change is similar to 
rules currently in place at BOX. For the foregoing reasons, this rule 
filing qualifies for immediate effectiveness as a ``non-controversial'' 
rule change under paragraph (f)(6) of Rule 19b-4 of the Act, as it does 
not raise any new, unique or substantive issues, and is beneficial for 
competitive purposes and to promote a free and open market for the 
benefit of investors.
    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-2012-10 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-2012-10. 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-2012-10 and should be 
submitted on or before March 23, 2012.

    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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-5082 Filed 3-1-12; 8:45 am]
BILLING CODE 8011-01-P