Document ID: SEC-2011-1819-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2011-11-23T05:00Z

[Federal Register Volume 76, Number 226 (Wednesday, November 23, 2011)]
[Notices]
[Pages 72472-72473]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-30195]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65771; File No. SR-ISE-2011-60]

Self-Regulatory Organizations; International Securities Exchange, 
LLC; Order Granting Approval of Proposed Rule to Expand the Short Term 
Options Series Program

November 17, 2011.

I. Introduction

    On September 23, 2011, 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 (``Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to expand the Short Term Options 
Series Program (``STOS Program''). The proposed rule change was 
published for comment in the Federal Register on October 13, 2011.\3\ 
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\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 65503 (October 6, 2011), 
76 FR 63691 (``Notice'').
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II. Description of the Proposal

    The proposed rule change seeks to amend ISE Rules 504 and 2009 to

[[Page 72473]]

expand the STOS Program \4\ so that the Exchange may select up to 25 
option classes to participate in the STOS Program \5\ and list up to 30 
Short Term Option Series (``STOS Options'') for each option class that 
participates in the Exchange's STOS Program.\6\ Currently, the Exchange 
may open no more than 15 option classes and no more than 20 series for 
each expiration date in those classes.\7\ The Exchange proposed no 
other changes to the STOS Program.
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    \4\ The Exchange adopted the STOS Program on a pilot basis in 
2005. See Securities Exchange Act Release No. 52012 (July 12, 2005), 
70 FR 41246 (July 18, 2005) (SR-ISE-2005-17). The STOS Program was 
approved on a permanent basis in 2010. See Securities Exchange Act 
Release No. 62444 (July 2, 2010), 75 FR 39595 (July 9, 2010) (SR-
ISE-2010-72).
    \5\ The Exchange previously increased the total number of option 
classes that may participate in the STOS Program from five to 15. 
See Securities Exchange Act Release No. 63878 (February 9, 2011), 76 
FR 8796 (February 15, 2011) (SR-ISE-2011-08).
    \6\ The Exchange previously increased the number of permissible 
series per STOS class from seven to 20 series. See Securities 
Exchange Act Release No. 62444 (July 2, 2010), 75 FR 39595 (July 9, 
2010) (SR-ISE-2010-72).
    \7\ However, if the Exchange opens less than 20 series for an 
expiration date, additional series may be opened with that 
expiration date when the Exchange deems it necessary to maintain an 
orderly market, to meet customer demand, or when the market price of 
the underlying security moves substantially from the exercise price 
or prices of the series already opened. Any additional series listed 
by the Exchange shall have strike prices within 30% above or below 
the current price of the underlying security. The Exchange may also 
open additional series of Short Term Option Series with strike 
prices more than 30% above or below the current price of the 
underlying security if demonstrated customer interest exists for 
such series, as expressed by institutional, corporate, or individual 
customers or their brokers. Market-makers trading for their own 
account shall not be considered when determining customer interest 
under this provision. See Supplementary Material .02(d) to Rule 504 
and Supplementary Material .01(d) to Rule 2009.
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    In the Notice, the Exchange stated that the principal reason for 
the proposed expansion is customer demand for adding, or not removing, 
classes from the STOS Program. Specifically, ISE cited an increased 
demand for more series when market-moving events, such as corporate 
events and large price swings, have occurred during the life span of an 
affected STOS class. Currently, if the maximum number of series has 
been reached, the Exchange must delete or delist certain series in 
order to make room for more in-demand series.

III. Discussion

    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.\8\ 
Specifically, the Commission finds that the proposal is consistent with 
Section 6(b)(5) of the Act,\9\ which requires, among other things, that 
the rules of a national securities exchange be designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in facilitating transactions in securities, 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 
proposal strikes a reasonable balance between the Exchange's desire to 
offer a wider array of products and the need to avoid unnecessary 
proliferation of options series.
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    \8\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \9\ 15 U.S.C. 78f(b)(5).
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    In approving this proposal, the Commission notes that the Exchange 
has analyzed its capacity and represents that it and the Options Price 
Reporting Authority (``OPRA'') have the necessary systems capacity to 
handle the potential additional traffic associated with trading of an 
expanded number of classes and series in the STOS Program. The 
Commission expects the Exchange to monitor the trading volume 
associated with the additional options series listed as a result of 
this proposal and the effect of these additional series on market 
fragmentation and on the capacity of the Exchange's, OPRA's, and 
vendors' automated systems.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-ISE-2011-60) be, and it 
hereby is, approved.
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    \10\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-30195 Filed 11-22-11; 8:45 am]
BILLING CODE 8011-01-P