Document ID: SEC-2010-1336-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2010-09-02T04:00Z

[Federal Register: September 2, 2010 (Volume 75, Number 170)]
[Notices]               
[Page 53991-53992]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02se10-94]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62772; File No. SR-ISE-2010-91]

 
Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing of Proposed Rule Change To Adopt a Pilot Program 
To List Additional Expiration Months for Each Class of Options Opened 
for Trading on the Exchange

August 26, 2010.
    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 August 25, 2010, the International Securities Exchange, LLC 
(the ``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 
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 ISE is proposing to amend its rules to adopt a pilot program to 
list additional expiration months for each class of options opened for 
trading on the Exchange. The text of the proposed rule change is 
provided below (italics indicate additions; [brackets] indicate 
deletions):

Rule 504. Series of Options Contracts Open for Trading

* * * * *

Supplementary Material to Rule 504

    .01-.07 No Change
    .08 Additional Expiration Months Pilot Program (``Pilot Program''). 
For a Pilot Program expiring on [insert date 12 months from the next 
full month from approval], the Exchange may select up to 20 options 
classes for which it may list up to two (2) additional expiration 
months in addition to the expiration months the Exchange currently 
lists pursuant to Rule 504(e). Additional expiration months listed 
pursuant to this Supplementary Material .08 will be the nearest months 
that were not previously listed. The Exchange may also list additional 
expiration months for option classes that are selected by other 
securities exchanges that employ a similar program under their 
respective rules.
* * * * *

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 self-regulatory organization 
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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its rules to adopt a pilot program 
to list additional expiration months for each class of options opened 
for trading on the Exchange.
    Pursuant to ISE Rule 504(e), the Exchange currently opens four 
expiration months for each class of options open for trading on the 
Exchange: the first two being the two nearest months, regardless of the 
quarterly cycle on which that class trades; the third and fourth being 
the next two months of the quarterly cycle previously designated by the 
Exchange for that specific class. For example, if the Exchange listed 
in late May a new equity option on a January-April-July-October 
quarterly cycle, the Exchange would list the two nearest term months 
(June and July) and the next two expiration months of the cycle 
(October and January). When the June series expires, the Exchange would 
add the August series as the next nearest month. And when the July 
series expire, the Exchange would add the September series as the next 
month of the cycle.
    The Exchange believes that there is market demand for a greater 
number of expiration months. The Exchange therefore proposes to adopt a 
pilot program pursuant to which it will list up to an additional two 
expiration months, for a total of six expiration months for each class 
of options open for trading on the Exchange. The proposal will become 
effective on a pilot basis for a period twelve months to commence on 
the next full month after approval is received to establish the pilot 
program. Under the proposal, the additional months listed pursuant to 
the pilot program will result in four consecutive expiration months 
plus two months from the quarterly cycle. For example, for option 
classes in the January cycle that have expiration months of June, July, 
October, and January, the Exchange would additionally list the August 
and September series. For option classes in the February quarterly 
cycle that have expiration months of October, November, February and 
May, the Exchange would additionally list the December and January 
series. Under the proposal, no additional LEAP series will be created.
    The Exchange seeks to limit the proposed rule change to the 20 most 
actively traded options classes. By limiting the pilot to a small 
number of classes, the Exchange will be able to gauge interest in the 
pilot while limiting any additional demands on system resources. ISE 
estimates that this pilot could add up to six or seven percent to 
current quote traffic, although changes in market maker quoting 
behavior will likely reduce that increase by up to half. The Exchange 
believes that a limited pilot is a prudent step to determine actual 
market demand for additional expiration months.
    If the Exchange were to propose an extension or an expansion of the 
pilot program, or should the Exchange propose to make the pilot program 
permanent, ISE will submit, along with any filing proposing such 
amendments to the pilot program, a pilot program report (``Report'') 
that will provide an analysis of the pilot program covering the first 
nine months of the pilot program and shall submit the Report to the 
Commission at least sixty (60) days prior to the expiration date of the 
pilot program. The Report will include, at a minimum: (1) Data and 
written analysis on the open interest and trading volume in the classes 
for which additional expiration months were opened; (2) an assessment 
of the appropriateness of the option classes selected for the pilot 
program; (3) an assessment of the impact of the pilot program on the 
capacity on ISE, OPRA and on market data vendors (to the extent data 
from market data vendors is available); (4) any capacity problems or 
other problems that arose during the operation of the pilot program and 
how

[[Page 53992]]

ISE addressed such problems; (5) any complaints that ISE received 
during the operation of the pilot program and how ISE addressed them; 
and (6) any additional information that would assist the Commission in 
assessing the operation of the pilot program.
    Finally, the Exchange represents that it has the necessary systems 
capacity to support new options series that will result from the 
introduction of additional expiration months listed pursuant to this 
proposed rule change.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \3\ of the 
Securities Exchange Act of 1934 (the ``Act''), in general, and furthers 
the objectives of Section 6(b)(5) \4\ in particular, in that it is 
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, and to remove impediments to and perfect the mechanisms of 
a free and open market and a national market system in a manner 
consistent with the protection of investors and the public interest. In 
particular, the Exchange believes listing additional near-term 
expiration months will offer investors more variety in trading options 
series that were previously not available. The Exchange believes this 
proposed rule change will also generate additional volume in these 
option classes without significantly taxing system resources.
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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.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove such proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be 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 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 Number SR-ISE-2010-91 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-2010-91. 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 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-2010-91 and should be 
submitted on or before September 23, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-21930 Filed 9-1-10; 8:45 am]
BILLING CODE 8010-01-P