Document ID: SEC-2008-1624-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2008-12-01T05:00Z

[Federal Register: December 1, 2008 (Volume 73, Number 231)]
[Notices]               
[Page 72887-72889]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01de08-137]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58997; File No. SR-ISE-2008-88]

 
Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change To List Options on the Mini-Nasdaq-100 Index at $1 Strike Price 
Intervals

November 21, 2008.
    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 November 18, 2008, the International Securities Exchange, LLC 
(``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 self-
regulatory organization. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The ISE proposes to amend certain of its rules to allow the 
Exchange to list options on the Mini-Nasdaq-100 Index (``MNX''), which 
is based on 1/10th the value of the Nasdaq-100 Index, at $1 strike 
price intervals. The text of the proposed rule change is as follows, 
with additions italicized:
Rule 504. Series of Options Contracts Open for Trading
    (a)--(g) no change.
Supplementary Material To Rule 504
    .01--.03 no change.
    .04 Notwithstanding Supplementary Material .01 above, the intervals 
between strike prices for Mini-Nasdaq-100 Index (``MNX'' or ``Mini-
NDX'') options series shall be determined in accordance with Rule 
2009(c)(5).
* * * * *
Rule 2009. Terms of Index Options Contracts
    (a)--(b) no change.
    (c) Procedures for Adding and Deleting Strike Prices. The 
procedures for adding and deleting strike prices for index options are 
provided in Rule 504, as amended by the following:
    (1)--(4) no change.
    (5) Notwithstanding Rule 2009(c)(1), the interval between strike 
prices of series of Mini-Nasdaq-100 Index (``MNX'' or ``Mini-NDX'') 
options will be $1 or greater, subject to following conditions:
    (i) Initial Series. The Exchange may list series at $1 or greater 
strike price intervals for Mini-NDX options, and will list at least two 
strike prices above and two strike prices below the current value of 
MNX at about the time a series is opened for trading on the Exchange. 
The Exchange shall list strike prices for Mini-NDX options that are 
within 5 points from the closing value of MNX on the preceding day.
    (ii) Additional Series. Additional series of the same class of 
Mini-NDX options may be opened for trading on the Exchange when the 
Exchange deems it necessary to maintain an orderly market, to meet 
customer demand or when the underlying MNX moves substantially from the 
initial exercise price or prices. To the extent that any additional 
strike prices are listed by the Exchange, such additional strike prices 
shall be within thirty percent (30%) above or below the closing value 
of MNX. The Exchange may also open additional strike prices that are 
more than 30% above or below the current MNX value provided that 
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. In addition to 
the initial listed series, the Exchange may list up to sixty (60) 
additional series per expiration month for each series in Mini-NDX 
options.
    (iii) The Exchange shall not list LEAPS on Mini-NDX options at 
intervals less than $5.
    (iv)(A) Delisting Policy. With respect to Mini-NDX options added 
pursuant to the above paragraphs, the Exchange will, on a monthly 
basis, review series that are outside a range of five (5) strikes above 
and five (5) strikes below the current value of MNX, and delist series 
with no open interest in both the

[[Page 72888]]

put and the call series having a: (i) Strike higher than the highest 
strike price with open interest in the put and/or call series for a 
given expiration month; and (ii) strike lower than the lowest strike 
price with open interest in the put and/or call series for a given 
expiration month.
    (B) Notwithstanding the above referenced delisting policy, Customer 
requests to add strikes and/or maintain strikes in Mini-NDX option 
series eligible for delisting shall be granted.
    (C) In connection with the above referenced delisting policy, if 
the Exchange identifies series for delisting, the Exchange shall notify 
other options exchanges with similar delisting policies regarding 
eligible series for delisting, and shall work with such other exchanges 
to develop a uniform list of series to be delisted, so as to ensure 
uniform series delisting of multiply listed Mini-NDX options.
    (d)--(e) 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 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to amend ISE Rule 2009, 
Terms of Index Option Contracts, to allow the Exchange to list options 
on the Mini-Nasdaq-100 Index (``MNX'' or ``Mini-NDX''), which is based 
on 1/10th the value of the Nasdaq-100 Index, at $1 or greater strike 
price intervals.\3\ Specifically, the Exchange proposes that the 
minimum strike price interval Mini-NDX options will be 0.01 point 
($1.00). The Exchange believes that $1 strike price intervals in Mini-
NDX option series will provide investors with greater flexibility by 
allowing them to establish positions that are better tailored to meet 
their investment objectives.
---------------------------------------------------------------------------

    \3\ Currently, under ISE Rule 2009(c)(1)(vii), the Exchange has 
authority to list Mini-NDX options at $2.50 strike price intervals.
---------------------------------------------------------------------------

    For initial series, the Exchange would list at least two strike 
prices above and two strike prices below the current value of MNX at or 
about the time a series is opened for trading on the Exchange. As part 
of this initial listing, the Exchange would list strike prices that are 
within 5 points from the closing value of MNX on the preceding day. As 
for additional series, the Exchange would be permitted to add 
additional series when the Exchange deems it necessary to maintain an 
orderly market, to meet customer demand or when the underlying MNX 
moves substantially from the initial exercise price or prices. To the 
extent that any additional strike prices are listed by the Exchange, 
such additional strike prices shall be within thirty percent (30%) 
above or below the closing value of MNX. The Exchange would also be 
permitted to open additional strike prices that are more than 30% above 
or below the current MNX value provided that 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 would not be considered when determining 
customer interest. In addition to the initial listed series, the 
Exchange may list up to sixty (60) additional series per expiration 
month for each series in Mini-NDX options. In addition, the Exchange 
proposes that it shall not list LEAPS on Mini-NDX options at intervals 
less than $5.
    The Exchange is also proposing to set forth a delisting policy with 
respect to Mini-NDX options. Specifically, the Exchange would, on a 
monthly basis, review series that are outside a range of five (5) 
strikes above and five (5) strikes below the current value of the MNX 
and delist series with no open interest in both the put and the call 
series having a: (i) Strike higher than the highest strike price with 
open interest in the put and/or call series for a given expiration 
month; and (ii) strike lower than the lowest strike price with open 
interest in the put and/or call series for a given expiration month.
    Notwithstanding the proposed delisting policy, customer requests to 
add strikes and/or maintain strikes in Mini-NDX options in series 
eligible for delisting shall be granted.
    Further, in connection with the proposed delisting policy, if the 
Exchange identifies series for delisting, the Exchange shall notify 
other options exchanges with similar delisting policies regarding 
eligible series for listing, and shall work with such other exchanges 
to develop a uniform list of series to be delisted, so as to ensure 
uniform series delisting of multiply listed Mini-NDX options.
    It is expected that the proposed delisting policy for Mini-NDX 
options will be adopted by other options exchanges that list and trade 
Mini-NDX options.
    The Exchange also proposes to add new Supplementary Material .04 to 
Rule 504, Series of Option Contracts Open for Trading, which would be 
an internal cross reference stating that the intervals between strike 
prices for Mini-NDX option series would be determined in accordance 
with proposed new paragraph (5) to Rule 2009(c).
    ISE has analyzed its capacity and represents that it believes the 
Exchange and the Options Price Reporting Authority have the necessary 
systems capacity to handle the additional traffic associated with the 
listing and trading of $1 strikes or greater for Mini-NDX options.
2. Statutory 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) of the Exchange Act \4\ 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 proposed rule 
change will allow the Exchange to list options on MNX options at $1 
strike intervals for the benefit of investors and as a competitive 
response to the listing of MNX options at $1 strike price intervals by 
other exchanges.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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.

[[Page 72889]]

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing rule does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; or (iii) become operative for 30 
days from the date on which it was filed, 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) of the Act \5\ and Rule 19b-4(f)(6) 
thereunder.\6\
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78s(b)(3)(A).
    \6\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to provide 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 of the 
proposed rule change, or such shorter time as designated by the 
Commission. The Commission deems this requirement to be met.
---------------------------------------------------------------------------

    The Exchange has asked the Commission to waive the operative delay 
to permit the proposed rule change to become operative prior to the 
30th day after filing. The Commission has determined that waiving the 
30-day operative delay of the Exchange's proposal is consistent with 
the protection of investors and the public interest because such waiver 
will permit the Exchange to respond promptly to demand by market 
participants to list options on MNX at $1 strike price intervals, and 
compete with other exchanges listing options on MNX at $1 strike price 
intervals.\7\ Therefore, the Commission designates the proposal 
operative upon filing.
---------------------------------------------------------------------------

    \7\ For purposes only of waiving the 30-day operative delay, the 
Commission has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of such proposed rule 
change, the Commission may summarily abrogate 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 e-mail to rule-comments@sec.gov. Please include 
File No. SR-ISE-2008-88 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
    All submissions should refer to File Number SR-ISE-2008-88. 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 inspection 
and copying 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 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 No. SR-ISE-2008-88 and should be 
submitted on or before December 22, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
---------------------------------------------------------------------------

    \8\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Acting Secretary.
 [FR Doc. E8-28422 Filed 11-28-08; 8:45 am]

BILLING CODE 8011-01-P