Document ID: SEC-2010-1376-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2010-09-09T04:00Z

[Federal Register: September 9, 2010 (Volume 75, Number 174)]
[Notices]               
[Page 54925-54926]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09se10-121]                         

[[Page 54925]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62815; File No. SR-ISE-2010-86]

 
Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change Amending Rules 413 and 2006

September 1, 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 23, 2010, the International Securities Exchange, LLC 
(the ``Exchange'' or the ``ISE'') filed with the Securities and 
Exchange Commission (the ``SEC'' or the ``Commission'') the proposed 
rule change as described in Items I, II, and III below, which Items 
have been prepared by the Exchange. The Exchange has filed the proposal 
as a ``non-controversial'' proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ 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.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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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 ISE Rules 413 (Exemptions from 
Position Limits) and 2006 (Exemptions from Position Limits) to enable 
Exchange members to rely on position limit exemptions granted by other 
options exchanges. The text of the proposed rule change is available on 
the Exchange's Web site http://www.ise.com, at the principal office of 
the Exchange, on the Commission's Web site at http://www.sec.gov, 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 purpose of the proposed rule change is to amend ISE Rules 413 
and 2006 to enable Exchange members to rely on position limit 
exemptions granted by other options exchanges under specified 
circumstances. This proposed rule change is based on similar rules of 
The NASDAQ Stock Market LLC (``Nasdaq''), NASDAQ OMX PHLX (``Phlx'') 
and NYSE Arca.\5\
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    \5\ See Rules of the Nasdaq Options Market (``NOM'') Chapter 
III, Section 8 and Chapter XIV, Section 8; Phlx 1001 and 1001A; and 
NYSE Arca 5.17 and 6.8.
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    ISE Rule 413 governs position limit exemptions for equity options 
and ISE Rule 2006 governs position limit exemptions for index options. 
These rules include a number of position limit exemptions available to 
Exchange members. Rules 413 and 2006, however, do not have a provision 
that recognizes position limit exemptions that are granted to Exchange 
members by other option exchanges, as provided for in NOM, Phlx and 
NYSE Arca rules. In light of the desirability to have similar position 
limit standards, the Exchange proposes to add a similar an exemption to 
both Rule 413 and Rule 2006.
    Specifically, the Exchange proposes to add a new subsection to both 
ISE Rule 413 and Rule 2006 to address position limit exemptions granted 
by other options exchanges. This proposed addition will provide that an 
Exchange member may rely upon any valid exemption from applicable 
position limits that has been granted by another options exchange for 
any options contract traded on ISE, provided that such Exchange member 
provides the Exchange either with a copy of any written exemption 
issued by another options exchange or with a written description of any 
exemption issued by another options exchange that is not in writing, 
where such description contains sufficient detail for Exchange to 
verify the validity of that exemption with the issuing options 
exchange. In addition, such Exchange member must fulfill all conditions 
precedent for such exemption and comply at all times with the 
requirements of such exemption with respect to trading on the Exchange.
    The Exchange notes that position limits tend to be similar across 
options exchanges, which is desirable in light of cross option exchange 
membership(s) and multiple listing and trading of similar product(s) on 
different exchanges. Because Exchange members frequently have 
membership and/or trading privileges on other options exchanges, it is 
important that ad hoc position limit exemptions granted by other 
options exchanges (``exemption grants'') are available to Exchange 
members to the extent that such exemption grants are reduced to writing 
and verifiable by the Exchange.
    These new proposed rules do not give the Exchange the ability to 
alter the scope of these exemptions but only to recognize the exemption 
so that the position limit process would be the same across the 
exchanges.
    For example, an Exchange member may go to another options exchange 
of which it is a member, such as the NYSE Arca or NOM to request a 
position limit exemption (exemption grant) for option contracts in the 
SPDRs (SPY). The other exchange provides the exemption grant until 
expiration in the same month to this particular firm for this 
particular issue (SPY). Should the same Exchange member want to trade 
SPY on the ISE to the extent of the exemption grant, the Exchange's 
proposed rule change would allow it to do so, but only to the extent 
that the firm provides the Exchange with a copy of the written 
exemption grant provided by the issuing exchange or, if the exemption 
is not in writing, to the extent that said Exchange member provides the 
Exchange with sufficient detail for Exchange regulatory staff to be 
able to verify the validity of the exemption grant with the issuing 
options exchange.\6\
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    \6\ Additionally, the Exchange member would have to fulfill all 
conditions precedent for such exemption grant and comply with the 
requirements of such exemption with respect to trading on the 
Exchange.
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    The Exchange believes that by adding uniformity and predictability 
to the position limit process, the proposed rule change should be 
beneficial to the Exchange members, and their customers. Moreover, the 
proposed rule change should promote competition by allowing trades 
across options exchanges that are similar in respect of position 
limits.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \7\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act \8\ in particular, because it 
is designed to prevent fraudulent and manipulative acts and practices, 
and to promote just and equitable principles of

[[Page 54926]]

trade, 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, by allowing the Exchange to have 
uniform position limit procedures.
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    \7\ 15 U.S.C. 78f (b).
    \8\ 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: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days after the date of the filing, or such 
shorter time as the Commission may designate, it has become effective 
pursuant to Section 19(b)(3)(A) of the Act \9\ and Rule 19b-4(f)(6) 
thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under 19b-4(f)(6) normally may not 
become operative prior to 30 days after the date of filing.\11\ 
However, Rule 19b-4(f)(6)(iii) \12\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange has requested that the 
Commission waive the 30-day operative delay so that the proposal may 
become operative immediately upon filing, thereby giving the Exchange a 
position limit process that can recognize exemptions granted by other 
exchanges. The Commission believes that waiving the 30-day operative 
delay is consistent with the protection of investors and the public 
interest because such waiver will afford Exchange members the benefit 
of the proposal--the ability to rely on exemptions granted by other 
exchanges, when appropriately documented--without unnecessary delay. 
For this reason, the Commission designates the proposed rule change as 
operative under upon filing.\13\
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    \11\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires that a self-regulatory organization submit to 
the Commission 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 Exchange has satisfied this requirement.
    \12\ Id.
    \13\ For the 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).
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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.

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-2010-86 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-2010-86. 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 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-2010-86 and should be 
submitted on or before September 30, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-22443 Filed 9-8-10; 8:45 am]
BILLING CODE 8010-01-P