Document ID: SEC-2009-1009-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change, as Modified by Amendment No. 1 Thereto, To Expose All-or-None Orders on a Three-Month Pilot Basis
Posted Date: 2009-07-22T04:00Z

[Federal Register: July 22, 2009 (Volume 74, Number 139)]
[Notices]               
[Page 36290-36292]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22jy09-124]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60311; File No. SR-ISE-2009-51]

 
Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change, as Modified by Amendment No. 1 Thereto, To Expose All-or-None 
Orders on a Three-Month Pilot Basis

July 15, 2009.
    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 July 9, 2009, the International Securities Exchange, LLC (the 
``Exchange'' or the ``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. On July 13, 2009, ISE filed Amendment No. 1 
\3\ to the proposed rule change. The Commission is publishing this 
notice to solicit comments on the proposed rule

[[Page 36291]]

change, as amended, from interested persons.
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    \1\ \\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, the Exchange made technical, non-
substantive corrections to Exhibit 1.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to amend its rules to implement a 
broadcast message that will inform members when a non-marketable all-
or-none limit order is placed on the limit order book. The text of the 
proposed rule change is as follows, with additions italicized:
    Rule 717. Limitations on Orders
* * * * *
    Supplementary Material to Rule 717
    .01-.03 No Change.
    .04 A non-marketable all-or-none limit order shall be deemed 
``exposed'' for the purposes of paragraphs (d) and (e) one second 
following a broadcast notifying members that such an order to buy or 
sell a specified number of contracts at a specified price has been 
received in the options series. This provision shall be in effect on a 
pilot basis expiring October 9, 2009.
* * * * *

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

    (a) Purpose--Pursuant to ISE Rule 717(d) and (e), Electronic Access 
Members must expose agency orders on the Exchange for at least one 
second before entering a contra-side proprietary order or a contra-side 
order that was solicited from a broker-dealer, or utilize one of the 
Exchange's execution mechanisms that have one second exposure periods 
built into the functionality.\4\
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    \4\ See ISE Rule 716(d) (Facilitation Mechanism), Rule 716(e) 
(Solicited Order Mechanism) and Rule 723 (Price Improvement 
Mechanism for Crossing Transactions).
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    The Exchange operates an integrated system that consolidates all 
market maker quotes and orders, and automatically disseminates the best 
bid and offer. If a limit order is designated as all-or-none, the 
contingency that the order must be executed in full makes it ineligible 
for display in the best bid or offer. Nevertheless, such orders are 
maintained in the system and remain available for execution after all 
other trading interest at the same price has been exhausted.\5\ Upon 
the receipt of a non-marketable all-or-none limit order, the system 
automatically will send a broadcast message to all members notifying 
them that an all-or-none order to buy or to sell a specified number of 
contracts at a specified price has been placed on the book.
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    \5\ Supplementary Material .02 to ISE Rule 713.
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    The purpose of this rule change is to specify that a non-marketable 
all-or-none limit order is deemed ``exposed'' for the purposes of Rule 
717(d) and (e) one second following a broadcast notifying members that 
such an order to buy or sell a specified number of contracts at a 
specified price has been received in the options series. Thus, all of 
the terms of the order will be disclosed to all members. The Exchange 
proposes to adopt this rule change on a three-month pilot basis 
expiring October 9, 2009.
    The Exchange notes that the Commission has previously determined 
that an order can be deemed ``exposed'' even in circumstances where the 
actual terms of the order are not disseminated. Specifically, the 
Commission approved the Price Improving Order type on the Nasdaq 
Options Market, which is a limit order in penny increments that is 
rounded to the minimum price variation in the security for display 
purposes.\6\ The Commission concluded that this order could be deemed 
``exposed'' under the NOM rule that is substantively identical to the 
exposure requirement contained in ISE Rule 717(d) and (e). Although the 
actual terms of the order are not displayed to market participants, the 
Commission found that the ability to ``fish'' inside the displayed 
quote, coupled with the restriction on participants that initially 
submitted the Price Improving Order from trading with that order until 
after the exposure period had elapsed, provided a meaningful 
opportunity for interaction prior to the time at which the submitting 
participant could interact with the order. The Commission also noted 
that Price Improving Orders might be executed against other trading 
interest in the system, which will also be the case with respect to 
all-or-none orders on the Exchange.
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    \6\ \\ Securities Exchange Act Release No. 57478 (March 12, 
2008), 73 FR 14521(March 18, 2008).
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    The Exchange believes its broadcast message provides complete 
exposure of all-or-none orders, which is greater exposure than that of 
Price Improving Orders at NOM, as market participants will be 
explicitly informed when there is a non-displayed order, as well as the 
size and price of such order. In contrast, the only indication that 
there may be a Price Improving Order available for execution on NOM is 
an increase in size at the NOM best bid or offer (``BBO'') or a new 
displayed price at the NOM BBO. Since the displayed size and price 
change constantly, NOM market participants do not know whether there is 
in fact a non-displayed order available for execution. Therefore, the 
opportunity for NOM participants to ``fish'' for such non-displayed 
orders is greatly diminished. In contrast, the ISE's broadcast message 
will specify all of the terms of an all-or-none order.
    (b) Basis--The basis under the Act for this proposed rule change is 
the requirement under Section 6(b)(5) 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, under the proposed 
rule change all-or-none orders will be exposed to all members on a 
three-month pilot basis so that there is a greater opportunity for 
market participants to interact with such orders.

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 proposed rule change: (i) Does not significantly affect 
the protection of investors or the public interest; (ii) does not 
impose any significant burden on competition; and

[[Page 36292]]

(iii) does not become operative for 30 days after the date of the 
filing, 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 \7\ and Rule 19b-4(f)(6) thereunder.\8\
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally may 
not become operative prior to 30 days after the date of filing.\9\ 
However, Rule 19b-4(f)(6)(iii) \10\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest. ISE has requested that the 
Commission waive the 30-day operative delay. ISE states that under the 
proposal, all-or-none orders will be exposed to all members so that 
there is a greater opportunity for market participants to interact with 
such orders. The Commission also notes that the proposal is on a three-
month pilot basis. For these reasons, the Commission believes that 
waiving the 30-day operative delay is consistent with the protection of 
investors and the public interest, and designates the proposed rule 
change to be operative upon filing with the Commission.\11\
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    \9\ 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 Commission deems this requirement to be met.
    \10\ Id.
    \11\ 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 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.\12\
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    \12\ For purposes of calculating the 60-day period within which 
the Commission may summarily abrogate the proposed rule change under 
Section 19(b)(3)(C) of the Act, the Commission considers the period 
to commence on July 13, 2009, the date on which ISE submitted 
Amendment No. 1. See 15 U.S.C. 78s(b)(3)(C).
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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-2009-51 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-2009-51. 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 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-2009-51 and should be 
submitted on or before August 12, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-17351 Filed 7-21-09; 8:45 am]

BILLING CODE 8010-01-P