Document ID: SEC-2009-1638-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to $1 Strike Price
Posted Date: 2009-11-19T05:00Z

[Federal Register: November 19, 2009 (Volume 74, Number 222)]
[Notices]               
[Page 60009-60011]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19no09-83]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60992; File No. SR-ISE-2009-95]

 
Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change Relating to $1 Strike Price Intervals Below $200 for Options on 
the KBW Bank Index (BKX)

November 12, 2009.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on November 9, 2009, the International

[[Page 60010]]

Securities Exchange, LLC (``Exchange'' or ``ISE'') filed with the 
Securities and Exchange Commission (``SEC'' or ``Commission'') the 
proposed rule change as described in Items I and II 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 \4\ and Rule 19b-4(f)(6) thereunder.\5\ 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\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
    \4\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \5\ 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 certain of its rules to allow the 
Exchange to list options on the KBW Bank Index (``BKX'') at $1 strike 
price intervals. 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, 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 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 those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts 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 KBW Bank Index (``BKX'') at $1 strike price interval below $200.
    Strike price intervals for options on indexes are established in 
ISE Rule 2009(c)(1) at three levels: (a) At no less than $5 generally, 
(b) at no less than $2.50 for options on indexes that are specifically 
listed in the rule, and (c) at no less than $1 for Mini-Nasdaq-100 
Index (MNX), which are based on \1/10\th the value of the Nasdaq 100 
Index (NDX).\6\ Thus, BKX options can be listed at $2.50 strike price 
intervals, as long as the strike price is below $200.\7\
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    \6\ Rule 2009 also discusses, among other things, that the 
strike prices of options pursuant to the Quarterly Options Series 
Program (``Quarterly Options Series'') will be fixed at a price per 
share, with at least two, but not more than five, strike prices 
above and at least two, but not more than five, strike prices below 
the value of the underlying security at the time that a Quarterly 
Options Series is opened for trading on the Exchange. For strike 
price intervals for non-index options, see ISE Rule 504.
    \7\ See ISE Rule 2009(c)(1)(lxxxii).
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    The Exchange now proposes that the minimum strike price interval 
for BKX options to be $1 or greater, as long as the strike price is 
below $200. The Exchange believes that $1 strike price intervals in BKX 
options series will provide investors with greater flexibility by 
allowing them to establish positions that are better tailored to meet 
their investment objectives.
    For initial series, the Exchange would list at least two strike 
prices above and two strike prices below the current value of BKX 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 BKX on the preceding day. As 
for additional series, the Exchange would be permitted to add series 
when the Exchange deems it necessary to maintain an orderly market, to 
meet customer demand or when the underlying BKX 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 BKX. The Exchange would also be permitted to open 
additional strike prices that are more than 30% above or below the 
current BKX 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 BKX options. 
In all cases, however, $1 strike price intervals may be listed on BKX 
options only where the strike price is less than $200. In addition, the 
Exchange notes that, consistent with ISE Rule 2009(c), it shall not 
list LEAPS on BKX options at intervals less than $2.50.
    The Exchange is also proposing to set forth a delisting policy with 
respect to BKX options. Specifically, the Exchange would regularly 
review series that are outside a range of five (5) strikes above and 
five (5) strikes below the current value of the BKX and may 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 BKX 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 BKX options.
    It is expected that the proposed delisting policy for BKX options 
will be adopted by other options exchanges that list and trade BKX 
options.
    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 BKX 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 \8\ 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 BKX options at $1 
strike intervals for the benefit of investors and as a competitive 
response to the listing of BKX options at $1 strike price intervals by 
another exchange.
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    \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.

[[Page 60011]]

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: (i) Does not 
significantly affect the protection of investors or the public 
interest; (ii) does not impose any significant burden on competition; 
and (iii) by its terms, does not 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, 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). In addition, Rule 19b-4(f)(6)(iii) 
requires the self-regulatory organization to 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.
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    The Exchange has requested that the Commission waive the 30-day 
operative delay to permit the Exchange to compete effectively with 
other exchanges that have implemented similar rules permitting $1.00 
strike price intervals for options on the KBW Bank Index.\11\ The 
Commission believes such waiver is consistent with the protection of 
investors and the public interest.\12\ Accordingly, the Commission 
designates the proposed rule change operative upon filing with the 
Commission.
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    \11\ See Securities Exchange Act Release No. 60840 (October 20, 
2009), 74 FR 55593 (October 28, 2009) (SR-Phlx-2009-77).
    \12\ For purposes only of waiving the 30-day operative delay of 
this proposal, 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.

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-2009-95 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-2009-95. 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 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 Number SR-ISE-
2009-95 and should be submitted on or before December 10, 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. E9-27748 Filed 11-18-09; 8:45 am]

BILLING CODE 8011-01-P