Document ID: SEC-2012-0996-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2012-06-26T04:00Z

[Federal Register Volume 77, Number 123 (Tuesday, June 26, 2012)]
[Notices]
[Pages 38100-38107]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-15489]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67225; File No. SR-ISE-2012-22]

Self-Regulatory Organizations; International Securities Exchange, 
LLC; Order Instituting Proceedings To Determine Whether To Approve or 
Disapprove Proposed Rule Change, as Modified by Amendment No. 1, To Add 
an Index Option Product for Trading on the Exchange

June 20, 2012.

I. Introduction

    On March 9, 2012, the International Securities Exchange, LLC 
(``Exchange'' or ``ISE'') filed with the Securities and Exchange 
Commission (``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Exchange Act'' or ``Act'') \1\ and 
Rule 19b-4 thereunder,\2\ a proposed rule change to list and trade 
options on the ISE Max SPY Index (``ISE Max SPY''). The proposed rule 
change was published for comment in the Federal Register on March 22, 
2012.\3\ The Commission received three comment letters on the proposed 
rule change.\4\ On May 1, 2012, the Commission extended the time period 
for Commission action to June 20, 2012.\5\ On May 4, 2012, ISE 
submitted a response to the comment letters \6\ and filed Amendment No. 
1 to

[[Page 38101]]

the proposed rule change.\7\ The Commission subsequently received three 
additional comment letters \8\ and a second response letter from 
ISE.\9\ All the comment letters received, including ISE's response 
letters, are available on the Commission's Web site.\10\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 66614 (March 16, 
2012), 77 FR 16883 (``Notice'').
    \4\ See letters to Elizabeth M. Murphy, Secretary, Commission, 
from Janet McGinness, EVP & Corporate Secretary, NYSE Euronext, 
dated April 2, 2012 (``NYSE Letter''); Kenneth M. Vittor, Executive 
Vice President and General Counsel, McGraw-Hill Companies, Inc., 
dated April 11, 2012 (``McGraw-Hill Letter I''); and Edward T. 
Tilly, President and Chief Operating Officer, Chicago Board Options 
Exchange, Incorporated (``CBOE''), dated April 13, 2012 (``CBOE 
Letter I'').
    \5\ See Securities Exchange Act Release No. 66889 (May 1, 2012), 
77 FR 26812 (May 7, 2012).
    \6\ See letter to Elizabeth M. Murphy, Secretary, Commission, 
from Michael J. Simon, Secretary and General Counsel, ISE, dated May 
4, 2012 (``ISE Response Letter I'').
    \7\ Amendment No. 1 replaced the sentence: ``Additionally, the 
proposed rule change would provide Members and investors with 
additional opportunities to trade S&P 500[supreg] options with a 
p.m.-settlement feature in an exchange environment and subject to 
transparent exchange-based rules, and that investors would also 
benefit from the opportunity to trade in association with this 
product on Expiration Fridays thereby removing impediments to a free 
and open market consistent with the Act.'' with the sentence: 
``Additionally, the proposed rule change would provide Members and 
investors with additional opportunities to trade options on a 
product that provides exposure to the share prices of SPY with a 
p.m.-settlement feature in an exchange environment and subject to 
transparent exchange-based rules, and that investors would also 
benefit from the opportunity to trade in association with this 
product on expiration Fridays thereby removing impediments to a free 
and open market consistent with the Act.'' According to ISE, the 
purpose of the amendment is to correct an erroneous sentence in the 
Statutory Basis section that could be misinterpreted. See Amendment 
No. 1.
    \8\ See letters to Elizabeth M. Murphy, Secretary, Commission, 
from Edward T. Tilly, President and Chief Operating Officer, CBOE, 
dated June 7, 2012 (``CBOE Letter II''); Kenneth M. Vittor, 
Executive Vice President and General Counsel, McGraw-Hill Companies, 
Inc., dated June 18, 2012 (``McGraw-Hill Letter II''); and from 
Edward T. Tilly, President and Chief Operating Officer, CBOE, dated 
June 19, 2012 (``CBOE Letter III'').
    \9\ See letter to Elizabeth M. Murphy, Secretary, Commission, 
from Michael J. Simon, Secretary and General Counsel, ISE, dated 
June 15, 2012 (``ISE Response Letter II'').
    \10\ The comment letters are available at http://sec.gov/comments/sr-ise-2012-22/ise201222.shtml.
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    This order institutes proceedings to determine whether to approve 
or disapprove the proposed rule change, as modified by Amendment No. 1. 
Institution of these proceedings, however, does not indicate that the 
Commission has reached any conclusions with respect to the proposed 
rule change, nor does it mean that the Commission will ultimately 
disapprove the proposed rule change. Rather, as addressed below, the 
Commission desires to solicit additional input from interested parties 
on the issues presented by the proposed rule change.

II. Description of the Proposal

    As set forth in more detail in the Notice, ISE proposes to list and 
trade options, including long-term options, on the ISE Max SPY Index, 
which is ``designed to represent 10 times the value of the published 
share prices in the SPDR S&P 500 ETF [(``SPY'')] Trust.'' \11\ Options 
on the ISE Max SPY Index would be European-style and p.m. cash-settled, 
and they would be quoted and traded in U.S. dollars.
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    \11\ ISE states that SPY is based on the S&P 500, which is a 
capitalization-weighted index of 500 stocks from a broad range of 
industries.
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    According to ISE, the real-time value of the ISE Max SPY Index is 
calculated by multiplying the share prices of SPY by a factor of ten 
and rounding to the tenth place. This value would be calculated by ISE 
or its agent, and would be disseminated by ISE every 15 seconds during 
its regular trading hours to market information vendors via the Options 
Price Reporting Authority.\12\
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    \12\ ISE states that it also would disseminate these values to 
its members.
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    ISE proposes to calculate the settlement value for options on the 
ISE Max SPY Index using the net asset value (``NAV'') of the fund, as 
calculated by ISE, on a per share basis, times ten. ISE states that the 
method it will use for calculating the NAV of SPY is the same method 
that is used industry-wide for calculating the NAV of an exchange 
traded fund (``ETF'') with equity-only holdings, and is the per-share 
dollar amount of the fund, which is calculated by dividing the total 
value of all the securities in its portfolio, less any liabilities, by 
the number of fund shares outstanding.\13\ ISE also states that the 
settlement value that it calculates may be different from the NAV 
published by the trustee of the SPY trust.\14\ In calculating the 
settlement value for options on the ISE Max SPY Index, ISE states that 
it would use the published closing prices from the primary market of 
the SPY trust's portfolio securities.\15\
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    \13\ See Notice, supra note 3 and ISE Response Letter II, supra 
note 9, at 3. In its second response letter, ISE sets forth its 
formula for calculating the index settlement value: 
Isett(t) = NAVSPY(t) x M. See ISE Response 
Letter II, supra note 9, at 2-3. In this formula, 
``Isett(t)'' is the ISE Max SPY settlement value at time 
(t), ``NAVSPY(t)'' is the NAV per share of the SPY trust 
at time (t) as calculated by ISE, and ``M'' is the constant 
multiplier of 10. See id. ISE also provides the formula for 
calculating NAVSPY(t):
    NAVSPY(t) = [[Sigma]ni=1[P(i) x S(i) + Cash] x [1 - Fee/365]/
Shares Outstanding
    See id. In this formula, ``n'' is the number of stocks held by 
the trust, ``P(i)'' is the closing price of each stock 
held by the trust, ``S(i)'' is the number of shares of 
each stock held by the trust, ``Cash'' is the cash held in the 
trust, ``Fee'' is the stated fee for the trust, and ``Shares 
Outstanding'' is the number of trust shares outstanding. See id. ISE 
also states that ``the net cash amount is determined by adding the 
accrued dividends of the portfolio securities since the fund's last 
distribution minus the accrued fees, which are essentially the 
annual management fees prorated per day.'' See id. at 3.
    \14\ ISE explains in its response letters that this difference 
may result because the trust may independently decide which exchange 
it deems to be the ``primary market'' as a source of closing prices, 
and the trustee reserves the right to evaluate portfolio securities 
independently of closing sale prices if it deems such prices to be 
``inappropriate.'' See ISE Response Letter I, supra note 6, at 6-7 
and ISE Response Letter II, supra note 9, at 3. See also infra 
Section III.B.2.ii.
    \15\ In its response letters, ISE provides additional 
clarification regarding its calculation of the NAV of SPY, and its 
rationale for the difference between the calculation of the 
settlement value for the proposed options and the value for the ISE 
Max SPY Index itself. See infra Section III.B.2.
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    As proposed, Exchange rules that are applicable to the trading of 
options on broad-based indexes would apply to the trading of options on 
the ISE Max SPY Index.\16\ Specifically, the trading of options on the 
ISE Max SPY Index would be subject to, among others, Exchange rules 
governing margin requirements and trading halt procedures for index 
options. The trading of options on the ISE Max SPY Index also would be 
subject to the Exchange's customer protection rules.\17\
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    \16\ See ISE Rules 2000 through 2013.
    \17\ See ISE Rules 608-612 and 616.
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    ISE proposes that options on the ISE Max SPY Index be approved on a 
pilot basis for an initial period of 14 months. ISE states that if it 
were to propose an extension of the program or propose to make the 
program permanent, then it would submit a filing proposing such 
amendments to the program. ISE notes that any positions established 
under the pilot would not be impacted by the expiration of the 
pilot.\18\ As part of the pilot program, ISE would submit a pilot 
program report to the Commission at least two months prior to the 
expiration date of the program (``annual report''). The annual report 
would contain an analysis of volume, open interest and trading 
patterns. The analysis would examine trading in the proposed option 
product as well as trading in the securities that comprise the S&P 500 
index. In addition, for series that exceed certain minimum open 
interest parameters, the annual report would provide analysis of index 
price volatility and share trading activity. In addition to the annual 
report, ISE committed to provide the Commission with periodic interim 
reports while the pilot is in effect that would contain some, but not 
all, of the information contained in the annual report. In its filing, 
ISE notes that it would provide the annual and interim reports to the 
Commission on a confidential basis.
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    \18\ As an example, ISE states in the Notice that a position in 
a series that expires beyond the conclusion of the pilot period 
could be established during the 14-month pilot. If the pilot program 
were not extended, then the position could continue to exist. 
However, any further trading in the series would be restricted to 
transactions where at least one side of the trade is a closing 
transaction. See Notice, supra note 3.
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Comment Letters

    As noted above, the Commission received six comment letters and two

[[Page 38102]]

ISE response letters on the proposed rule change.\19\
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    \19\ See supra notes 4, 6, 8, and 9.
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    One commenter expresses support for the proposed rule change and 
states that it ``generally applaud[s] efforts to provide investors with 
additional opportunities to invest using listed options.'' \20\ In 
particular, this commenter supports ISE's proposal to allow p.m. 
settlement for options on the ISE Max SPY Index.\21\ This commenter 
also supports the proposal to impose no position limits for options on 
the ISE Max SPY Index.\22\ This commenter states that a key part of its 
basis for agreeing with the proposed position limits is the fact that 
``there is a very large degree of economic equivalence between options 
on [ISE's] proposed index and the existing C2 SPXPM product.'' \23\
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    \20\ See NYSE Letter, supra note 4, at 1.
    \21\ See id. at 1-2.
    \22\ See id. at 2.
    \23\ See id.
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    Two commenters oppose the proposed rule change for the reasons 
discussed below.

A. Pending Litigation; Potential for Market Disruption and Harm to 
Investors

    Two commenters argue that the proposed options are, in fact, 
options on the S&P 500 index and therefore would violate a permanent 
injunction entered by the Illinois state court in 2010 
(``Injunction'').\24\ These two commenters have filed a motion to 
enforce this Injunction against ISE in Illinois Circuit Court,\25\ and 
request that the Commission disapprove the proposed rule change \26\ or 
not take action to approve the proposed rule change until the 
litigation is resolved.\27\ In a second comment letter, CBOE argues 
that the Commission should disapprove the proposed options because they 
could not legally be traded.\28\ In addition, CBOE requests that if the 
Commission considers the proposed rule change prior to judicial action 
on the motion, the Commission should make clear that any approval is 
solely concerned with whether the proposed rule change is consistent 
with the Act, and that the Illinois state court has full and 
independent authority to resolve the issues that arise under state 
law.\29\
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    \24\ See CBOE Letter I and McGraw-Hill Letter I, supra note 4. 
According to one commenter, ``the ISE rule filing itself violates 
the Injunction because the Injunction prohibits ISE from listing 
options on the S&P 500 Index and the submission and notification of 
the rule filing commences the process of listing such options.'' See 
CBOE Letter I, supra note 4, at 2. Another commenter states that 
ISE's planned unauthorized use of the S&P 500 index constitutes an 
unlawful violation of Standard & Poor's Financial Services LLC's 
(``S&P'') intellectual property rights. See McGraw-Hill Letter I, 
supra note 4, at 1 and 4. This commenter urges the Commission to not 
approve the listing and trading of products that have previously 
been determined to be unlawful. See id. at 4. In subsequent comment 
letters, commenters note that the Illinois Appellate Court recently 
affirmed the lower court's Injunction. See CBOE Letter II, supra 
note 8, at 6 and McGraw-Hill Letter II, supra note 8, at 1.
    \25\ See Attachment 1 to CBOE Letter I and Attachment to McGraw-
Hill Letter I, supra note 4.
    \26\ See CBOE Letter I, supra note 4, at 2 and McGraw-Hill 
Letter I, supra note 4, at 1.
    \27\ See CBOE Letter I, supra note 4, at 2.
    \28\ See CBOE Letter II, supra note 8, at 7.
    \29\ See CBOE Letter I, supra note 4, at 2. See also CBOE Letter 
II, supra note 8, at 8.
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    In its response letter, ISE states that it is opposing the motion 
to enforce the Injunction.\30\ ISE objects to the commenters' request 
that the Commission delay approval of the proposed rule change until 
the Illinois court decides on the motion, referring to prior Commission 
action where the Commission indicated that its decision to approve a 
rule filing should be based solely on whether it complies with the Act, 
without regard to any state law issues.\31\ ISE states that because the 
current Illinois proceedings involve issues of intellectual property 
law and state procedure, the Commission should approve this proposed 
rule change without regard to the Illinois proceedings.\32\
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    \30\ See ISE Response Letter I, supra note 6, at 2. ISE states 
that the commenters' primary basis for claiming that the proposed 
options are options on the S&P 500 index is ``a single, erroneous 
sentence contained in ISE's 50 page rule filing'' and that this 
sentence ``is contained in the basis section of ISE's rule filing, 
which section is not controlling in terms of the description of the 
product.'' See id. at 3. ISE subsequently amended this sentence in 
Amendment No. 1. See supra note 7.
    \31\ See ISE Response Letter I, supra note 6, at 2-3.
    \32\ See id. at 3.
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    According to the two commenters, significant market disruption and 
harm to investors could occur if the Commission were to approve the 
proposed rule change prior to the Illinois court ruling on whether the 
proposed options violate the existing Injunction or are otherwise 
unlawful.\33\ Specifically, these commenters express the concern that 
if ISE commences trading in the proposed options before a decision by 
the Illinois court where the court finds that such trading is unlawful, 
investors would have no readily available means to trade out of or 
exercise their positions in the proposed options.\34\
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    \33\ See CBOE Letter I, supra note 4, at 2 and McGraw-Hill 
Letter I, supra note 4, at 1 and 4.
    \34\ See CBOE Letter I, supra note 4, at 2 and McGraw-Hill 
Letter I, supra note 4, at 1 and 4.
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    In its first response letter, ISE disagrees with the comment that 
the Commission's approval of the proposed rule change before the 
Illinois court's ruling on the motion could result in significant 
market disruption or harm to investors.\35\ Nevertheless, ISE 
represents that, absent returning to the Commission and seeking 
explicit approval to do so, it will not commence trading options on the 
ISE Max SPY Index until the Illinois Circuit Court has ruled on the 
motion.\36\
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    \35\ See ISE Response Letter I, supra note 6, at 4.
    \36\ See id.
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    In a second comment letter, CBOE reiterates its concerns regarding 
potential market disruption and harm to investors.\37\ In response to 
ISE's letter, CBOE states that the Illinois lower court's ruling on the 
motion to enforce the Injunction may not be the end of the litigation 
over whether the proposed options may be validly traded under state 
law, and that the Commission should condition any approval on ISE's 
undertaking not to commence trading until all judicial challenges to 
the lawfulness of the proposed options under state law have been 
resolved.\38\
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    \37\ See CBOE Letter II, supra note 8, at 7. The commenter 
states that by exposing investors to these undisclosed risks, the 
proposal fails to protect investors and the public interest. See id. 
See also McGraw-Hill Letter II, supra note 8, at 2-3 (stating that 
it would be inappropriate and contrary to the public interest for 
the Commission to approve a product that has been enjoined and is 
the subject of ongoing litigation to enforce the Injunction).
    \38\ See CBOE Letter II, supra note 8, at 8.
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    In its second response letter, ISE again represents that it will 
not launch the proposed options for trading unless and until the 
Illinois Circuit Court denies the motion to enforce the Injunction.\39\ 
In addition, in the event that the Illinois Circuit Court were to deny 
the motion to enforce the Injunction, and such a decision was to be 
subsequently reversed and ISE were to be enjoined from offering the 
proposed options after it had commenced trading and there is open 
interest, ISE represents that it would seek to have the state court 
permit it to continue to offer a market for closing-only transactions 
for so long as it takes all open interest to wind down in an orderly 
manner.\40\ ISE states that it has systems, rules, and procedures in 
place that would permit such a closing-only orderly wind down, and that 
it is ``inconceivable that the Court would refuse to permit such a 
closing-only market.'' \41\ ISE further states that even if the court 
were to deny a closing-only market, there are adequate rules and 
procedures in place, at the exchange and the clearing level, to allow 
for an orderly wind down of

[[Page 38103]]

any open interest.\42\ In addition, ISE represents that it will insert 
a litigation risk discussion into the Options Disclosure Document 
(``ODD''),\43\ which will be substantially similar to the litigation 
risk language included in prior versions of the ODD with respect to 
index participation products.\44\ Finally, ISE states that these 
investor protection risks are not unique to the proposed product, and 
that there have been multiple cases where a market becomes unavailable 
for the continued trading of a product in which there is open 
interest.\45\
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    \39\ See ISE Response Letter II, supra note 9, at 4.
    \40\ See id.
    \41\ See id.
    \42\ See id. As an example, ISE points out that the Options 
Clearing Corporation (``OCC'') has by-laws and rules that, in the 
case of index options, permit it to create and use a replacement 
index to close out the open interest. See id.
    \43\ The ODD explains the characteristics and risks of exchange-
traded options. Rule 9b-1 under the Act requires, among other 
things, that broker-dealers furnish the ODD to a customer before 
accepting an order from the customer to purchase or sell an option 
contract relating to an options class that is the subject of the 
ODD, or approve the customer's account for the trading of such 
option. See 17 CFR 240.9b-1(d).
    \44\ See ISE Response Letter II, supra note 9, at 4-5.
    \45\ See id. at 5. ISE gives an example of a listed company 
declaring bankruptcy, where all options markets have delisted 
options on the stock and there was no available market to close 
existing open interest. See id. ISE states that in these instances, 
investors with open positions waited until expiration and were 
either assigned or not, according to OCC rules and procedures. See 
id.
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B. Potential for Investor Confusion

1. Characterization of the Product as Options on the ISE Max SPY Index
    One commenter asserts that ISE's description of the proposed 
options is inaccurate and misleading.\46\ This commenter understands 
from the filing that the settlement value for options on the ISE Max 
SPY Index would be calculated differently from all other values of the 
ISE Max SPY Index, stating that ``the settlement value will be 
calculated by reference to the stocks in the S&P 500 Index as weighted 
by S&P in its S&P 500 Index.'' \47\ This commenter argues that the 
benchmark for the proposed option is not SPY, because the proposed 
options are not actually settled by reference to SPY.\48\ This 
commenter subsequently asserts that the proposed rule change ``misleads 
investors by falsely characterizing the Proposed Options as options on 
the ISE Max SPY Index.'' \49\ Specifically, this commenter states that 
ISE has admitted that the proposed options would not be settled based 
on the value of SPY and has failed to set forth any way in which the 
settlement value for the proposed options would have any relation to 
the ISE Max SPY Index.\50\ This commenter also asserts that the 
proposed rule change misleads investors by characterizing the proposed 
option as a broad-based index option, when the ISE Max SPY Index 
actually consists of only a single component security.\51\
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    \46\ See CBOE Letter I, supra note 4, at 4.
    \47\ See id. See also McGraw-Hill Letter I, supra note 4, at 3.
    \48\ See CBOE Letter I, supra note 4, at 4. According to the 
commenter, this point is further illustrated by ISE's proposal with 
respect to position limits for the options on the ISE Max SPY Index. 
See id. at 5. The commenter points out that ISE proposed no position 
limits for these options by reference to the position limits for the 
p.m.-settled S&P 500 index (``SPXPM'') options, rather than the 
position limits for other SPY-based products. See id. Another 
commenter states that the Commission should be concerned by the 
misleading disconnect between the name of the proposed options and 
the manner in which the options would be settled. See also McGraw-
Hill Letter I, supra note 4, at 2-3 and note 5.
    \49\ See CBOE Letter II, supra note 8, at 2.
    \50\ See id. Another commenter also reiterates, in its second 
comment letter, that the proposed options would not be settled based 
on any value of the ISE Max SPY Index, but rather based on ISE's 
recalculation of the S&P 500 index, using the same stocks selected 
by S&P and the same weighting methodology. See McGraw-Hill Letter 
II, supra note 8, at 2.
    \51\ See CBOE Letter II, supra note 8, at 4.
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    In response, ISE states that the rule filing makes clear that the 
ISE Max SPY Index is calculated based on the traded prices of SPY 
shares, and that the options on the ISE Max SPY Index are settled on 
the basis of a calculation of the NAV of the SPY trust's assets.\52\ 
Further, to ensure that investors have an ongoing means to access 
information about options on the ISE Max SPY Index, ISE represents, in 
its second response letter, that it will: (i) Work with the OCC to 
amend the ODD to provide a clear and unambiguous description of the 
product and any unique risks associated with it; (ii) display the 
contract specifications on its Web site; (iii) create a special web 
page devoted exclusively to the proposed options, which will describe 
in plain English all the terms of this product, including index 
calculation and settlement; and (iv) follow the same marketing process 
it follows for all of its other new products, which is designed to 
promote awareness and a clear understanding of the product.\53\
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    \52\ See ISE Response Letter I, supra note 6, at 3.
    \53\ See ISE Response Letter II, supra note 9, at 2.
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    Further, according to one commenter, to the extent that the ``ISE 
Max SPY Index'' is ``index-like,'' it is only because the SPY trust 
holds all of the stocks in the S&P 500 index, weighted as the stocks in 
the S&P 500 index are weighted.\54\ This commenter argues that even if 
the benchmark could be said to have reference to SPY, the benchmark 
would have only one component security and therefore would not be an 
index.\55\ ISE states in response that an index with one component is 
still an index and refers to CBOE's micro narrow-based index options 
and CBOE's indexes that measure the spot yield of individual U.S. 
Treasury Securities by simply multiplying them by ten (i.e., TNX).\56\ 
In its second letter, CBOE states that, consistent with Section 3 of 
the Act \57\ and the principles set forth in Commission's staff legal 
bulletin, micro narrow-based indexes may consist of no fewer than two 
securities and no more than nine securities.\58\ CBOE also states that 
its micro narrow-based index option rule applies only to an underlying 
benchmark that is itself a security index.\59\ With respect to ISE's 
reference to CBOE's indexes that measure the spot yield of individual 
U.S. Treasury Securities, CBOE states that ``TNX options were not 
security index options, but instead were interest rate options based on 
interest rate values that were `indexed' to make the options contracts 
a suitable size.'' \60\ CBOE further states that TNX options were 
regulated as interest rate options and were described for all purposes 
as interest rate options.\61\
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    \54\ See CBOE Letter I, supra note 4, at 5.
    \55\ See id. at 4 and CBOE Letter II, supra note 8, at 4-6. CBOE 
states that ``allowing options to trade on a security index 
comprised of a single component would implicate potentially far-
reaching regulatory considerations under the Exchange Act. If the 
concept of a `security index option' is that elastic, then options 
on a single equity stock could just as easily be traded as a 
security index option, through the fiction of creating a reference 
point to that single stock's prices. That has never before been 
contemplated, and should not be permitted--at least without deep 
regulatory examination of the implications of that development.'' 
See CBOE Letter II, supra note 8, at 6. See also McGraw-Hill Letter 
I, supra note 4, at note 3.
    \56\ See ISE Response Letter I, supra note 6, at 7-8.
    \57\ In this regard, CBOE points out that the definition of 
``security future'' in Section 3 of the Act makes a distinction 
between a ``narrow-based security index'' and a ``single security.'' 
See CBOE Letter II, supra note 8, at 5.
    \58\ See id. at 4-5.
    \59\ See id. at 5.
    \60\ See id. at 6. CBOE states that ``[t]he term `index' was 
used in referring to the reference value for the TNX in a manner 
distinct from the meaning of a `security index' '' and that the term 
``meant a number or a reference point, in the same sense that the 
word `index' is used in the term `consumer price index.' '' See id.
    \61\ See id.
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    In response, ISE states that there is no legal requirement that an 
index consists of more than one component.\62\ ISE disagrees with the 
commenter's rationale that indexes must contain at least two 
components, and states that the commenter is ``backpedaling on its

[[Page 38104]]

own past history of creating one-component indexes.'' \63\
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    \62\ See ISE Response Letter II, supra note 9, at 5.
    \63\ See id.
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2. Clarity and Completeness of the Description of the Options on the 
ISE Max SPY Index
i. Method for Calculating Settlement Values
    One commenter states that ISE is unclear in describing the assets 
that it would take into account in calculating the settlement value of 
the proposed options, and points out the differences between ISE's 
calculation of the NAV of SPY, as described in the Notice, and the 
trust's calculation of the NAV of SPY.\64\ In particular, this 
commenter points out that ISE omitted the reference to ``other assets'' 
of the trust in the description of its calculation methodology.\65\ The 
commenter states that if ISE does not take the ``other assets'' held in 
the trust into account in calculating settlement values for the 
proposed options, its settlement value calculation methodology will 
``clearly diverge from the method used by the Trustee for the Trust to 
calculate NAVs for the Trust.'' \66\ The commenter states that if this 
is ISE's intent, it needs to be clearly stated in the filing.\67\
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    \64\ See CBOE Letter I, supra note 4, at 5-6.
    \65\ See id. The commenter also states that the calculation of 
the values of the S&P 500 index, unlike the calculation of the NAV 
of SPY, does not take into account other assets such as dividends. 
See id. at 6.
    \66\ See id.
    \67\ See id.
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    In its response letter, ISE states that the ISE Max SPY Index ``is 
settled by reference to the value of the SPY ETF'' and that it is 
independently calculating the NAV of the SPY ETF using a methodology 
that closely tracks the methodology that State Street Global Advisors 
(``SSgA'') uses to calculate the NAV of the SPY ETF.\68\ ISE states 
that generally, the NAV for equity-based ETFs is calculated in the same 
manner, regardless of who the calculation agent is.\69\ ISE further 
explains that NAV is determined by adding the value of the portfolio 
securities to the trust's net cash (accrued dividends minus accrued 
fees and expenses), and dividing the result by the total number of 
outstanding shares of the fund.\70\ ISE states that the net cash amount 
is usually determined by the fund's administrator, who provides that 
information to the National Securities Clearing Corporation 
(``NSCC'').\71\
---------------------------------------------------------------------------

    \68\ See ISE Response Letter I, supra note 6, at 4.
    \69\ See id. at 6.
    \70\ See id.
    \71\ See id.
---------------------------------------------------------------------------

    In a second comment letter, CBOE reiterates that ISE fails to 
explain the differences between its calculation of the NAV and the NAV 
published by the trustee of the trust.\72\ CBOE states that ISE's 
proposal did not make clear that the settlement of the proposed options 
is based on a calculation of the NAV of the SPY ETF, and that the 
proposal misleads investors about how ISE would calculate the 
settlement value.\73\ CBOE notes that ``ISE states that the NAV 
calculation of an ETF `generally' is determined by `adding the trust's 
net cash (accrued dividends minus accrued fees and expenses)' to the 
value of the portfolio securities,'' thereby implying that it would do 
so as well when computing the settlement value of the proposed 
options.\74\ CBOE states, however, that ``ISE is careful never to 
actually state--either in the ISE Proposal or [ISE Response Letter I]--
that it would use dividends and Trust expenses when calculating the 
settlement value of the Proposed Options.'' \75\ CBOE further points 
out that ISE may not be able to include those factors in its 
calculation because the trust disseminates information about the SPY 
ETF's net cash at the same time as the information about the value of 
its stock holdings.\76\
---------------------------------------------------------------------------

    \72\ See CBOE Letter II, supra note 8, at 4.
    \73\ See id. at 3-4.
    \74\ See id. at 3.
    \75\ See id. Another commenter states, in a second comment 
letter, that ``the Commission should not be misled by ISE's oblique 
reference to the use of a `well known methodology that is intended 
to track, as closely as possible SSGA's methodology for its 
calculation of the NAV for the SPY ETF' '' because ``[t]he `well-
known methodology' that ISE proposes to employ is to use S&P's 
selection of stocks for inclusion in the S&P 500 and the manner in 
which those stocks are weighted by S&P for purposes of calculating 
the S&P 500, both of which are proprietary to S&P.'' See McGraw-Hill 
Letter II, supra note 8, at 2.
    \76\ See CBOE Letter II, supra note 8, at 3-4. CBOE reiterates 
this comment in its third comment letter. See CBOE Letter III, supra 
note 8, at 1-2. In particular, CBOE questions the timing that the 
information necessary for ISE to make the settlement calculation 
would be made available. See id. In this regard, CBOE states that 
``the information on which ISE purportedly would rely to compute the 
NAV of the SPY ETF would not be available until hours after ISE's 
admitted deadline.'' See id. at 2. Accordingly, CBOE concludes that 
ISE's proposal ``continues to mislead investors about how the 
Proposed Options would settle.'' See id. See also infra Section 
III.B.2.i (describing the calculating methodology for the settlement 
value of options on the ISE Max SPY Index).
---------------------------------------------------------------------------

    In a second response letter, ISE specifically sets forth the 
formula for settlement value calculation, including the formula for 
calculating the NAV of SPY.\77\ ISE states that its NAV calculating 
method is the same standard method that is used industry-wide for ETFs 
with equity-only holdings.\78\ Specifically, ISE explains that after 
the close of each trading day, the fund's administrator provides to the 
NSCC the portfolio securities of the fund, the number of shares of each 
security, the net cash of the fund, and the shares outstanding of the 
fund.\79\ The NSCC makes this information available to market 
participants on a daily basis after the close of each trading day.\80\ 
ISE states that, by way of its market data vendor, it will calculate 
the settlement value using the data received from the NSCC.\81\
---------------------------------------------------------------------------

    \77\ See ISE Response Letter II, supra note 9, at 2-3.
    \78\ See id. at 3.
    \79\ See id.
    \80\ See id.
    \81\ See id. ISE states that, unlike the trust's NAV 
calculation, investors will have certainty in knowing how the 
settlement value of ISE Max SPY options was calculated by ISE. See 
id.
---------------------------------------------------------------------------

ii. Source of Prices Used in Calculating Settlement Values
    One commenter states that ISE is unclear in describing the sources 
of the prices that it would use in calculating settlement values for 
the proposed options and that ISE's representation of the trust's NAV 
calculation is inconsistent with the prospectus.\82\ In its response 
letter, ISE states that the filing clearly identifies the source of the 
prices--the published closing prices from the primary market of the 
securities.\83\ ISE also disagrees with the comment that its 
representation is inconsistent with the SPDR prospectus because the 
trust may independently decide which exchange it deems to be the 
``primary market'' as a source for closing prices.\84\ In a second 
response letter, ISE again states that its calculation of the NAV would 
be based upon the closing prices from the primary markets of each 
portfolio security, and that it recognizes that the SPY trust may use 
different prices because the trustee reserves the right to evaluate 
portfolio securities independently of closing sale prices if it deems 
such prices to be ``inappropriate.'' \85\
---------------------------------------------------------------------------

    \82\ See CBOE Letter I, supra note 4, at 6-7.
    \83\ See ISE Response Letter I, supra note 6, at 6-7.
    \84\ See id. at 7.
    \85\ See ISE Response Letter II, supra note 9, at 3.
---------------------------------------------------------------------------

iii. Differences between Settlement Value and All Other Values
    One commenter states that ISE's filing ``does not contain any 
explanation of why it proposes to calculate settlement values of the 
Proposed Benchmark differently from all other values of the Proposed 
Benchmark.'' \86\ In its response

[[Page 38105]]

letter, ISE explains that it is doing so to decrease the opportunity 
for manipulation and other abusive trading practices.\87\ Specifically, 
ISE states that a would-be manipulator would need to manipulate the 
closing price of 500 individual stocks, as opposed to the closing price 
of one ETF.\88\ ISE also states that its calculation of the NAV would 
allow for a timely settlement of the proposed options.\89\ 
Specifically, ISE states that the obligation of SSgA is to establish a 
NAV of the SPY ETF before the next day's opening.\90\ However, since 
the OCC requires settlement values to be sent to it the same day as the 
settlement of an option, ISE cannot rely on the SSgA-published NAV.\91\
---------------------------------------------------------------------------

    \86\ See CBOE Letter I, supra note 4, at 7. The ``Proposed 
Benchmark'' refers to the ISE Max SPY Index. See id. at note 2. This 
commenter further states that ``ISE's plan to use the same prices to 
calculate settlement values that S&P uses to calculate the S&P 500 
demonstrates that ISE's true purpose is to replicate the value of 
the S&P 500 as closely as possible, even though doing so creates the 
possibility of discontinuities between the settlement values of the 
Proposed Benchmark and all other values of that benchmark.'' See id. 
at 7. See also CBOE Letter II, supra note 8, at 3 (stating that ISE 
intends ``to replicate European-style, p.m. settled S&P 500 index 
options'' by ``divorcing its Proposed Options from all connection to 
the ISE Max SPY Index value at the most important time--i.e., 
settlement--and by instead calculating the settlement value on the 
`closing prices of [the] 500 individual stocks' in the S&P 500 
index.'')
    \87\ See ISE Response Letter I, supra note 6, at 4. CBOE 
disagrees with ISE's argument that its calculation methodology for 
the settlement of options on the ISE Max SPY Index would decrease 
manipulation because ``the SPY ETF is one of the most actively 
traded securities in the investing world.'' See CBOE Letter II, 
supra note 8, at 3.
    \88\ See ISE Response Letter I, supra note 6, at 5.
    \89\ See id. at 4. See also supra note 76 (discussing CBOE's 
response to this comment in its third comment letter).
    \90\ See id. at 5.
    \91\ See id. at 5-6. In its second response letter, ISE 
reiterates that because the trustee is under no obligation to 
distribute the NAV before the next day's open, ISE will perform its 
own calculation of the NAV to ensure that the settlement value is 
transmitted to OCC in time for regular processing of expiring 
contracts (generally before 6 p.m. ET). See ISE Response Letter II, 
supra note 9, at 3-4.
---------------------------------------------------------------------------

    Further, ISE points out that ``the concept of utilizing a reference 
price to settle an index option product that differs from the values of 
the proposed benchmark is not novel, and is best illustrated in CBOE's 
AM-settled S&P 500 index [(``SPX'')] options.'' \92\ In response, CBOE 
differentiates the settlement of SPX options from the settlement of ISE 
Max SPY options.\93\ Specifically, CBOE states that SOQ \94\ represents 
a modified calculation of the same interest that underlies SPX options 
during their life--the S&P 500 index.\95\ Conversely, CBOE states that 
ISE would use a different underlying benchmark to calculate the 
settlement value of the proposed options--the benchmark during the life 
of the proposed options would be the ISE Max SPY Index (based on the 
traded prices of SPY), whereas the benchmark at settlement would be a 
recalculated S&P 500 index.\96\
---------------------------------------------------------------------------

    \92\ See ISE Response Letter I, supra note 6, at 4-5. 
Specifically, ISE states that SPX options use a settlement value 
calculation called the Special Opening Quotation (``SOQ''), and SOQ 
is a special calculation of the underlying index where the opening 
prices of the index components are used to determine the settlement 
value of options contracts. See id. at 5. According to ISE, because 
component stocks may open after the primary markets have opened, or 
not at all, this can result in a settlement value that has a 
significant discrepancy from the initial index quote. See id. ISE 
reiterates this point in its second response letter. See ISE 
Response Letter II, supra note 9, at 4.
    \93\ See CBOE Letter II, supra note 8, at 2.
    \94\ See supra note 92.
    \95\ See CBOE Letter II, supra note 8, at 2.
    \96\ See id.
---------------------------------------------------------------------------

iv. Special Dividends and Special Distributions
    One commenter states that companies in the S&P 500 index from time 
to time pay special dividends and make special distributions to their 
shareholders, and ISE did not explain whether or how the relationship 
between settlement value and other values would be preserved in such a 
circumstance.\97\
---------------------------------------------------------------------------

    \97\ See CBOE Letter I, supra note 4, at 7.
---------------------------------------------------------------------------

    In its response letter, ISE states that it has never been a 
practice of the exchanges to describe the details on dividend 
processing for components of indexes in rule filings seeking approval 
of index options.\98\ Further, ISE states that because the proposed 
product is an index option, it does not anticipate adjustments being 
made to the options as a result of any component dividends, and that 
this is customary practice for index options.\99\
---------------------------------------------------------------------------

    \98\ See ISE Response Letter I, supra note 6, at 7.
    \99\ See id.
---------------------------------------------------------------------------

3. ODD Amendments
    One commenter suggests that the ODD would require supplementation 
before the proposed options could be listed and traded.\100\ First, 
this commenter states that an investor looking for disclosure with 
respect to the proposed product might be uncertain as to whether they 
are described in Chapter III (Options on Equity Securities) or Chapter 
IV (Index Options) of the ODD.\101\ Second, this commenter states that 
the ODD would need to be supplemented to provide disclosure with 
respect to the difference between the calculation of the settlement 
value and all other values of the proposed options.\102\
---------------------------------------------------------------------------

    \100\ See CBOE Letter I, supra note 4.
    \101\ See id. at 7-8.
    \102\ See id. at 8-9.
---------------------------------------------------------------------------

    In its response letter, ISE states that it will follow the well-
settled process for supplementing the ODD to devise disclosure of any 
risks associated with the proposed options that are determined by the 
Listed Options Disclosure Committee (``LODC'') \103\ to be necessary 
for disclosure.\104\ Further, as discussed above, in its second 
response letter, ISE represents that it will work with the OCC to amend 
the ODD to provide a clear and unambiguous description of the proposed 
options and any unique risks associated with it.\105\
---------------------------------------------------------------------------

    \103\ ISE states that the LODC is comprised of representatives 
of the OCC and each of the participant exchanges, and has the 
responsibility for determining and performing the necessary 
disclosure. See ISE Response Letter I, supra note 6, at 8.
    \104\ See id.
    \105\ See ISE Response Letter II, supra note 9, at 2.
---------------------------------------------------------------------------

IV. Proceedings To Determine Whether To Approve or Disapprove SR-ISE-
2012-22, as Modified by Amendment No. 1, and Grounds for Disapproval 
Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2) of the Act to determine whether the proposed rule change 
should be approved or disapproved.\106\ Institution of such proceedings 
is appropriate at this time in view of the legal and policy issues 
raised by the proposed rule change. Institution of disapproval 
proceedings does not indicate that the Commission has reached any 
conclusions with respect to any of the issues involved. Rather, as 
described in greater detail below, the Commission seeks and encourages 
interested persons to provide additional comment on the proposed rule 
change to inform the Commission's analysis of whether to approve or 
disapprove the proposed rule change.
---------------------------------------------------------------------------

    \106\ 15 U.S.C. 78s(b)(2). Section 19(b)(2)(B) of the Act 
provides that proceedings to determine whether to approve or 
disapprove a proposed rule change must be concluded within 180 days 
of the date of publication of notice of the filing of the proposed 
rule change. The time for conclusion of the proceedings may be 
extended for up to an additional 60 days if the Commission finds 
good cause for such extension and publishes its reasons for so 
finding or if the self-regulatory organization consents to the 
extension.
---------------------------------------------------------------------------

    As discussed above, the proposed rule change would allow ISE to 
list and trade European-style, p.m. and cash settled options on the ISE 
Max SPY Index. The proposed options would not be subject to position 
limits. The real-time value of the ISE Max SPY Index would be 
calculated by multiplying the share prices of SPY by a factor of ten 
and rounding to the tenth place, whereas the settlement value of the 
option would be

[[Page 38106]]

based on the NAV of SPY, as calculated by ISE,\107\ on a per share 
basis, times ten.
---------------------------------------------------------------------------

    \107\ See supra note 13.
---------------------------------------------------------------------------

    The section of the Act applicable to the proposed rule change that 
provides the grounds for the disapproval (or approval) under 
consideration is Section 6(b)(5),\108\ which requires that the rules of 
an exchange be designed, among other things, to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of 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.
---------------------------------------------------------------------------

    \108\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    As discussed above, one commenter supports the proposed rule 
change,\109\ while two commenters oppose the proposed rule change.\110\ 
Commenters raise the concern that the proposed rule change could lead 
to significant market disruption and harm to investors if ISE commences 
trading in the proposed options before all judicial challenges to the 
lawfulness of the proposed options under state law have been 
resolved.\111\ In addition, commenters raise concerns regarding whether 
the proposed new product could be misleading to investors and 
questioned the accuracy and clarity of ISE's description of the 
proposed options, including the calculation of the settlement 
value,\112\ the differences between the calculation of the settlement 
value and all other values of the ISE Max SPY Index,\113\ and the 
characterization of the proposed options as options on the ``ISE Max 
SPY Index.'' \114\
---------------------------------------------------------------------------

    \109\ See NYSE Letter, supra note 4.
    \110\ See CBOE Letter I, supra note 4; McGraw-Hill Letter I, 
supra note 4; CBOE Letter II, supra note 8; McGraw-Hill Letter II, 
supra note 8; and CBOE Letter III, supra note 8.
    \111\ See CBOE Letter I, supra note 4, at 2; McGraw-Hill Letter 
I, supra note 4, at 1 and 4; CBOE Letter II, supra note 8, at 6-8; 
and McGraw-Hill Letter II, supra note 8, at 2-3.
    \112\ See CBOE Letter I, supra note 4, at 5-7; CBOE Letter II, 
supra note 8, at 3-4; McGraw-Hill Letter II, supra note 8, at 2; and 
CBOE Letter III, supra note 8, at 1-2.
    \113\ See CBOE Letter I, supra note 4, at 7; McGraw-Hill Letter 
I, supra note 4, at 3; and CBOE Letter II, supra note 8, at 2-3.
    \114\ See CBOE Letter I, supra note 4, at 4-5; McGraw-Hill 
Letter I, supra note 4, at 2-4; CBOE Letter II, supra note 8, at 2-
7; and McGraw-Hill Letter II, supra note 8, at 2.
---------------------------------------------------------------------------

    In light of the concerns raised by commenters, the Commission 
believes that questions remain as to whether the proposed rule change 
is consistent with the requirements of Section 6(b)(5) of the Act, 
including whether the proposed options are designed to protect 
investors and the public interest.

V. Procedure: Request for Written Comments

    The Commission requests that interested persons provide written 
submissions of their views, data and arguments with respect to the 
issues identified above, as well as any others they may have identified 
with the proposal. In particular, the Commission invites the written 
views of interested persons concerning whether the proposed rule change 
is consistent with Section 6(b)(5) or any other provision of the Act, 
or the rules and regulations thereunder. Although there do not appear 
to be any issues relevant to approval or disapproval which would be 
facilitated by an oral presentation of views, data, and arguments, the 
Commission will consider, pursuant to Rule 19b-4, any request for an 
opportunity to make an oral presentation.\115\
---------------------------------------------------------------------------

    \115\ Section 19(b)(2) of the Act, as amended by the Securities 
Acts Amendments of 1975, Pub. L. 94-29, 89 Stat. 97 (1975), grants 
the Commission flexibility to determine what type of proceeding--
either oral or notice and opportunity for written comments--is 
appropriate for consideration of a particular proposal by a self-
regulatory organization. See Securities Acts Amendments of 1975, 
Report of the Senate Committee on Banking, Housing and Urban Affairs 
to Accompany S. 249, S. Rep. No. 75, 94th Cong., 1st Sess. 30 
(1975).
---------------------------------------------------------------------------

    Interested persons are invited to submit written data, views and 
arguments regarding whether the proposed rule change should be approved 
or disapproved by August 10, 2012. Any person who wishes to file a 
rebuttal to any other person's submission must file that rebuttal by 
August 27, 2012.
    The Commission is asking that commenters address the merit of ISE's 
statements in support of the proposal, in addition to any other 
comments they may wish to submit about the proposed rule change. 
Specifically, the Commission is requesting comment on the following:
     What are commenters' views as to whether market disruption 
and harm to investors would occur if the Commission were to approve the 
proposed rule change before all judicial challenges to the lawfulness 
of the proposed options under state law have been resolved? In light of 
the Exchange's representation that it would not start trading the 
proposed options until the Illinois Circuit Court rules on the motion 
to enforce the Injunction, and its representation regarding the 
potential mechanisms to ensure an orderly wind down of trading in the 
event that ISE is enjoined from offering the product after trading has 
already begun, do commenters believe any harm would result if the 
Exchange started trading the proposed options before all judicial 
challenges to the lawfulness of the proposed options under state law 
have been resolved? Why or why not?
     As outlined above, the Exchange has provided additional 
detail about how it intends to calculate the settlement value for 
options on the ISE Max SPY Index.\116\ What are commenters' views as to 
whether the Exchange should provide additional clarity in the filing 
regarding the calculation methodology for the settlement value of 
options on the ISE Max SPY Index to mitigate concerns regarding the 
potential for investor confusion? Please be specific in your response.
---------------------------------------------------------------------------

    \116\ See supra Section III.B.2.i. and note 13.
---------------------------------------------------------------------------

     As noted above, the Exchange would calculate the value of 
the ISE Max SPY Index by reference to the traded prices of SPY, times 
ten, at all times. However, the settlement value of the options on the 
ISE Max SPY Index would be calculated by reference to the NAV of SPY, 
as calculated by the Exchange, on a per share basis, times ten.\117\ 
What are commenters' views of the impact, if any, of the differences 
between the calculation of the settlement value of the proposed options 
and the value of the ISE Max SPY Index itself on investor understanding 
of the options on the ISE Max SPY Index? Do commenters believe that the 
differences between the calculation of the settlement value of the 
proposed options and the value of the ISE Max SPY Index itself could 
cause investor confusion? Please explain why or why not.
---------------------------------------------------------------------------

    \117\ See supra Section III.B.2.i. and note 13.
---------------------------------------------------------------------------

     If commenters believe that the differences between the 
calculation of the settlement value of the proposed options and the 
value of the ISE Max SPY Index itself could cause investor confusion, 
what are commenters' views as to whether the steps that ISE has 
proposed to take to provide investors with information about the 
product \118\

[[Page 38107]]

would be sufficient to mitigate such concerns?
---------------------------------------------------------------------------

    \118\ As stated above, in its second response letter, ISE 
represents that it will: (i) Work with the OCC to amend the ODD to 
provide a clear and unambiguous description of the product and any 
unique risks associated with it; (ii) display the contract 
specifications on its Web site; (iii) create a special Web page 
devoted exclusively to the proposed options, which will describe in 
plain English all the terms of this product, including index 
calculation and settlement; and (iv) follow the same marketing 
process it follows for all of its other new products, which is 
designed to promote awareness and a clear understanding of the 
product. See ISE Response Letter II, supra note 9, at 2.
---------------------------------------------------------------------------

     Do commenters believe that the characterization of the 
proposed options as options on the ``ISE Max SPY Index'' would have the 
potential to cause investor confusion? If so, why? If not, why not? If 
so, what are commenters' views on whether any potential confusion would 
be sufficiently mitigated by the steps that ISE has proposed to take to 
provide investors with information about the product? \119\ Please be 
specific in your response.
---------------------------------------------------------------------------

    \119\ See id.
---------------------------------------------------------------------------

    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 email to rule-comments@sec.gov. Please include 
File Number SR-ISE-2012-22 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-2012-22. This file 
number should be included on the subject line if email 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-2012-22 and should be 
submitted on or before August 10, 2012. Rebuttal comments should be 
submitted by August 27, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\120\
---------------------------------------------------------------------------

    \120\ 17 CFR 200.30-3(a)(57).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-15489 Filed 6-25-12; 8:45 am]
BILLING CODE 8011-01-P