Document ID: SEC-2009-0499-0001
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 Quoting Obligations of Second Market Competitive Market Makers
Posted Date: 2009-04-09T04:00Z

[Federal Register: April 9, 2009 (Volume 74, Number 67)]
[Notices]               
[Page 16247-16249]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09ap09-116]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59701; File No. SR-ISE-2009-15]

 
Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change Relating to Quoting Obligations of Second Market Competitive 
Market Makers

April 3, 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 March 25, 2009, the International Securities Exchange, LLC (the 
``Exchange'' or the ``ISE'') filed with the Securities and Exchange 
Commission the proposed rule change as described in Items I, II, and 
III below, which items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.

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[[Page 16248]]

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

    The ISE proposes to amend the quoting obligations of Second Market 
Competitive Market Makers. The text of the proposed rule change is as 
follows, with deletions in [brackets] and additions in italics:
Rule 904. Market Maker Quotes and Orders
    (a) Quotes. Except as provided below, all of the requirements of 
Rules 803, 804, and 805 related to quoting obligations of Primary 
Market Makers and Competitive Market Makers apply to SMPMMs and SMCMMs 
respectively. For purposes of the Rules, SMCMMs are considered 
appointed to all of the options classes listed in the Second Market.
    (1) SMCMMs are not required to make markets in a minimum number of 
options classes in the Second Market. SMCMMs may choose whether to make 
markets in one or more options classes traded in the Second Market on a 
daily basis.
    (2) If an SMCMM chooses to make markets in one or more options 
classes in the Second Market, it must [participate in the opening 
rotation and] make markets and enter into any resulting transactions on 
a continuous basis in all of the series of the options class until the 
close of trading that day. Further, SMCMMs may [not] initiate quoting 
in an additional number of options classes intraday, up to the number 
of options classes for which they participated in the opening rotation 
on that day.
    (b) No Change.
* * * * *

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of these statements may be examined at 
the places specified in Item IV below. The self-regulatory organization 
has prepared summaries, set forth in sections A, B and C below, of the 
most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to amend the quoting 
obligations of Second Market Competitive Market Makers (``SMCMMs''). 
Pursuant to Commission approval, ISE currently lists for trading a 
number of low-volume options classes that qualify for listing under its 
Rule 502 in a ``Second Market.'' \3\ Among other things, the Second 
Market has allowed the Exchange to provide an opportunity for 
additional members to provide liquidity as market makers. Specifically, 
the Second Market trading rules allow SMCMMs to choose whether to make 
markets in one or more options classes on a daily basis. Under the 
current rules, if a SMCMM chooses to make markets in an options class, 
it must participate in the opening rotation and continue to quote all 
of the series of the options class through the close that day. Further, 
SMCMMs are not allowed to initiate quoting in an options class 
intraday.
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    \3\ See Securities Exchange Act Release No. 54580 (October 6, 
2006), 71 FR 60781 (October 16, 2006) (SR-ISE-2006-40).
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    The Exchange proposes to amend its Second Market rules as follows: 
(1) Permit SMCMMs to quote in a greater number of options classes 
intraday, and (2) relax the requirement that SMCMMs must participate in 
the opening rotation in the options class that it chooses to make a 
market in on a specific day. With this proposed rule change, SMCMMs may 
initiate quoting in an options class intraday. However, the number of 
options classes in which a SMCMM may initiate quoting shall be limited 
to a number equal to the number of classes in which the SMCMM 
participated in the opening rotation on that day. For example, if a 
SMCMM participates in the opening rotation for 30 options classes, it 
may initiate quoting intraday in an additional 30 classes. Once an 
SMCMM starts quoting, it will continue to be required to quote all of 
the series through the remainder of the day.
    The Exchange believes that relaxing the obligation for SMCMMs to 
participate in the opening and permitting this class of market makers 
to quote in a greater number of options classes intraday will encourage 
additional SMCMM participation and add liquidity to these low-volume 
options classes.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder and, in particular, the requirements of section 
6(b) of the Act. Specifically, the Exchange believes the proposed rule 
change is consistent with Section 6(b)(5) requirements that the rules 
of an exchange be designed to promote just and equitable principles of 
trade, to prevent fraudulent and manipulative acts, 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 is designed to 
attract additional liquidity in low-volume options classes by providing 
for open access to market makers.

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

    This proposed rule change does not significantly affect the 
protection of investors or the public interest, does not impose any 
significant burden on competition, and, by its terms, 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 Exchange provided the 
Commission with written notice of its intent to file the proposed rule 
change, along with a brief description and text of the proposed rule 
change, at least five business days prior to the date of filing the 
proposed rule change as required by Rule 19b-4(f)(6).\4\ The proposed 
amendment to ISE Rule 904 will allow SMCMMs to quote in a greater 
number of options classes intraday and thus provide additional 
liquidity in the low-

[[Page 16249]]

volume options classes that trade in the Exchange's Second Market. 
Further, no other exchange requires its market makers to participate in 
the opening rotation in 100% of the series in options classes in which 
it makes a market. For the foregoing reasons, this rule filing 
qualifies for immediate effectiveness as a ``non-controversial'' rule 
change under paragraph (f)(6) of Rule 19b-4 of the Act, as it does not 
raise any new, unique or substantive issues, and is beneficial for 
competitive purposes and to promote a free and open market for the 
benefit of investors.
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    \4\ 17 CFR 240.19b-4(f)(6).
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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-2009-15 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-2009-15. 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 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-
2009-15 and should be submitted on or before April 30, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-8066 Filed 4-8-09; 8:45 am]

BILLING CODE 8010-01-P