[Federal Register Volume 73, Number 241 (Monday, December 15, 2008)]
[Notices]
[Pages 76078-76080]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-29555]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59053; File No. SR-ISE-2008-90]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing of Proposed Rule Change Relating to Alternative 
Primary Market Makers

December 4, 2008.
    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 November 21, 2008, 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\ U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The ISE proposes to amend Rule 802 to provide for an Alternative 
Primary Market Maker. The text of the proposed rule change is as 
follows, with additions italicized: 

Rule 802. Appointment of Market Makers

    (a) No change.
    (b) (1) The Board or designated committee will allocate equity 
options classes into groupings (``Groups'' of options) and will make 
appointments to those Groups rather than individual classes, except as 
provided in paragraph (f) and Supplementary Material .02 below. Absent 
an exemption by the Exchange, an appointment of a market maker shall be 
limited to the options classes trading in no more than one Group for 
each Membership held by the market maker.
    (2) No change.
    (c)-(f) No change.
Supplementary Material to Rule 802
    .01 No change.
    .02 A Member that is approved to act in the capacity of a 
Competitive Market Maker with respect to one or more CMM Rights may 
voluntarily be appointed to act as an ``Alternative Primary Market 
Maker,'' so long as the Exchange has determined that such Member has 
the appropriate systems and procedures in place to undertake the 
responsibilities of a Primary Market Maker.
    (a) The Exchange may appoint an Alternative Primary Market Maker to 
an options class only in the event that no Primary Market Makers or 
Second Market Primary Market Makers seek allocation of the security.
    (b) If no Primary Market Makers or Second Market Primary Market 
Makers seek allocation of an options class, all eligible Competitive 
Market Makers will be given notice and an opportunity to seek 
allocation of the security as an Alternative Primary Market Maker. Such 
allocations will be made by the Allocation Committee according to the 
guidelines contained in Rule 802.
    (c) An Alternative Primary Market Maker shall have all of the 
responsibilities and privileges of a Primary Market Maker under the 
Rules with respect to all appointed options classes.
    (d) Options classes allocated to Alternative Primary Market Makers 
may be traded in the Second Market as provided in Chapter 9 of the 
Rules. With respect to options classes traded in the First Market, such 
classes will not be allocated to a particular Group under Rule 
802(b)(1), and all Competitive Market Makers shall be eligible for 
appointment to such classes. 
    (e) If an Alternative Primary Market Maker ceases trading of an 
options

[[Page 76079]]

class, the class will be reallocated by the Exchange to a Primary 
Market Maker or another Alternative Primary Market Maker, as 
appropriate.
* * * * *

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 Exchange proposes to enhance its market by establishing 
Alternative Primary Market Makers (``Alternative PMMs''). Currently, 
when the ISE lists new options classes, it allocates them to one of its 
Primary Market Makers (``PMMs'') under Rule 802. Pursuant to power 
delegated to the Board, an Allocation Committee, which consists of 
representatives of Electronic Access Members, makes allocation 
decisions according to the guidelines contained in Rule 802. Under Rule 
802, allocations are voluntary, and at times ISE is unable to list new 
products because none of the PMMs are interested in trading the class. 
At other times, ISE must delist certain products due to lack of PMM 
interest. Most frequently, this occurs with respect to options on 
stocks that have pending corporate actions, and options products that 
are not listed at any other options exchange. Despite the lack of PMM 
interest, these products may be of interest to other market making 
firms at the Exchange.
    To better enable the Exchange to list and retain these options 
classes, ISE proposes to appoint Competitive Market Makers (``CMMs'') 
that meet certain qualifications as Alternative PMMs when none of the 
PMMs want an allocation.\3\ Specifically, under this proposal, in order 
to be appointed as an Alternative PMM, the Exchange must first 
determine that a CMM has the appropriate systems and procedures in 
place to undertake the responsibilities of a PMM. Further, before an 
Alternative PMM is appointed to an options class, that options class 
will always be offered first to the PMMs or Second Market PMMs (as 
applicable) under the Exchange's regular allocation procedure. Rule 
802(b)(1) currently states that the Board or a designated committee 
will make appointments to ``Groups'' of options rather than individual 
classes. For the purpose of allocating a product, i.e., an individual 
options class, to an Alternative PMM, the Exchange proposes to carve 
out an exception in Rule 802(b)(1) pursuant to which the Allocation 
Committee shall allocate individual options classes to an Alternative 
PMM in accordance with Supplementary Material .02 to Rule 802. The 
options class may be a new listing or a listing that the current PMM or 
Second Market PMM (as applicable) no longer wishes to make a market in.
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    \3\ Only CMMs that own or lease CMM Rights shall be eligible to 
be appointed as an Alternative PMM. That is, Electronic Access 
Members (``EAMs'') acting as market makers in the Second Market will 
not be eligible to be appointed as Alternative PMMs.
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    Under the proposal, if no PMMs or Second Market PMMs (as 
applicable) want the allocation, then the Alternative PMMs will be 
offered the opportunity to serve as PMM in the options class according 
to ISE's regular allocation procedures. Once appointed to an options 
class, the Alternative PMM will have all of the responsibilities and 
privileges of a PMM under the Rules with respect to all appointed 
options classes. For example, Alternative PMMs will enjoy privileges 
that include, among other things, participation rights and small order 
execution preference while accepting responsibilities that include, 
among other things, the obligation to provide continuous quotations in 
the options class to which the Alternative PMM is appointed, to 
conducting the opening rotation on a daily basis for as long as the 
Alternative PMM is appointed to that options class.
    Finally, if an Alternative PMM ceases trading of an options class, 
that options class will be reallocated by the Exchange. An Alternative 
PMM will not have any transferable rights in options classes to which 
it is appointed nor will it have any PMM voting rights.
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) 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 
allocate more new products and continue listing existing products for 
the benefit of both investors and the Exchange. Further, the Exchange 
believes that Alternative PMMs will make ISE a more competitive market.

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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve such proposed rule change; or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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 [email protected]. Please include 
File Number SR-ISE-2008-90 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.


[[Page 76080]]


All submissions should refer to File Number SR-ISE-2008-90. 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 the filing also will be available for 
inspection and copying at the principal office of the ISE. All comments 
received will be posted without change; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-ISE-2008-90 and should be 
submitted on or before January 5, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\4\
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    \4\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-29555 Filed 12-12-08; 8:45 am]
BILLING CODE 8011-01-P