[Federal Register Volume 74, Number 26 (Tuesday, February 10, 2009)]
[Notices]
[Pages 6678-6680]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-2655]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59347; File No. SR-ISE-2009-05]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change To Eliminate $3 Underlying Price Requirement for Continued 
Listing and Listing of Additional Series

February 3, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on February 2, 2009, the International Securities Exchange, LLC 
(``ISE'' or the ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by ISE. ISE has 
designated the proposed rule change as constituting a non-controversial 
rule change under Rule 19b-4(f)(6) under the Act,\3\ which renders the 
proposal effective upon filing with the Commission. 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.
    \3\ 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 ISE proposes to amend Rule 503(b) to eliminate the $3 market 
price per share requirement from the Exchange's requirements for 
continued approval for an underlying security. The Exchange also 
proposes to amend Rule 503(c) by eliminating the prohibition against 
listing additional series of options on an underlying security at any 
time when the price per share of such underlying security is less than 
$3. The text of the proposed rule change is as follows, with deletions 
in [brackets] and additions in italics:
    Rule 503. Withdrawal of Approval of Underlying Securities:
    (a) No Change.
    (b) Absent exceptional circumstances, an underlying security will 
not be deemed to meet the Exchange's requirements for continued 
approval whenever any of the following occur:
    (1) There are fewer than 6,300,000 shares of the underlying 
security held by persons other than those who are required to report 
their security holdings under Section 16(a) of the Exchange Act.
    (2) There are fewer than 1,600 holders of the underlying security.
    (3) The trading volume (in all markets in which the underlying 
security is traded) has been less than 1,800,000 shares in the 
preceding twelve (12) months.
    (4) [The market price per share of the underlying security closed 
below $3 on the previous trading day as measured by the closing price 
reported by the primary market in which the underlying security is 
traded.] Reserved.
    (5) The underlying security ceases to be an ``NMS stock'' as 
defined in Rule 600 of Regulation NMS under the Exchange Act.
    (6) If an underlying security is approved for options listing and 
trading under the provisions of Rule 502(c), the trading volume [and 
price history] of the Original Security (as therein defined) prior to 
but not after the commencement of trading in the Restructure Security 
(as therein defined), including ``when-issued'' trading, may be taken 
into account in determining whether the trading volume [and market 
price] requirement[s] of (3) [and (4)] of this paragraph (b) [are] is 
satisfied.
    (c) [In connection with paragraph (b)(4) of this Rule, the Exchange 
shall not open for trading any additional series of options contracts 
of the class covering an underlying security at any time (including on 
a next-day, expiration or intra-day basis) when the market price per 
share of such underlying security closed less than $3 on the last 
trading day preceding the day on which such series are added, as 
measured by the closing price reported by the primary market in which 
the underlying security trades. In addition to closing at or above $3 
on the last trading day preceding the day series are added, the 
Exchange shall not open for trading any additional series of options 
contracts on an intra-day basis unless the last reported trade in the 
primary market in which the underlying security trades is at least $3 
at the time the Exchange determines to add the series. Notwithstanding 
the above, the Exchange may add a series if the additional series is 
traded on at least one other registered national securities exchange 
and, at the time the additional series was listed by such other 
registered national securities exchange, it met the $3 market price 
requirement.] Reserved.
    (d)-(k) 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 this proposed rule change is to eliminate the $3 
market price per share requirement from the Exchange's requirements for 
continued

[[Page 6679]]

approval for an underlying security from Rule 503(b)(4). This proposed 
rule change also amends Rule 503(c) by eliminating the prohibition 
against listing additional series or options on an underlying security 
at any time when the price per share of such underlying security is 
less than $3. The Exchange also proposes to make technical changes 
throughout Rule 503 to eliminate references to paragraph (4) of Rule 
503.
    ISE's rules require that the market price for a security be at 
least $3 on the previous trading day for the continued listing of 
options on that underlying security. If the price of an underlying 
security falls below $3, the Exchange can continue to trade then-listed 
series on that underlying security, but is unable to list new series of 
options. The Exchange believes that the $3 market price per share 
requirement is no longer necessary or appropriate, and that only those 
underlying securities meeting the remaining continued listing criteria 
set forth in Rule 503 will be eligible for continued listing and the 
listing of additional options series. The Exchange believes that the 
current $3 market price per share requirement could have a negative 
effect on investors. For example, in the current volatile market 
environment in which the market price for a large number of securities 
has fallen below $3, the Exchange is currently unable to list new 
series on underlying securities trading below $3. If there is market 
demand for series below $3, the Exchange would be unable to accommodate 
such requests and investors would be unable to hedge their positions 
with options series with strikes below $3.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) that an exchange have rules that are 
designed to promote just and equitable principles of trade, and to 
remove impediments to and perfect the mechanism for a free and open 
market and a national market system, and in general, to protect 
investors and the public interest. In particular, the proposed rule 
change will permit the Exchange to make options on underlying 
securities available even if the price of the underlying security is 
less than $3 thus providing investors additional opportunities to hedge 
their positions.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The proposed rule change does not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    The Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any unsolicited written comments from members or other interested 
parties.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \4\ and Rule 19b-
4(f)(6) thereunder.\5\
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    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file 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. 
ISE has satisfied this requirement.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \6\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6) \7\ permits the Commission to 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. ISE requests that the 
Commission waive the 30-day operative delay. The Commission notes that 
this proposed rule change is substantially identical to a proposed rule 
change that was approved by the Commission after an opportunity for 
public comment,\8\ and does not raise any new substantive issues. The 
Exchange believes that waiving the 30-day operative delay will allow 
the Exchange to respond promptly to demand by market participants to 
list the options series that CBOE is expected to list upon receiving 
Commission approval of CBOE's proposed rule change. For these reasons, 
the Commission believes that waiving the 30-day operative delay \9\ is 
consistent with the protection of investors and the public interest and 
designates the proposal operative upon filing.
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    \6\ 17 CFR 240.19b-4(f)(6).
    \7\ 17 CFR 240.19b-4(f)(6).
    \8\ ISE's proposed rule change is substantially identical to a 
proposed rule change by the Chicago Board Options Exchange 
(``CBOE'') recently approved by the Commission. See Securities 
Exchange Act Release No. 59336 (February 2, 2009) (SR-CBOE-2008-
127).
    \9\ For purposes only of waiving the 30-day operative delay, the 
Commission has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.

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-2009-05 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-2009-05. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for inspection and 
copying in the Commission's Public Reference Room, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying

[[Page 6680]]

information from submissions. You should submit only information that 
you wish to make publicly available. All submissions should refer to 
File Number SR-ISE-2009-05 and should be submitted on or before March 
3, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-2655 Filed 2-9-09; 8:45 am]
BILLING CODE 8011-01-P