[Federal Register Volume 76, Number 104 (Tuesday, May 31, 2011)]
[Notices]
[Pages 31385-31387]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-13315]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64538; File No. SR-ISE-2011-30)


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing of Proposed Rule Change Relating to Complex 
Orders

May 24, 2011.
    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 May 23, 2011, the International Securities Exchange, LLC (the 
``Exchange'' or the ``ISE'') 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 the Exchange. 
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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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to specify in its rules that complex orders 
may be entered into the Price Improvement Mechanism for options classes 
traded on its Optimise platform. The text of the proposed rule change 
is available on the Exchange's Web site http://www.ise.com, at the 
principal office of the Exchange, at the Commission's Public Reference 
Room, and on the Commission's Web site at http://www.sec.gov.

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 Exchange included statements 
concerning the purpose of, and basis for,

[[Page 31386]]

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 has developed an enhanced technology trading platform 
(the ``Optimise platform''). To assure a smooth transition, the 
Exchange is in the process of migrating option classes from its current 
trading system to the Optimise platform.\3\ The Optimise platform 
offers members the same trading functionality as the current trading 
system with some enhancements, several of which were previously added 
to the ISE's rules.\4\ The purpose of this rule filing is to specify in 
the Exchange's rules that complex orders may be entered into the Price 
Improvement Mechanism for options classes traded on the Optimise 
platform.
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    \3\ Options classes are being transferred from the current 
trading platform to the Optimise trading platform. The same options 
cannot trade on both systems at the same time.
    \4\ See Securities Exchange Act Release No. 63117 (October 15, 
2010), 75 FR 65042 (October 21, 2010) (SR-ISE-2010-101); and 
Securities Exchange Act Release No. 64275 (April 8, 2011), 76 FR 
21087 (April 14, 2011) (File No. SR-ISE-2011-24).
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    The Exchange's Facilitation Mechanism has been available for the 
execution of complex orders since 2005 \5\ and the Solicited Order 
Mechanism has been available for the execution of complex orders since 
2006.\6\ Both of the mechanisms expose orders to all exchange members 
for one second to provide an opportunity for price improvement. 
Supplementary Material .08 to Rule 716 specifies that members may use 
the Facilitation Mechanism and the Solicited Order Mechanism to execute 
complex orders at a net price. The complex orders are processed in the 
mechanisms at the net price in the same manner as single-legged orders. 
With respect to the bids and offers for the individual legs of a 
complex order entered into the mechanisms, the priority rules for 
complex orders contained in Rule 722(b)(2) continue to apply. If an 
improved net price for the complex order being executed can be achieved 
from bids and offers for the individual legs of the complex order in 
the Exchange's auction market, the order being executed will receive an 
execution at the better net price.
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    \5\ Securities Exchange Act Release No. 52327 (August 24, 2005), 
70 FR 51854 (August 31, 2005) (File No. SR-ISE-2004-33).
    \6\ Securities Exchange Act Release No. 53729 (April 26, 2006), 
71 FR 26154 (May 3,
    2006) (File No. SR-ISE-2006-14).
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    The Price Improvement Mechanism works in the same basic manner as 
the Facilitation Mechanism and the Solicited Order Mechanism, exposing 
orders to all members for one second to provide an opportunity for 
price improvement. The Exchange proposes to make the Price Improvement 
Mechanism available for the execution of complex orders on the Optimise 
platform by adding Supplementary Material .10 to Rule 723. Proposed 
Supplementary Material .10 to Rule 723 specifies that members may use 
the Price Improvement Mechanism to execute complex orders at a net 
price. The complex orders are processed in the mechanisms at the net 
price in the same manner as single-legged orders. With respect to the 
bids and offers for the individual legs of a complex order entered into 
the mechanisms, the priority rules for complex orders contained in Rule 
722(b)(2) continue to apply. If an improved net price for the complex 
order being executed can be achieved from bids and offers for the 
individual legs of the complex order in the Exchange's auction market, 
the order being executed will receive an execution at the better net 
price.\7\
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    \7\ The Exchange provides the Commission with monthly statistics 
related to PIM order execution. These statistics will include 
Complex Orders executed through the PIM.
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    Rule 723(b)(1) requires that orders entered into the Price 
Improvement Mechanism be entered at a price that is better than the ISE 
best bid or offer and equal to or better than the national best bid or 
offer, and Supplementary Material .08 to Rule 723 provides an exception 
to this requirement. Proposed Supplementary Material .10 to Rule 723 
specifies that Complex orders must be entered at a price that is better 
than the best net price (i) available on the complex order book; and 
(ii) achievable from the best ISE bids and offers for the individual 
legs (an ``improved net price''). It also specifies that Supplementary 
Material .08 is not applicable to the entry of complex orders; complex 
orders will be rejected unless they are entered at an improved net 
price. Proposed Supplementary Material .10 further specifies that all 
references to the national best bid and offer in Rule 723 and the 
Supplementary Material thereto are inapplicable. Finally, Rule 
723(c)(5) specifies that the exposure period will automatically 
terminate upon the receipt of certain orders. Proposed Supplementary 
Material .10 specifies that the provisions of Rule 723(c)(5) shall 
apply with respect to the receipt of complex orders during the exposure 
period, and not to the receipt of orders for the individual legs of the 
complex order. Accordingly, the exposure period will not automatically 
terminate due to the receipt of orders for the individual legs of the 
complex order during the exposure period. As mentioned previously, if 
at the end of the exposure period an improved net price for the complex 
order can be achieved from bids and offers for the individual legs of 
the complex order, the order will be executed against such bids and 
offers.
2. Statutory Basis
    The basis under the Act for this proposed rule change is found in 
Section 6(b)(5),\8\ in that the proposed change will serve to remove 
impediments to and perfect the mechanisms of a free and open market and 
a national market system and, in general, to protect investors and the 
public interest. The proposed rule change will make an existing service 
available to an additional order type. By making the Price Improvement 
Mechanism available for complex orders, members will be given an 
additional way in which they can seek price improvement for their 
customers when executing complex orders on the Exchange. Moreover, the 
Proposal assures that the existing priority rules applicable to the 
execution of complex orders is maintained and automatically enforced by 
the system.
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    \8\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

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

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.

[[Page 31387]]

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate 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 or disapprove the 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-2011-30 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-2011-30. 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 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-2011-30 and should be 
submitted on or before June 21, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-13315 Filed 5-27-11; 8:45 am]
BILLING CODE 8011-01-P