[Federal Register Volume 76, Number 226 (Wednesday, November 23, 2011)]
[Notices]
[Pages 72472-72473]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-30195]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65771; File No. SR-ISE-2011-60]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Order Granting Approval of Proposed Rule to Expand the Short Term
Options Series Program
November 17, 2011.
I. Introduction
On September 23, 2011, the International Securities Exchange, LLC
(``ISE'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission''), pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to expand the Short Term Options
Series Program (``STOS Program''). The proposed rule change was
published for comment in the Federal Register on October 13, 2011.\3\
The Commission received no comment letters on the proposal. This order
approves the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 65503 (October 6, 2011),
76 FR 63691 (``Notice'').
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II. Description of the Proposal
The proposed rule change seeks to amend ISE Rules 504 and 2009 to
[[Page 72473]]
expand the STOS Program \4\ so that the Exchange may select up to 25
option classes to participate in the STOS Program \5\ and list up to 30
Short Term Option Series (``STOS Options'') for each option class that
participates in the Exchange's STOS Program.\6\ Currently, the Exchange
may open no more than 15 option classes and no more than 20 series for
each expiration date in those classes.\7\ The Exchange proposed no
other changes to the STOS Program.
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\4\ The Exchange adopted the STOS Program on a pilot basis in
2005. See Securities Exchange Act Release No. 52012 (July 12, 2005),
70 FR 41246 (July 18, 2005) (SR-ISE-2005-17). The STOS Program was
approved on a permanent basis in 2010. See Securities Exchange Act
Release No. 62444 (July 2, 2010), 75 FR 39595 (July 9, 2010) (SR-
ISE-2010-72).
\5\ The Exchange previously increased the total number of option
classes that may participate in the STOS Program from five to 15.
See Securities Exchange Act Release No. 63878 (February 9, 2011), 76
FR 8796 (February 15, 2011) (SR-ISE-2011-08).
\6\ The Exchange previously increased the number of permissible
series per STOS class from seven to 20 series. See Securities
Exchange Act Release No. 62444 (July 2, 2010), 75 FR 39595 (July 9,
2010) (SR-ISE-2010-72).
\7\ However, if the Exchange opens less than 20 series for an
expiration date, additional series may be opened with that
expiration date when the Exchange deems it necessary to maintain an
orderly market, to meet customer demand, or when the market price of
the underlying security moves substantially from the exercise price
or prices of the series already opened. Any additional series listed
by the Exchange shall have strike prices within 30% above or below
the current price of the underlying security. The Exchange may also
open additional series of Short Term Option Series with strike
prices more than 30% above or below the current price of the
underlying security if demonstrated customer interest exists for
such series, as expressed by institutional, corporate, or individual
customers or their brokers. Market-makers trading for their own
account shall not be considered when determining customer interest
under this provision. See Supplementary Material .02(d) to Rule 504
and Supplementary Material .01(d) to Rule 2009.
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In the Notice, the Exchange stated that the principal reason for
the proposed expansion is customer demand for adding, or not removing,
classes from the STOS Program. Specifically, ISE cited an increased
demand for more series when market-moving events, such as corporate
events and large price swings, have occurred during the life span of an
affected STOS class. Currently, if the maximum number of series has
been reached, the Exchange must delete or delist certain series in
order to make room for more in-demand series.
III. Discussion
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange.\8\
Specifically, the Commission finds that the proposal is consistent with
Section 6(b)(5) of the Act,\9\ which requires, among other things, that
the rules of a national securities exchange be designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in facilitating transactions in securities, 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. The Commission believes that the
proposal strikes a reasonable balance between the Exchange's desire to
offer a wider array of products and the need to avoid unnecessary
proliferation of options series.
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\8\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\9\ 15 U.S.C. 78f(b)(5).
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In approving this proposal, the Commission notes that the Exchange
has analyzed its capacity and represents that it and the Options Price
Reporting Authority (``OPRA'') have the necessary systems capacity to
handle the potential additional traffic associated with trading of an
expanded number of classes and series in the STOS Program. The
Commission expects the Exchange to monitor the trading volume
associated with the additional options series listed as a result of
this proposal and the effect of these additional series on market
fragmentation and on the capacity of the Exchange's, OPRA's, and
vendors' automated systems.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\10\ that the proposed rule change (SR-ISE-2011-60) be, and it
hereby is, approved.
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\10\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-30195 Filed 11-22-11; 8:45 am]
BILLING CODE 8011-01-P