[Federal Register Volume 77, Number 58 (Monday, March 26, 2012)]
[Notices]
[Pages 17531-17532]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-7202]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66623; File No. SR-ISE-2012-23]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change Regarding the Short Term Option Series Program

March 20, 2012.
    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 March 13, 2012, the International Securities Exchange, LLC 
(``Exchange'' or ``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 Exchange filed the proposal as a ``non-controversial'' proposed 
rule change pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and 
Rule 19b-4(f)(6) thereunder.\4\ 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\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 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 Exchange proposes to amend its rules regarding the Short Term 
Option Series Program. The text of the proposed rule change is 
available on the Exchange's Web site www.ise.com, at the principal 
office of the Exchange, and at the Commission's Public Reference Room.

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, 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 amend ISE Rules 504 
and 2009 regarding the Short Term Option Series Program (``STOS 
Program'').\5\ Specifically, the Exchange proposes to amend its rules 
to allow the Exchange to open short term option series that are opened 
by other securities exchanges in option classes selected by other 
exchanges under their respective short term option rules.
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    \5\ 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).
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    Currently, ISE may select up to 30 currently listed option classes 
on which short term option series may be opened in the STOS Program. 
The Exchange may also match any option classes that are selected by 
other securities exchanges that employ a similar program under their 
respective rules. For each option class eligible for participation in 
the STOS Program, the Exchange may open up to 30 short term option 
series for each expiration date in that class.
    This proposal seeks to allow the Exchange to open short term option 
series that are opened by other securities exchanges in option classes 
selected by other exchanges under their respective short term option 
rules. This change is being proposed notwithstanding the current cap of 
30 series per class under the STOS Program. This is a competitive 
filing and is based on approved filings and existing rules of The 
NASDAQ Stock Market LLC for the NASDAQ Options Market (``NOM'') and 
NASDAQ OMX PHLX, Inc. (``PHLX'').\6\
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    \6\ See Securities Exchange Act Release Nos. 65775 (November 17, 
2011), 76 FR 72473 (November 23, 2011) (SR-NASDAQ-2011-138) and 
65776 (November 17, 2011), 76 FR 72482 (November 23, 2011) (SR-PHLX-
2011-131).
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    ISE is competitively disadvantaged since it operates a 
substantially similar STOS Program as NOM and PHLX but is limited to 
listing a maximum of 30 series per options class that participates in 
its STOS Program (whereas PHLX and NOM are not similarly restricted).
    The Exchange is not proposing any changes to the STOS Program other 
than the ability to open short term option series that are opened by 
other securities exchanges in option classes selected by other 
exchanges under their respective short term option rules.
    ISE notes that the STOS Program has been well-received by market 
participants, in particular by retail investors. ISE believes that the 
current proposed revision to the STOS Program will permit the Exchange 
to meet increased customer demand and provide market participants with 
the ability to hedge in a greater number of option classes and series.
    With regard to the impact of this proposal on system capacity, ISE 
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 series for the classes that participate in the STOS 
Program.
    The proposed increase to the number of series per classes eligible 
to participate in the STOS Program is required for competitive purposes 
as well as to ensure consistency and uniformity among the competing

[[Page 17532]]

options exchanges that have adopted similar STOS Programs.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Securities Exchange Act of 1934 \7\ (the 
``Act'') in general, and furthers the objectives of Section 6(b)(5) of 
the Act \8\ in particular, in that it is 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 Exchange believes that expanding the current short 
term options program will result in a continuing benefit to investors 
by giving them more flexibility to closely tailor their investment 
decisions and hedging decisions in greater number of securities. The 
Exchange believes that expanding the current program will provide the 
investing public and other market participants with additional 
opportunities to hedge their investment thus allowing these investors 
to better manage their risk exposure. While the expansion of the STOS 
Program will generate additional quote traffic, the Exchange does not 
believe that this increased traffic will become unmanageable since the 
proposal remains limited to a fixed number of classes.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    ISE does not believe that this proposed rule change will impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Exchange Act. In this regard and as 
indicated above, the Exchange notes that the rule change is being 
proposed as a competitive response to existing NOM and PHLX rules. ISE 
believes this proposed rule change is necessary to permit fair 
competition among the options exchanges with respect to their short 
term options programs.

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 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 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 \9\ and Rule 19b-
4(f)(6) thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's 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 of the proposed rule 
change, or such shorter time as designated by the Commission. The 
Exchange has satisfied this requirement.
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    The Exchange has requested that the Commission waive the 30-day 
operative delay. The Commission believes that waiver of the operative 
delay is consistent with the protection of investors and the public 
interest because the proposal is substantially similar to those of 
other exchanges that have been approved by the Commission and permit 
such exchanges to open short term option series that are opened by 
other securities exchanges under their respective short term option 
rules.\11\ Therefore, the Commission designates the proposal operative 
upon filing.\12\
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    \11\ See supra note 6.
    \12\ 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 summarily may temporarily suspend 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 email to [email protected]. Please include 
File Number SR-ISE-2012-23 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-2012-23. This file 
number should be included on the subject line if email 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-2012-23 and should be 
submitted on or before April 16, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-7202 Filed 3-23-12; 8:45 am]
BILLING CODE 8011-01-P