[Federal Register Volume 78, Number 56 (Friday, March 22, 2013)]
[Notices]
[Pages 17729-17731]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-06568]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69153; File No. SR-ISE-2013-23]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change To Amend Its Rules Related to Mini Options Traded on the 
Exchange

March 15, 2013.
    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 March 13, 2013, 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, 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 amend its rules related to Mini Options 
traded on the Exchange. 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    ISE proposes to amend its rules related to Mini Options traded on 
the Exchange. Mini Options overlie 10 equity or ETF shares, rather than 
the standard 100 shares.\3\ Mini Options are currently approved on the 
following five (5) underlying securities: SPDR S&P 500 ETF (``SPY''), 
Apple Inc. (``AAPL''), SPDR Gold Trust (``GLD''), Google Inc. 
(``GOOG''), and Amazon.com, Inc. (``AMZN'').
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    \3\ Mini Options were approved for trading on September 28, 
2012. See Securities Exchange Act Release No. 67948 (September 28, 
2012), 77 FR 60735 (October 4, 2012) (Approving SR-ISE-2012-58). The 
Exchange expects to begin trading Mini Options on March 18, 2013.
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    The purpose of this proposed rule change is to adopt new 
Supplementary Material .13(d) to ISE Rule 504 to codify the minimum 
contract threshold requirement for the execution of Mini Options in the 
Exchange's Block Order Mechanism and Solicited Order Mechanism. The 
Block Order Mechanism is a process by which a Member can obtain 
liquidity for the execution of block-size orders.\4\ Block-size orders 
are orders for fifty (50) or more contracts.\5\ The Solicited Order 
Mechanism is a process by which an Electronic Access Member can attempt 
to execute orders of 500 or more contracts it represents as agent 
against contra orders that it solicited.\6\ The minimum contract 
threshold required for the Block Order Mechanism and the Solicited 
Order Mechanism applies to option contracts that overlie 100 shares and 
therefore does not currently apply to Mini Options.
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    \4\ See ISE Rule 716(c).
    \5\ See ISE Rule 716(a).
    \6\ See ISE Rule 716(e).
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    This proposed rule change also proposes to adopt a minimum contract 
threshold for the execution of a Qualified Contingent Cross Order in 
Mini Options. A Qualified Contingent Cross Order is an order to buy or 
sell at least 1000 contracts that is identified as being part of a 
qualified contingent trade coupled with a contra-side order to buy or 
sell an equal number of contracts.\7\ Again, the minimum contract 
threshold required for the execution of a Qualified Contingent Cross 
order applies to option contracts that overlie 100 shares and therefore 
does not currently apply to Mini Options.
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    \7\ See ISE Rule 715(j).

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[[Page 17730]]

    The Exchange now proposes to adopt new Supplementary Material 
.13(d) to Rule 504 to adjust the minimum contract threshold for 
executing Mini Options in the Block Order Mechanism and Solicited Order 
Mechanism by ten times their current requirement. Thus, Mini Options 
executed in the Block Order Mechanism must be for five hundred (500) or 
more Mini Option contracts, and Mini Options executed in the Solicited 
Order Mechanism must be for five thousand (5,000) or more Mini Option 
contracts. Further, new Supplementary Material .13(d) to Rule 504 also 
adjusts the minimum contract threshold for the execution of Qualified 
Contingent Cross orders in Mini Options. Thus, a Qualified Contingent 
Cross order in Mini Options must be comprised of an order to buy or 
sell at least 10,000 Mini Option contracts coupled with a contra-side 
order to buy or sell an equal number of Mini Option contracts.
    The Exchange believes it is appropriate to adjust the minimum 
contract threshold for Mini Options so they are equivalent (same number 
of underlying securities) to the minimum contract threshold required 
for standard options that are executed in the Block Order Mechanism and 
Solicited Order Mechanism and for the execution of Qualified Contingent 
Cross orders in Mini Options. The Exchange believes that adjusting the 
minimum contract threshold will remove any confusion on the part of 
market participants that want to use these Exchange functionalities to 
execute Mini Options.
2. Statutory Basis
    The basis under the Securities Exchange Act of 1934 (the ``Exchange 
Act'') for this proposed rule change is found in Section 6(b)(5), in 
that the proposed change is designed to promote just and equitable 
principles of trade, 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. In 
particular, the proposed rule change will assure that standard options 
and Mini Options on the same underlying security will have an 
equivalent minimum contract threshold for the execution of orders in 
the Exchange's Block Order Mechanism and Solicited Order Mechanism and 
for Qualified Contingent Cross orders executed on the Exchange. The 
Exchange believes the proposed rule change will also avoid investor 
confusion because in the absence of this proposal, the minimum contract 
threshold for executing Mini Options in the Block Order Mechanism and 
Solicited Order Mechanism and for executing Qualified Contingent Cross 
orders in Mini Options would have been different than that for standard 
options (i.e., different number of underlying securities). The Exchange 
does not intend that Mini Options and standard options have different 
minimum contract threshold requirements for its auction mechanisms and 
for Qualified Contingent Cross orders executed on the Exchange. The 
Exchange further believes that investors and other market participants 
will benefit from this proposed rule change because it proposes to 
clarify and establish the minimum contract threshold for executing Mini 
Options in the Block Order Mechanism and Solicited Order Mechanism and 
for executing Qualified Contingent Cross orders in Mini Options prior 
to the commencement of trading. The Exchange believes that investors 
generally will be expecting the minimum contract threshold for Mini 
Options to be equivalent to the minimum contract threshold for standard 
options when it comes to executing trades in the Exchange's various 
auctions and in executing Qualified Contingent Cross orders in Mini 
Options on the same underlying security. This proposed rule change will 
therefore lessen investor confusion.

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

    This proposed rule change does not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Exchange Act. ISE believes that the proposed rule change will in 
fact relieve any burden on, or otherwise promote, competition. Mini 
Options are currently approved for trading on multiple options 
exchanges and all of the options exchanges that have a minimum contract 
threshold in their rules will have the opportunity to amend their rules 
to adopt minimum contract thresholds for Mini Options that are 
equivalent to the minimum contract threshold for standard options.

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: (1) Does not 
significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
and (3) by its terms does not become operative for 30 days after the 
date of this filing, or such shorter time as the Commission may 
designate if consistent with the protection of investors and the public 
interest, the proposed rule change has become effective pursuant to 
Section 19(b)(3)(A) of the Act \8\ and Rule 19b-4(f)(6) thereunder.\9\
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to provide the Commission 
with written notice of its 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 fulfilled this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing. However, 
Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter 
time if such action is consistent with the protection of investors and 
the public interest. The Exchange requests that the Commission waive 
the 30-day operative delay so that the proposed rule change may 
coincide with the anticipated launch of trading in Mini Options. The 
Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public 
interest.\10\ Waiver of the operative delay will allow the Exchange to 
implement its proposal consistent with the commencement of trading in 
Mini Options as scheduled and expected by members and other 
participants on March 18, 2013. For these reasons, the Commission 
designates the proposed rule change as operative upon filing.
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    \10\ For purposes only of waiving the 30-day operative delay, 
the Commission has also 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

[[Page 17731]]

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-2013-23 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-2013-23. 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 
10:00 a.m. and 3:00 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-2013-23 and should be 
submitted on or before April 12, 2013.

    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. 2013-06568 Filed 3-21-13; 8:45 am]
BILLING CODE 8011-01-P