[Federal Register Volume 78, Number 124 (Thursday, June 27, 2013)]
[Notices]
[Pages 38745-38746]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-15366]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69828; File No. SR-ISE-2013-40]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change To Extend the Penny Pilot Program

June 21, 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 June 13, 2013, the International Securities Exchange, LLC (the 
``Exchange'' or the ``ISE'') filed with the Securities and Exchange 
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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The ISE proposes to amend its rules relating to a pilot program to 
quote and to trade certain options in pennies (``Penny Pilot Program'') 
and to revise the provision describing how the Exchange specifies which 
option classes trade in the Penny Pilot Program. The text of the 
proposed rule change is available on the Exchange's Web site at 
www.ise.com, at the Exchange's principal office 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 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 Exchange 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
    Under the Penny Pilot Program, the minimum price variation for all 
participating options classes, except for the Nasdaq-100 Index Tracking 
Stock (``QQQQ''), the SPDR S&P 500 Exchange Traded Fund (``SPY'') and 
the iShares Russell 2000 Index Fund (``IWM''), is $0.01 for all 
quotations in options series that are quoted at less than $3 per 
contract and $0.05 for all quotations in options series that are quoted 
at $3 per contract or greater. QQQQ, SPY and IWM are quoted in $0.01 
increments for all options series. The Penny Pilot Program is currently 
scheduled to expire on June 30, 2013.\3\ The Exchange proposes to 
extend the time period of the Penny Pilot Program through December 31, 
2013, and to provide revised dates for adding replacement issues to the 
Penny Pilot Program. The Exchange proposes that any Penny Pilot Program 
issues that have been delisted may be replaced on the second trading 
day following July 1, 2013. The replacement issues will be selected 
based on trading activity for the six month period beginning December 
1, 2012, and ending May 31, 2013. This filing does not propose any 
substantive changes to the Penny Pilot Program: all classes currently 
participating will remain the same and all minimum increments will 
remain unchanged. The Exchange believes the benefits to public 
customers and other market participants who will be able to express 
their true prices to buy and sell options have been demonstrated to 
outweigh the increase in quote traffic.
---------------------------------------------------------------------------

    \3\ See Exchange Act Release No. 68424 (December 13, 2012), 77 
FR 75241 (December 19, 2012) (SR-ISE-2012-95).
---------------------------------------------------------------------------

    With this proposed rule change, the Exchange also proposes to 
revise the provision describing how the Exchange specifies which option 
classes trade in the Penny Pilot Program. Currently, the rule requires 
that the Exchange specify which options trade in the Penny Pilot 
Program and in what increments in a Regulatory Information Circular 
that has been filed with the Commission pursuant to Rule 19b-4 under 
the Exchange Act and distributed to its Members. The Exchange now 
proposes to revise that provision to indicate information regarding the 
option classes trading in the Penny Pilot Program will be communicated 
to Members through a Market Information Circular. The Exchange will 
also post on its Web site the replacement option classes that are 
selected for the Penny Pilot Program.\4\ By revising this provision, 
the Exchange will eliminate the requirement to file a Regulatory 
Information Circular with the Commission pursuant to Rule 19b-4.
---------------------------------------------------------------------------

    \4\ This revision is consistent with rules at most of the other 
options exchanges participating in the Penny Pilot Program: BATS 
Exchange, Inc. Rule 21.5, Interpretations and Policies .01; NASDAQ 
OMX BX, Inc. Chapter VI, Section 5(3); NASDAQ OMX PHLX, Inc. Rule 
1034(a)(i)(B); The NASDAQ Stock Market LLC Chapter VI, Section 5; 
NYSE MKT LLC Rule 960NY, Commentary .02; and NYSE Arca, Inc. Rule 
6.72, Commentary .02.
---------------------------------------------------------------------------

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 rule change is designed to promote just and equitable 
principles of trade, 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. In particular, the proposed 
rule change, which extends the Penny Pilot Program for an additional 
six months, will enable public customers and other market participants 
to express their true prices to buy and sell options for the benefit of 
all market participants. In addition, the revision to how the Exchange 
will specify which options participate in the Penny Pilot Program 
promotes just and equitable principles of trade since it clarifies how 
Members and other market participants will be made aware of which 
option classes are trading in the Penny Pilot Program and eliminates an 
unnecessary requirement that the Exchange specify which option classes 
are in the Penny Pilot Program through a Regulatory Information 
Circular that has been filed with the Commission pursuant to Rule 19b-4 
under the Exchange Act. The requirement to file the Regulatory 
Information Circular is

[[Page 38746]]

unnecessary because most other options exchanges do not require such a 
submission to the Commission.\5\
---------------------------------------------------------------------------

    \5\ Only BOX Options Exchange LLC (at Rule 7050(b)) requires 
that a Regulatory Information Circular specifying which options 
trade in the Penny Pilot Program be submitted to the Commission.
---------------------------------------------------------------------------

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

    This proposed rule change does not impose any burden on 
competition. Specifically, the Exchange believes that, by extending the 
expiration of the Penny Pilot Program, the proposed rule change will 
allow for further analysis of the Penny Pilot Program and a 
determination of how the Penny Pilot Program should be structured in 
the future. In doing so, the proposed rule change will also serve to 
promote regulatory clarity and consistency, thereby reducing burdens on 
the marketplace and facilitating investor protection.

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 written comments from members or other interested parties.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \6\ and Rule 19b-4(f)(6) thereunder.\7\ 
Because the 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 prior to 
30 days from the date on which it was filed, 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)(iii) thereunder.\9\
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \7\ 17 CFR 240.19b-4(f)(6).
    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative prior to 30 days after the date of the filing.\10\ 
However, pursuant to Rule 19b-4(f)(6)(iii),\11\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing. The Commission believes 
that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest because doing so will 
allow the Pilot Program to continue without interruption in a manner 
that is consistent with the Commission's prior approval of the 
extension and expansion of the Pilot Program and will allow the 
Exchange and the Commission additional time to analyze the impact of 
the Pilot Program.\12\ Accordingly, the Commission designates the 
proposed rule change as operative upon filing with the Commission.\13\
---------------------------------------------------------------------------

    \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 the 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 pre-filing requirement.
    \11\ 17 CFR 240.19b-4(f)(6)(iii).
    \12\ See Securities Exchange Act Release No. 61061 (November 24, 
2009), 74 FR 62857 (December 1, 2009) (SR-NYSEArca-2009-44). See 
also supra note 3.
    \13\ For purposes only of waiving the operative delay for this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    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-2013-40 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-2013-40. 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-2013-40 and should be 
submitted on or before July 18, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2013-15366 Filed 6-26-13; 8:45 am]
BILLING CODE 8011-01-P