[Federal Register Volume 79, Number 51 (Monday, March 17, 2014)]
[Notices]
[Pages 14774-14775]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-05751]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71685; File No. SR-ISE-2014-11]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change To Permit Market Makers To Enter Opening Only Orders in 
Appointed Options Classes

March 11, 2014.
    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 February 25, 2014 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 self-regulatory 
organization. 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 ISE proposes to amend Rule 805(a) to permit market makers to 
enter Opening Only Orders in the options classes to which they are 
appointed. 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, 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 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 proposes to amend Rule 805(a) to permit market makers 
to enter Opening Only Orders in the options classes to which they are 
appointed. On October 7, 2010 the Exchange filed an immediately 
effective rule change that, among other things, established two new 
order types, including the ``Opening Only Order,'' which is a limit 
order that can be entered for the opening rotation only.\3\ When the 
ISE adopted this new order type, however, it did not add it to the list 
of order types in Rule 805(a) that market makers are permitted to trade 
in their appointed classes.\4\ Because of this, market makers are not 
currently permitted to submit Opening Only Orders in the options 
classes to which they are appointed. Prior to the launch of the ISE's 
T7 trading system (formerly ``Optimise''), which introduced Opening 
Only Orders, market makers could submit immediate-or-cancel (``IOC'') 
orders prior to the opening of trading, which provided the same 
functionality as ISE's current Opening Only Orders. Specifically, like 
Opening Only Orders, the ISE permitted members to submit IOC orders at 
any time prior to the opening of trading, which would then execute 
during the opening rotation, with any unexecuted portion being 
cancelled. Under the T7 trading system, however, IOC orders are only 
permitted intraday. The Exchange now proposes to amend its rules so 
that market makers are able to use this functionality again by 
submitting Opening Only Orders to the ISE. Market makers on other 
options exchanges, such as the MIAX Options Exchange (``MIAX''), 
similarly have the ability to enter ``opening only'' order types in 
their appointed classes.\5\
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    \3\ See Exchange Act Release No. 63117 (October 15, 2010), 75 FR 
65042 (October 21, 2010) (SR-ISE-2010-101). An ``Opening Only 
Order'' is a limit order that can be entered for the opening 
rotation only. Any portion of the order that is not executed during 
the opening rotation is cancelled.
    \4\ Market makers are currently permitted to submit the 
following order types in their appointed options classes: IOC 
orders, market orders, fill-or-kill orders, complex orders, and 
certain block orders and non-displayed penny orders. See ISE Rule 
805(a).
    \5\ See MIAX Rule 605(a).
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 2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Securities Exchange Act of 1934 
(the ``Act''),\6\ in general, and with Section 6(b)(5) of the Act,\7\ 
in particular, in that it is designed to promote just and equitable 
principles of trade, 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 allowing market makers to use Opening Only Orders will 
give those members greater flexibility to update prices during the 
opening rotation. Specifically, market makers have requested that they 
be permitted to use Opening Only Orders so that they may use this order 
type to update their prices in single series during the opening process 
more efficiently than relying on quoting systems that are designed to 
update prices across multiple series. As explained above, ``opening 
only'' orders types are available to market makers on other exchanges, 
and this functionality was previously available to ISE market makers 
prior to the introduction of the T7 trading system as members, 
including market makers, were able to submit IOC orders for execution 
in the opening rotation. Moreover, because any portion of an Opening 
Only Order that is not executed during the opening rotation is 
cancelled, this proposed rule change is generally consistent with Rule 
805(a), which was intended to prevent market makers from having both 
standing limit orders and quotes in the same options class.
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    \6\ 15 U.S.C. 78f.
    \7\ 15 U.S.C. 78f(b)(5).
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 B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\8\ the Exchange does 
not believe that the proposed rule change will impose any burden on 
intermarket or intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. To the contrary, 
the Exchange believes that the proposed rule change is pro-competitive 
as it permits market makers to use functionality already available to 
other ISE members, and to market makers on other exchanges, who are 
currently able to submit Opening Only Orders or other similar order 
types.
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    \8\ 15 U.S.C. 78f(b)(8).

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[[Page 14775]]

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 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 for 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 \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). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its 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.
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    A proposed rule change filed under Rule 19b-4(f)(6) \11\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\12\ 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 Exchange stated that 
the proposal will allow market makers, during the opening process, to 
use an order type that more efficiently update their prices. The 
Exchange also stated that Opening Only Orders are presently available 
to other ISE members and to market makers on competing options 
exchanges. The Commission believes that the proposed rule change 
presents no novel issues. Moreover, the Commission believes that the 
proposed rule change is consistent with the protection of investors and 
the public interest, because it allows the market makers to more 
efficiently, and thereby more readily, display updated prices to the 
public. Therefore, the Commission waives the 30-day operative delay 
requirement and designates the proposed rule change to be operative 
upon filing.\13\
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    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 17 CFR 240.19b-4(f)(6)(iii).
    \13\ 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. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or 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 email to [email protected]. Please include 
File Number SR-ISE-2014-11 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-ISE-2014-11. 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-2014-11 and should be 
submitted on or before April 7, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-05751 Filed 3-14-14; 8:45 am]
BILLING CODE 8011-01-P