
[Federal Register: February 10, 2009 (Volume 74, Number 26)]
[Notices]
[Page 6678-6680]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10fe09-125]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59347; File No. SR-ISE-2009-05]


Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change To Eliminate $3 Underlying Price Requirement for Continued
Listing and Listing of Additional Series

February 3, 2009.
    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 February 2, 2009, the International Securities Exchange, LLC
(``ISE'' or the ``Exchange'') 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 ISE. ISE has
designated the proposed rule change as constituting a non-controversial
rule change under Rule 19b-4(f)(6) under the Act,\3\ which renders the
proposal effective upon filing with the Commission. 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\ 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 ISE proposes to amend Rule 503(b) to eliminate the $3 market
price per share requirement from the Exchange's requirements for
continued approval for an underlying security. The Exchange also
proposes to amend Rule 503(c) by eliminating the prohibition against
listing additional series of options on an underlying security at any
time when the price per share of such underlying security is less than
$3. The text of the proposed rule change is as follows, with deletions
in [brackets] and additions in italics:
    Rule 503. Withdrawal of Approval of Underlying Securities:
    (a) No Change.
    (b) Absent exceptional circumstances, an underlying security will
not be deemed to meet the Exchange's requirements for continued
approval whenever any of the following occur:
    (1) There are fewer than 6,300,000 shares of the underlying
security held by persons other than those who are required to report
their security holdings under Section 16(a) of the Exchange Act.
    (2) There are fewer than 1,600 holders of the underlying security.
    (3) The trading volume (in all markets in which the underlying
security is traded) has been less than 1,800,000 shares in the
preceding twelve (12) months.
    (4) [The market price per share of the underlying security closed
below $3 on the previous trading day as measured by the closing price
reported by the primary market in which the underlying security is
traded.] Reserved.
    (5) The underlying security ceases to be an ``NMS stock'' as
defined in Rule 600 of Regulation NMS under the Exchange Act.
    (6) If an underlying security is approved for options listing and
trading under the provisions of Rule 502(c), the trading volume [and
price history] of the Original Security (as therein defined) prior to
but not after the commencement of trading in the Restructure Security
(as therein defined), including ``when-issued'' trading, may be taken
into account in determining whether the trading volume [and market
price] requirement[s] of (3) [and (4)] of this paragraph (b) [are] is
satisfied.
    (c) [In connection with paragraph (b)(4) of this Rule, the Exchange
shall not open for trading any additional series of options contracts
of the class covering an underlying security at any time (including on
a next-day, expiration or intra-day basis) when the market price per
share of such underlying security closed less than $3 on the last
trading day preceding the day on which such series are added, as
measured by the closing price reported by the primary market in which
the underlying security trades. In addition to closing at or above $3
on the last trading day preceding the day series are added, the
Exchange shall not open for trading any additional series of options
contracts on an intra-day basis unless the last reported trade in the
primary market in which the underlying security trades is at least $3
at the time the Exchange determines to add the series. Notwithstanding
the above, the Exchange may add a series if the additional series is
traded on at least one other registered national securities exchange
and, at the time the additional series was listed by such other
registered national securities exchange, it met the $3 market price
requirement.] Reserved.
    (d)-(k) No Change.
* * * * *

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 purpose of this proposed rule change is to eliminate the $3
market price per share requirement from the Exchange's requirements for
continued

[[Page 6679]]

approval for an underlying security from Rule 503(b)(4). This proposed
rule change also amends Rule 503(c) by eliminating the prohibition
against listing additional series or options on an underlying security
at any time when the price per share of such underlying security is
less than $3. The Exchange also proposes to make technical changes
throughout Rule 503 to eliminate references to paragraph (4) of Rule
503.
    ISE's rules require that the market price for a security be at
least $3 on the previous trading day for the continued listing of
options on that underlying security. If the price of an underlying
security falls below $3, the Exchange can continue to trade then-listed
series on that underlying security, but is unable to list new series of
options. The Exchange believes that the $3 market price per share
requirement is no longer necessary or appropriate, and that only those
underlying securities meeting the remaining continued listing criteria
set forth in Rule 503 will be eligible for continued listing and the
listing of additional options series. The Exchange believes that the
current $3 market price per share requirement could have a negative
effect on investors. For example, in the current volatile market
environment in which the market price for a large number of securities
has fallen below $3, the Exchange is currently unable to list new
series on underlying securities trading below $3. If there is market
demand for series below $3, the Exchange would be unable to accommodate
such requests and investors would be unable to hedge their positions
with options series with strikes below $3.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) that an exchange have rules that are
designed to promote just and equitable principles of trade, and to
remove impediments to and perfect the mechanism for 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 permit the Exchange to make options on underlying
securities available even if the price of the underlying security is
less than $3 thus providing investors additional opportunities to hedge
their positions.

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

    The proposed rule change does not impose any burden on competition
that is not necessary or appropriate in furtherance of the purposes of
the Act.

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: (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, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \4\ and Rule 19b-
4(f)(6) thereunder.\5\
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    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file 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.
ISE has satisfied this requirement.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \6\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6) \7\ permits the Commission to
designate a shorter time if such action is consistent with the
protection of investors and the public interest. ISE requests that the
Commission waive the 30-day operative delay. The Commission notes that
this proposed rule change is substantially identical to a proposed rule
change that was approved by the Commission after an opportunity for
public comment,\8\ and does not raise any new substantive issues. The
Exchange believes that waiving the 30-day operative delay will allow
the Exchange to respond promptly to demand by market participants to
list the options series that CBOE is expected to list upon receiving
Commission approval of CBOE's proposed rule change. For these reasons,
the Commission believes that waiving the 30-day operative delay \9\ is
consistent with the protection of investors and the public interest and
designates the proposal operative upon filing.
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    \6\ 17 CFR 240.19b-4(f)(6).
    \7\ 17 CFR 240.19b-4(f)(6).
    \8\ ISE's proposed rule change is substantially identical to a
proposed rule change by the Chicago Board Options Exchange
(``CBOE'') recently approved by the Commission. See Securities
Exchange Act Release No. 59336 (February 2, 2009) (SR-CBOE-2008-
127).
    \9\ 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 may summarily abrogate 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 e-mail to rule-comments@sec.gov. Please include
File Number SR-ISE-2009-05 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-2009-05. This file
number should be included on the subject line if e-mail 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 inspection and
copying 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 such 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

[[Page 6680]]

information from submissions. You should submit only information that
you wish to make publicly available. All submissions should refer to
File Number SR-ISE-2009-05 and should be submitted on or before March
3, 2009.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-2655 Filed 2-9-09; 8:45 am]

BILLING CODE 8011-01-P
