
[Federal Register Volume 78, Number 40 (Thursday, February 28, 2013)]
[Notices]
[Pages 13717-13721]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-04615]



[[Page 13717]]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68971; File No. SR-ISE-2013-14]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing of Proposed Rule Change To List Options on the 
Dow Jones FXCM Dollar Index

February 22, 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 February 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 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.
---------------------------------------------------------------------------

    \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 Exchange proposes to amend its rules for the listing and 
trading on the Exchange of options on a foreign currency index, the Dow 
Jones FXCM Dollar Index. The Exchange also proposes to list and trade 
long-term options on the Dow Jones FXCM Dollar Index. Options on the 
Dow Jones FXCM Dollar Index will be settled in the same manner as the 
Exchange's foreign currency options and will have European-style 
exercise provisions. The text of the proposed rule change is available 
on the Exchange's Internet Web site at 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its rules to provide for the listing 
and trading on the Exchange of options on a foreign currency index, the 
Dow Jones FXCM Dollar Index (the ``Dollar Index''). Options on the 
Dollar Index will be settled in the same manner as the Exchange's 
foreign currency options (``FX Options'') \3\ and will have European-
style exercise provisions. The components that comprise the Dollar 
Index are a subset of the Exchange's FX Options. In addition to regular 
options, the Exchange propose to also list long-term options on the 
Dollar Index.
---------------------------------------------------------------------------

    \3\ The Commission previously approved the listing of FX Options 
on nineteen underlying foreign currencies. See Securities Exchange 
Act Release No. 55575 (April 3, 2007), 72 FR 17963 (April 10, 2007) 
(SR-ISE-2006-59).
---------------------------------------------------------------------------

Index Design and Composition
    The Dollar Index was designed and developed by Dow Jones Indexes, a 
unit of CME Group that creates indexes, and Forex Capital Markets LLC, 
an online foreign exchange brokerage firm. The Dollar Index is 
calculated and maintained by Dow Jones. The Dollar Index reflects U.S. 
dollar fluctuations against a basket of four of the most liquid 
currencies in the world: Euro, British pound, Japanese yen, and 
Australian dollar. More specifically, the Dollar Index's input data are 
individual currency pairs calculated based on the conventional quote 
format as follows:

------------------------------------------------------------------------
             Convention                            Currency
------------------------------------------------------------------------
EUR/USD.............................  euro.
GBP/USD.............................  British pound.
USD/JPY.............................  Japanese yen.
AUD/USD.............................  Australian dollar.
------------------------------------------------------------------------

    Spot currency quotes are derived from ThomsonReuters, the same 
source that the Exchange currently uses for the underlying values of 
its existing FX Options. Each input value is based on the mid-point 
between the bid and ask quotes. The Dollar Index has a base date of 
January 1, 2011 and a base value of 10000, using closing prices as of 
December 31, 2010. Spot quotes for each pair on the base date were as 
follows:

------------------------------------------------------------------------
 
------------------------------------------------------------------------
EUR/USD......................................................     1.3370
GBP/USD......................................................     1.5601
USD/JPY......................................................      81.21
AUD/USD......................................................     1.0218
------------------------------------------------------------------------

    On its base date, the Dollar Index was set to be equally-weighted 
such that each constituent currency pair has equal influence on the 
overall index value. Equal positions in U.S. dollar terms were 
calculated on the base date by assuming a $10,000 allocation to each 
currency pair as follows:

------------------------------------------------------------------------
 
------------------------------------------------------------------------
EUR/USD position in U.S. dollar terms..  1.3370 x [euro]7,479 = $10,000.
GBP/USD position in U.S. dollar terms..  1.5601 x [pound]6,410 =
                                          $10,000.
USD/JPY position in U.S. dollar terms..  [yen]812,150 / 81.21 = $10,000.
AUD/USD position in U.S. dollar terms..  1.0218 x AU$9,787 = $10,000.
------------------------------------------------------------------------

    This method is similar to equally-weighted stock indexes that 
calculate the number of shares needed in order for each stock 
constituent to have an equal position.\4\ The Dollar Index level is 
calculated in accordance with the following equation:
---------------------------------------------------------------------------

    \4\ Equal-weighted indexes have become increasingly prevalent. 
For example, Standard & Poor's calculates an equal-weighted version 
of its S&P500 Index, and Nasdaq OMX calculates an equal-weighted 
version of its Nasdaq-100 Index. Additionally, ISE once listed 
options on the Morgan Stanley Technology Index, also an equal-
weighted index of stocks in the technology sector.
---------------------------------------------------------------------------

    Dollar Index level = [($20,000 - ((EUR/USD) x ([euro] Position) + 
($20,000 - ((GBP/USD) x ([pound] Position)) + ($20,000 - (([yen] 
Position) / (USD/JPY)) + ($20,000 - ((AUD/USD) x (AU$ Position)]/
Divisor
    The Dollar Index is designed to reflect spot positions in each 
currency with the weighting of each currency set as equal at inception 
and rebalancing events. Rebalancing events are not scheduled. For 
example, the Dollar Index is rebalanced if the value of any position 
falls below $1,000 (i.e., loses 90% of its original $10,000 position 
value).\5\ At that point, each currency is again set to an equal 
position. This method of unscheduled rebalancing captures the prevalent 
strategy among currency traders with long-term exposure to the most 
actively traded currency pairs. The

[[Page 13718]]

need for scheduled rebalancing is more important for stock indexes 
where the high volatility and idiosyncratic risk of individual stocks 
can cause a select few to dominate the index weighting. Unlike stocks, 
a portfolio of major currencies that are all paired against the US 
dollar does not have the same risks. The volatility of each currency 
pair is low which results in an even lower volatility for the overall 
index.
---------------------------------------------------------------------------

    \5\ See http://www.djindexes.com/mdsidx/downloads/fact_info/Dow_Jones_FXCM_Dollar_Index_Fact_Sheet.pdf.
---------------------------------------------------------------------------

    The components that comprise the Dollar Index include a subset of 
the modified exchange rates \6\ previously approved by the Commission 
as the basis for FX Options. The Exchange represents that the total 
number of components in the Dollar Index may not decrease from the 
number of components in the Dollar Index at the time of its initial 
listing.
---------------------------------------------------------------------------

    \6\ The term ``modified exchange rate'' means the price, for the 
sale of one foreign currency for another, quoted by various 
interbank foreign exchange participants, for immediate delivery 
(which generally means delivery two business days following the date 
on which the terms of such a sale are agreed upon), as reflected in 
the foreign currency price quotations reported by the foreign 
currency price quotation dissemination vendor selected by the 
Exchange, which is then modified by the Exchange with a modifier of 
1, 10 or 100. See ISE Rule 2201(8).
---------------------------------------------------------------------------

    As set forth in Exhibit 3-1, following are the characteristics of 
the Dollar Index: (i) The total number of currency pairs is four; (ii) 
the total gross domestic product (GDP) of the associated countries of 
the four currency pairs is $33.83 trillion; (iii) regarding GDP of 
individual component countries, the United States is the highest at 
$15.04 trillion and Malta (one of the 17 participating member states of 
the euro) is the lowest at $0.01 trillion; (iv) regarding the recent 
exchange rates of the individual components, (a) EUR/USD is 1.3608, (b) 
USD/JPY is 91.8650, (c) GBP/USD is 1.5790, and (d) AUD/USD is 1.0409; 
\7\ (v) regarding component weights, the Dollar Index is an equal-
weighted index at inception and rebalancing; (vi) regarding average 
daily spot volume of the individual components, according to the Bank 
for International Settlements' Triennial Central Bank Survey of Foreign 
Exchange and Derivatives Market Activity in 2010,\8\ (a) EUR/USD is 
$469 billion, (b) USD/JPY $183 billion, (c) GBP/USD is $140 billion, 
and (d) AUD/USD is $84 billion.
---------------------------------------------------------------------------

    \7\ All exchange rates are as of February 1, 2013.
    \8\ The Triennial Central Bank Survey of Foreign Exchange and 
Derivatives Market Activity is published every three (3) years; the 
most recent survey was published in December 2010.
---------------------------------------------------------------------------

Index Calculation and Maintenance
    As noted above, the Dollar Index will be maintained and calculated 
by Dow Jones. The level of the Dollar Index will reflect the current 
exchange rates of the four underlying currency pairs. The Dollar Index 
will be updated on a real-time basis beginning at 6:15 p.m. each day 
and ending at 5:00 p.m. (New York time) the following day from Sunday 
through Friday (the Dollar Index will basically be calculated for 22 
hours and 45 minutes each day). If the value of a component's exchange 
rate is not available, the last known exchange rate will be used in the 
calculation.
    Values of the Dollar Index will be disseminated every 15 seconds 
during the Exchange's regular trading hours to market information 
vendors such as Bloomberg and ThomsonReuters. In the event the Dollar 
Index ceases to be maintained or calculated, or its values are not 
disseminated every 15 seconds by a widely available source, the 
Exchange will not list any additional series for trading and will limit 
all transactions in such options to closing transactions only for the 
purpose of maintaining a fair and orderly market and protecting 
investors. As part of this proposal, the Exchange is also making a 
clarifying change to ISE Rule 2003(b) by replacing the word `stocks' 
with `components' because index options listed by the Exchange are no 
longer limited to having stocks as their underlying components; with 
this proposed rule change, the Exchange will also list options on 
indexes that have currencies as their underlying components.
Exercise and Settlement Value
    Options on the Dollar Index will expire on the Saturday following 
the third Friday of the expiration month. Trading in expiring options 
on the Dollar Index will normally cease at 12:00 p.m. (New York time) 
on the Friday preceding an expiration Saturday. The exercise and 
settlement value will be calculated using the WM Intra-day Spot rate 
corresponding to 12:00 p.m. New York time. The exercise-settlement 
amount is equal to the difference between the settlement value and the 
exercise price of the option, multiplied by $1. Exercise will result in 
the delivery of cash on the business day following expiration.
Contract Specifications
    The contract specifications for options on the Dollar Index are set 
forth in Exhibit 3-2. The Dollar Index is a foreign currency index, as 
defined in proposed Rule 2001(h). Options on the Dollar Index are 
European-style and cash-settled.\9\ The Exchange's standard trading 
hours for FX Options (7:30 a.m. to 4:15 p.m., New York time) will also 
apply to the Dollar Index. The Exchange proposes to apply margin 
requirements for the purchase and sale of options on the Dollar Index 
that are identical to those applied for individual FX Options. 
Accordingly, per proposed ISE Rule 1202(e), the margin level required 
for trading options on the Dollar Index shall be identical to the 
highest margin required for a component foreign currency as determined 
in accordance with ISE Rule 1202(d).
---------------------------------------------------------------------------

    \9\ The Exchange will calculate a settlement value for the Index 
using the settlement values for the individual component currencies. 
As described earlier, the settlement value for each individual 
component currency is determined using the WM Intra-day Spot rate.
---------------------------------------------------------------------------

    The trading of options on the Dollar Index will be subject to the 
trading halt procedures applicable to index options traded on the 
Exchange.\10\ Options on the Dollar Index will be quoted and traded in 
U.S. dollars.\11\ Accordingly, all Exchange and Options Clearing 
Corporation members shall be able to accommodate trading, clearance and 
settlement of the Dollar Index without alteration.
---------------------------------------------------------------------------

    \10\ See ISE Rule 2008(c).
    \11\ See ISE Rule 2009(a)(1).
---------------------------------------------------------------------------

    The Exchange proposes to list options on the Dollar Index that may 
expire at three-month (3) intervals or in consecutive months. The 
Exchange may also list up to six (6) expiration months at any one time. 
The Exchange proposes to set strike price intervals for options on the 
Dollar Index at minimum intervals of 2\1/2\ points, if the strike price 
is less than two hundred dollars ($200), in accordance with ISE Rule 
2009(c)(1). Further, when new series of options on the Dollar Index 
with a new expiration date are opened for trading, or when additional 
series of options on the Dollar Index in an existing expiration date 
are opened for trading as the current value of the Dollar Index moves 
substantially from the exercise prices of series already opened, the 
exercise prices of such new or additional series shall be reasonably 
related to the current value of the underlying index at the time such 
series are first opened for trading.\12\
---------------------------------------------------------------------------

    \12\ See ISE Rule 2009(c)(3). The term ``reasonably related to 
the current index value of the underlying index'' means that the 
exercise price is within thirty percent (30%) of the current index 
value, as defined in ISE Rule 2009(c)(4).
---------------------------------------------------------------------------

    The Exchange may also open for trading additional series of the 
same class of options on the Dollar Index as the current value of the 
underlying index moves substantially from the exercise price of those 
options on the

[[Page 13719]]

Dollar Index that already have been opened for trading on the Exchange. 
The exercise price of each series of options on the Dollar Index opened 
for trading on the Exchange shall be reasonably related to the current 
index value of the underlying index to which such series relates at or 
about the time such series of options is first opened for trading on 
the Exchange. The Exchange may also open for trading additional series 
of options on the Dollar Index that are more than thirty percent (30%) 
away from the current index value, provided that demonstrated customer 
interest exists for such series, as expressed by institutional, 
corporate, or individual customers or their brokers. Market makers 
trading for their own account shall not be considered when determining 
customer interest under this provision.\13\
---------------------------------------------------------------------------

    \13\ See ISE Rule 2009(c)(4).
---------------------------------------------------------------------------

    The Exchange proposes to adopt the minimum tick size for options on 
the Dollar Index to be $0.01. Accordingly, the Exchange proposes to 
amend Supplementary Material .02 to ISE Rule 710 to permit options on 
the Dollar Index to be quoted and traded in one-cent increments. The 
Exchange believes that this trading increment will result in narrower 
spreads for options on the Dollar Index than if traditional trading 
increments are used because options on the individual foreign currency 
pairs that make up the Dollar Index are quoted in $0.01 increments.\14\ 
The Exchange recognizes that allowing penny quoting increments for the 
Dollar Index represents an expansion of products with that feature. 
Nevertheless, permitting penny quoting in the Index is consistent with 
the Commission's prior approval of permitting penny quoting in the 
Exchange's FX Options. The Exchange believes that permitting the Dollar 
Index to be quoted and traded in one-cent increments will also promote 
adoption of trading FX-linked products on a listed and regulated 
market.
---------------------------------------------------------------------------

    \14\ See Securities Exchange Act Release No. 57019 (December 20, 
2007), 72 FR 73937 (December 28, 2007) (SR-ISE-2007-120).
---------------------------------------------------------------------------

    ISE further notes that the listing and trading of the Exchange's FX 
Options in penny increments was permitted in recognition of the immense 
liquidity in the spot FX markets, as well as the need for market makers 
in those products, which were new to the market at that time, to 
appropriately straddle theoretical options prices. In other words, 
market makers in FX Options could competitively quote the product more 
effectively if they could create bids and offers equidistant from 
theoretical prices. An artificially wide increment would have forced 
market makers to maintain larger spreads if the theoretical price was 
not coincidentally near the mid-point of the increment. Further, due to 
the relatively low volatility of currency pairs, quoting in penny 
increments allowed market makers to quote more aggressively than, say, 
for newly listed equity options.
    The following example illustrates the issue regarding quotes and 
the theoretical price. Assume that the Dollar Index level is 10,040.00. 
Also assume that the traditional minimum quoting increments are in 
place. The at-the-money call options with 30 days until expiration and 
a theoretical price of $82.04, might be quoted as follows: Bid $81.95 
and offered at $82.10. The market maker in the Dollar Index has little 
choice but to quote this series in such a way to ensure that the bid or 
offer is not the same as the theoretical price, but doing so results in 
the market maker setting its quote wider than it otherwise would. Due 
to the lower volatility exhibited by currency pairs, which is further 
muted by creating an index of currency pairs, the market maker may have 
been able to quote with a much smaller spread, resulting in a cost 
savings for investors. As a matter of reference, the historical 
annualized volatility for the four currency pairs comprising the Dollar 
Index is as follows: EURUSD volatility is 9.53%, GBPUSD volatility is 
8.91%, USDJPY volatility is 9.67%, and AUDUSD volatility is 14.58%. The 
historical annualized volatility for the Dollar Index is 6.78%, which 
illustrates the effects of combining multiple components and the basic 
principle that an index cannot exhibit overall volatility greater than 
any one of its components. As a comparison, volatility in the SPY ETF 
over the same period is 21.22%, and in Apple Inc. is 31.37%.\15\
---------------------------------------------------------------------------

    \15\ Volatility was measured using data from June 27, 2007 
through January 10, 2013.
---------------------------------------------------------------------------

    FX spot trading is available to investors of all sizes on web-based 
platforms that allow for significant leverage. Those products are not 
regulated in the same capacity as exchange-listed products, and do not 
benefit from clearinghouses that can mutualize risk across many 
participants. ISE endeavors to bring the full panoply of benefits 
afforded by an exchange listing, including investor safeguards, multi-
dealer competitive pricing, central clearing, and innovative 
functionality. Considering that spot FX is quoted in the smallest 
increment possible for a currency pair, having an artificial 
restriction in quoting increments for options would only undermine the 
attractiveness of the listed product while providing no investor 
protection. Indeed, it would simply create an unlevel playing field 
between regulated exchange-listed products and less regulated over-the-
counter products. Lastly, as noted above, considering that FX Options 
are currently quoted in penny increments, the Exchange believes that 
expanding quoting in penny increments to indexes solely comprised of 
currency pairs is a logical extension. There is no material impact, 
whether on industry participants or competitors, if penny quoting 
increments were permitted for the Dollar Index.
    For options on the Dollar Index, the Exchange proposes to establish 
aggregate position limits at 600,000 contracts on the same side of the 
market, provided no more than 300,000 of such contracts are in the 
nearest expiration month series. The Exchange notes that the proposed 
positions limits for the Dollar Index are equal to or lower than the 
position limits for individual FX options on the four currency pairs 
comprising the Dollar Index.\16\ The same limits that apply to position 
limits shall apply equally to exercise limits for options on the Dollar 
Index.\17\
---------------------------------------------------------------------------

    \16\ See ISE Rule 2208.
    \17\ See ISE Rule 2007.
---------------------------------------------------------------------------

    The Exchange proposes to list options on the Dollar Index in the 
three consecutive near-term expiration months plus up to three 
successive expiration months in the March cycle. For example, 
consecutive expirations of January, February, March, plus June, 
September, and December expirations would be listed.\18\ The trading of 
options on the Dollar Index shall be subject to the same rules that 
presently govern the trading of Exchange index options, including sales 
practice rules, margin requirements, trading rules, and position and 
exercise limits. In addition, long-term option series having up to 
sixty months to expiration may be traded.\19\ The trading of long-term 
options on the Dollar Index shall also be subject to the same rules 
that govern the trading of all the Exchange's index options, including 
sales practice rules, margin requirements, and trading rules. Further, 
pursuant to Supplementary Material .01 and .02 to ISE Rule 2009, the 
Exchange may also list Short Term Option Series and Quarterly Options 
Series, respectively, on the Dollar Index.
---------------------------------------------------------------------------

    \18\ See Rule 2009(a)(3).
    \19\ See Rule 2009(b)(1).
---------------------------------------------------------------------------

    Chapter 6 of the Exchange's rules is designed to protect public 
customer

[[Page 13720]]

trading and shall apply to trading in options on the Dollar Index. 
Specifically, ISE Rules 608(a) and (b) prohibit Members from accepting 
a customer order to purchase or write an option, including options on 
the Dollar Index, unless such customer's account has been approved in 
writing by a designated Options Principal of the Member.\20\ 
Additionally, ISE's Rule 610 regarding suitability is designed to 
ensure that options, including options on the Dollar Index, are only 
sold to customers capable of evaluating and bearing the risks 
associated with trading in this instrument. Further, ISE Rule 611 
permits members to exercise discretionary power with respect to trading 
options, including options on the Dollar Index, in a customer's account 
only if the Member has received prior written authorization from the 
customer and the account had been accepted in writing by a designated 
Options Principal. ISE Rule 611 also requires designated Options 
Principals or Representatives of a Member to approve and initial each 
discretionary order, including discretionary orders for options on the 
Dollar Index, on the day the discretionary order is entered. Finally, 
ISE Rule 609, Supervision of Accounts, Rule 612, Confirmation to 
Customers, and Rule 616, Delivery of Current Options Disclosure 
Documents and Prospectus, will also apply to trading in options on the 
Dollar Index.
---------------------------------------------------------------------------

    \20\ Pursuant to ISE Rule 602, Representatives of a Member may 
solicit or accept customer orders for options on the Dollar Index.
---------------------------------------------------------------------------

    Finally, a trading license issued by the Exchange will be required 
for all market makers to effect transactions as a market maker in the 
Dollar Index in accordance with ISE Rule 2013.
Surveillance and Capacity
    The Exchange has an adequate surveillance program in place for 
options traded on the Dollar Index, and intends to apply those same 
program procedures that it applies to the Exchange's other options 
products. Further, the ISE Market Surveillance Department conducts 
routine surveillance in approximately 30 discrete areas. Index products 
and their respective symbols are integrated into the Exchange's 
existing surveillance system architecture and are thus subject to the 
relevant surveillance processes. This is true for both surveillance 
system processing and manual processes that support the ISE's 
surveillance program. Additionally, the Exchange is also a member of 
the Intermarket Surveillance Group (ISG) under the Intermarket 
Surveillance Group Agreement, dated June 20, 1994. The members of the 
ISG include all of the U.S. registered stock and options markets: NYSE 
MKT LLC, NYSE Arca, Inc., BATS Exchange, Inc., NASDAQ OMX BX, Chicago 
Board Options Exchange, Inc., Chicago Stock Exchange, Inc., Financial 
Industry Regulatory Authority, NASDAQ Stock Market LLC, National Stock 
Exchange, Inc., the New York Stock Exchange LLC, and NASDAQ OMX PHLX, 
Inc. The ISG members work together to coordinate surveillance and 
investigative information sharing in the stock and options markets. In 
addition, the CME Group and ICE Futures U.S., Inc. are also members of 
ISG, which allows for the sharing of surveillance information for 
potential intermarket trading abuses. The CME Group and ICE Futures 
U.S., Inc. operate a marketplace for trading of futures for all the 
component foreign currencies included in the Dollar Index. Further, CME 
Group operates a marketplace for trading options on futures for all the 
component foreign currencies included in the Dollar Index.
    The Exchange represents that it has the necessary system capacity 
to support additional quotations and messages that will result from the 
listing and trading of options on the Dollar Index.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Securities Exchange Act of 1934 (the ``Act'') 
\21\ in general, and furthers the objectives of Section 6(b)(5) of the 
Act \22\ in particular in that it will permit options trading in the 
Dollar Index pursuant to rules designed to prevent fraudulent and 
manipulative acts and practices and promote just and equitable 
principles of trade. In particular, the Exchange believes the proposed 
rule change will further the Exchange's goal of introducing new and 
innovative products to the marketplace. The Exchange believes that 
listing options on the Dollar Index will provide an opportunity for 
investors to hedge, or speculate on, the market risk associated with 
the foreign currencies underlying the Dollar Index.
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 78f(b).
    \22\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that because the Dollar Index is comprised of 
a basket of four of the most liquid currencies in the world, and given 
the immense liquidity found in the spot currency market and the average 
daily spot volume of the individual components, the concern that the 
Dollar Index will be subject to market manipulation is greatly reduced. 
Therefore, the Exchange believes that the proposed rule change to list 
options on the Dollar Index is appropriate.
    The Exchange further notes that ISE Rules that apply to the trading 
of other index options currently traded on the Exchange would also 
apply to the trading of options on the Dollar Index. Additionally, the 
trading of options on the Dollar Index would be subject to, among 
others, Exchange Rules governing margin requirements and trading halt 
procedures. Also, the Exchange's proposed position limits for the 
Dollar Index are equal to or lower than the position limits for 
individual FX options on the four currency pairs comprising the Dollar 
Index, namely 600,000 contracts on the same side of the market for 
options on the Dollar Index. Further, delta-based hedge exemptions, in 
accordance with Rule 2006(d), will also apply to trading options on the 
Dollar Index.
    Finally, the Exchange represents that it has an adequate 
surveillance program in place to detect manipulative trading in options 
on the Dollar Index. The Exchange also represents that it has the 
necessary systems capacity to support the new options series. And as 
stated in the filing, the Exchange has rules in place designed to 
protect public customer trading.

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 Act. The Exchange notes that the proposed rule change will 
facilitate the listing and trading of a novel index option product that 
will enhance competition among market participants, to the benefit of 
investors and the marketplace.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (1) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or

[[Page 13721]]

(2) as to which the self-regulatory organization consents, the 
Commission will:
    (a) By order approve or disapprove such proposed rule change; or
    (b) Institute proceedings to determine whether the proposed rule 
change should be 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 rule-comments@sec.gov. Please include 
File Number SR-ISE-2013-14 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-2013-14. 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-2013-14 and should be 
submitted on or before March 21, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
---------------------------------------------------------------------------

    \23\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-04615 Filed 2-27-13; 8:45 am]
BILLING CODE 8011-01-P


