
[Federal Register Volume 78, Number 220 (Thursday, November 14, 2013)]
[Notices]
[Pages 68497-68499]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-27207]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70834; File No. SR-ISE-2013-55]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change Relating to Exchange Trading Days and Hours of Business and 
Trading Halts

November 7, 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 October 31, 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, II, and III 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 Exchange proposes to amend its rules to clarify Rule 700, 
``Days and Hours of Business,'' and Rule 702, ``Trading Halts.''
    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 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

[[Page 68498]]

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 is proposing to amend its rules to clarify when it 
will be open for trading along with when trading halts on underlying 
securities will inhibit trading on the Exchange. The Exchange is 
submitting this proposed rule change as a competitive response to a 
recently approved rule filing submitted by the Chicago Board Options 
Exchange (``CBOE'').\3\ Specifically, the Exchange is proposing to 
amend its rules to clarify that it will not be solely dependent upon 
the ``primary market'' when determining when to open and/or halt 
securities. Instead, the Exchange is proposing to clarify in its rules 
that it will be open if there is ample liquidity in the underlying 
market for the security. Generally, the national equity exchanges have 
similar core business hours.\4\ With this proposal, the Exchange is 
attempting to clarify in its rules that it can remain open to trade 
options during such business hours even if the ``primary market'' of 
the underlying securities is not open for business. The Exchange 
believes that the proposed changes will allow the markets to continue 
to function in an instance where all exchanges may not be halted. In 
addition, the Exchange believes the proposed changes will bring greater 
clarity to its Members regarding when the Exchange will be open for 
trading.
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 69558 (May 10, 
2013), 78 FR 28911 (May 16, 2013) (SR-CBOE-2013-035).
    \4\ See, e.g., New York Stock Exchange Rule 51(a) and BATS 
Exchange Rule 1.5(w) which describes regular trading hours as 9:30 
a.m. through 4:00 p.m. Eastern.
---------------------------------------------------------------------------

    Currently, Exchange Rule 700 provides that no Member shall make any 
bid, offer, or transaction on the Exchange before or after business 
hours.\5\ As an administrative cleanup change, the Exchange is 
proposing to eliminate this language as it is no longer relevant. 
Executions may only happen during business hours, however, Members have 
the ability to submit information in the Exchange's electronic trading 
system outside of business hours. The Exchange believes deleting this 
language would bring greater clarity to Exchange rules while updating 
the rule text to the current trading environment.
---------------------------------------------------------------------------

    \5\ See Exchange Rule 700.
---------------------------------------------------------------------------

    Next, the Exchange is proposing to add language to Rule 700(a) to 
specify that the Exchange will not solely rely on the ``primary 
market'' of an underlying security to determine whether the Exchange 
may trade the option for such security. The Exchange believes that the 
proposed rule change will specify that if there is an ample market in 
the underlying security, the Exchange has the authority to trade the 
option even if the primary market is not open. The Exchange believes 
that allowing such discretion will create a lesser market disruption if 
the primary exchange is unable to open for trading.
    Further, Rule 702 specifies when the Exchange will halt trading.\6\ 
Specifically, Rule 702(a)(1) lists factors that may be considered in 
making that determination. Currently, Rule 702(a)(1)(i) lists, as a 
factor in the decision with respect to options, ``trading in the 
underlying security has been halted or suspended in the primary 
market.'' The Exchange is proposing to add language to state, instead 
of the ``primary market,'' that the Exchange may factor in if ``trading 
in the underlying security has been halted or suspended in one or more 
of the markets trading the underlying security.'' The Exchange is 
proposing to make similar changes in Rule 702(a)(2)(iv) which lists 
factors in making the determination in an Equity Security (as defined 
in ISE Rule 2100). The Exchange believes the proposed changes will 
grant discretion for the Exchange to be open for trading when there is 
a robust market in the underlying security rather than limit it to only 
when the ``primary market'' is open.
---------------------------------------------------------------------------

    \6\ See Exchange Rule 702. The Exchange is not proposing any 
change to Rule 702(c), Trading Pauses, because a trading halt with 
respect to options is mandatory and not subject to discretion 
whenever trading in the security underlying the option contract has 
been paused by the primary listing market.
---------------------------------------------------------------------------

    Next, the Exchange is proposing to amend Rule 702(a)(3) so that a 
designated Exchange official may halt trading in an option not only if 
the ``primary market'' of the security has halted trading but if the 
security has been halted in ``one or more of the markets trading the 
underlying security.'' Under the current rule, the designated Exchange 
official almost certainly must halt trading whenever there is a halt of 
trading in the underlying security. The Exchange believes this proposed 
change will provide the designated Exchange official the discretion and 
the authority to halt trading in an option if the primary market for an 
underlying security is not open for business however that security is 
being traded elsewhere. For example, if the primary market is unable to 
open due to a natural disaster, or other circumstance, but other stock 
exchanges are trading the underlying security, the proposed change will 
allow the Exchange to continue trading the overlaying options.
    The Exchange believes the proposed changes will allow the Exchange 
to trade options for underlying stocks even if that underlying listing 
market shall be unable to trade due to an emergency or other 
circumstance unique to that stock exchange. Making these proposed 
changes will allow the Exchange to trade options when an underlying 
security is trading on any national securities exchange regardless of 
where that security is formally listed. The proposed discretion 
attempts to create a lessor [sic] market disruption if a listing or 
primary market is unable to trade due to some circumstance. Because of 
the connectivity of the national securities exchanges today, the 
Exchange believes limiting its ability to trade options to when the 
primary market of the underlying security is open might hurt investors 
if some circumstance should render the primary exchange inoperable. In 
addition, the Exchange believes that the reference to ``primary 
market'' is ambiguous and has the potential to cause confusion. Thus, 
the Exchange believes by further clarifying the language, it is clearer 
when the Exchange will be open for trading.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder, including the requirements of Section 6(b) of 
the Act.\7\ In particular, the Exchange believes the proposed rule 
change is consistent with the Section 6(b)(5) \8\ requirements that the 
rules of an exchange be designed to promote just and equitable 
principles of trade, to prevent fraudulent and manipulative acts, to 
foster cooperation and coordination with persons engaged in 
facilitating transactions in securities, to remove impediments to and 
to perfect the mechanism for a free and open market and a national 
market system, and, in general, to protect investors and the public 
interest.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes the proposed rule change protects investors 
by allowing trading in options as long as

[[Page 68499]]

the underlying security is trading on another exchange. Instead of only 
relying on the ``primary market,'' the proposed rule change attempts to 
clarify when options will trade on the Exchange to allow greater 
continuity in the marketplace. By allowing the Exchange to trade 
options whenever the underlying securities are trading, the proposed 
rule change seeks to create less of a disconnect if the ``primary'' 
market should be experiencing technical difficulties, an emergency, or 
other situation that may inhibit it to be connected to the marketplace.

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 does not believe the proposed rule change imposes 
any burden on intramarket competition because it will apply to all 
Members [sic]. In addition, the Exchange does not believe the proposed 
rule change will impose any burden on intermarket competition as it 
will merely give the Exchange discretion to trade options when there is 
an ample market for the underlying security of those options. Thus, the 
Exchange believes the proposed rule change will promote competition by 
giving the Exchange the ability to trade options when the underlying 
security is trading anywhere, and, thus, helping the Exchange to better 
participate in the marketplace. Additionally, as noted above, the 
proposed rule change is a competitive response to a recently approved 
rule filing submitted by the CBOE.\9\ ISE believes this proposed rule 
change is necessary to permit fair competition among the options 
exchanges.
---------------------------------------------------------------------------

    \9\ See supra note 3.
---------------------------------------------------------------------------

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

    The Exchange believes that the foregoing proposed rule change may 
take effect upon filing with the Commission pursuant to 
Section19(b)(3)(A) \10\ of the Act and Rule 19b-4(f)(6) thereunder \11\ 
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 after its filing date, or such shorter time as the Commission 
may designate.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    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: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) 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 rule-comments@sec.gov. Please include 
File Number SR-ISE-2013-55 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-2013-55. 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-2013-55 and should be 
submitted on or before December 5, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
---------------------------------------------------------------------------

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

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-27207 Filed 11-13-13; 8:45 am]
BILLING CODE 8011-01-P


