
[Federal Register Volume 78, Number 236 (Monday, December 9, 2013)]
[Notices]
[Pages 73912-73914]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-29258]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70967; File No. SR-ISE-2013-62]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change To Extend the Pilot Program That Eliminated the Position and 
Exercise Limits for Options on SPDR S&P 500 ETF

December 3, 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 November 20, 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 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 its rules to extend the pilot program 
that eliminated position and exercise limits for physically-settled 
options on the SPDR S&P ETF Trust (``SPY'') (``SPY Pilot Program''). 
The text of the proposed rule change is available on the

[[Page 73913]]

Exchange's Web site 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
    ISE proposes to amend Supplementary Material .01 to ISE Rule 412 
and Supplementary Material .01 of ISE Rule 414 to extend the time 
period of the SPY Pilot Program, which is scheduled to expire on 
December 5, 2013,\3\ through February 5, 2015. This filing is based on 
a filing recently submitted by NYSE MKT LLC, which extends the SPY 
Pilot Program for an additional fourteen months on that exchange.\4\
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    \3\ See Exchange Act Release No. 68000 (October 5, 2012), 77 FR 
62300 (October 12, 2012) (SR-ISE-2012-81).
    \4\ See Securities Exchange Act Release No. 70734 (October 22, 
2013), 78 FR 64255 (October 28, 2013) (SR-NYSEMKT-2013-83).
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    This filing does not propose any substantive changes to the SPY 
Pilot Program. In proposing to extend the SPY Pilot Program, the 
Exchange reaffirms its consideration of several factors that supported 
the original proposal of the SPY Pilot Program, including (1) the 
liquidity of the option and the underlying security, (2) the market 
capitalization of the underlying security and the related index, (3) 
the reporting of large positions and requirements surrounding margin, 
and (4) financial requirements imposed by ISE and the Commission.
    In the original proposal to establish the SPY Pilot Program, the 
Exchange stated that if it were to propose an extension, permanent 
approval or termination of the program, the Exchange would submit, 
along with any filing proposing such amendments to the program, a 
report providing an analysis of the SPY Pilot Program covering the 
first twelve (12) months during which the SPY Pilot Program was in 
effect (the ``Pilot Report'').\5\ However, because not all self-
regulatory organizations (``SROs'') have adopted similar rules 
eliminating position limits on SPY and market participants that are 
members of such SROs are required to comply with the more restrictive 
SPY position limits, no market participants have availed themselves of 
the SPY Pilot Program. As a result, there is no meaningful data 
available to compile the Pilot Report at this time and therefore the 
Exchange is not filing a Pilot Report with this extension request. The 
Exchange believes it is appropriate to extend the SPY Pilot Program to 
provide time for other SROs to adopt similar rules eliminating position 
limits on SPY so that the Exchange can prepare a meaningful Pilot 
Report if it were to propose any further extension, permanent approval 
or termination of the program.
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    \5\ See Exchange Act Release No. 68000 (October 5, 2012), 77 FR 
62300 (October 12, 2012) (SR-ISE-2012-81).
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    As with the original proposal to establish the SPY Pilot Program, 
the Exchange represents that the Pilot Report will be submitted within 
thirty (30) days of the end of the first twelve (12) months of the 
extended SPY Pilot Program time period and will cover the twelve months 
just ended. The Pilot Report will detail the size and different types 
of strategies employed with respect to positions established as a 
result of the elimination of position limits in SPY. In addition, the 
Pilot Report will note whether any problems resulted due to the no 
limit approach and any other information that may be useful in 
evaluating the effectiveness of the SPY Pilot Program. The Pilot Report 
will compare the impact of the SPY Pilot Program, if any, on the 
volumes of SPY options and the volatility in the price of the 
underlying SPY shares, particularly at expiration. In preparing the 
report the Exchange will utilize various data elements such as volume 
and open interest. In addition the Exchange will make available to 
Commission staff data elements relating to the effectiveness of the SPY 
Pilot Program.
    The Exchange also proposes to adopt rule text to codify that the 
SPY Pilot Program is subject to a pilot period that ends on February 5, 
2015.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the Securities Exchange Act of 1934 \6\ (the ``Act'') in general, 
and furthers the objectives of Section 6(b)(5) of the Act \7\ in 
particular, in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in facilitating transactions in securities, 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 extending the SPY Pilot 
Program promotes just and equitable principles of trade by permitting 
market participants, including market makers, institutional investors 
and retail investors, to establish greater positions when pursuing 
their investment goals and needs.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The proposed rule change is not 
designed to address any aspect of competition, whether between the 
Exchange and its competitors, or among market participants. Instead, 
the proposed rule change is designed to allow the SPY Pilot Program to 
continue while other SROs adopt similar provisions and meaningful data 
can be compiled into a Pilot Report.

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

    Because the foregoing proposed rule change does not significantly 
affect the protection of investors or the public interest, does not 
impose any significant burden on competition, and, by its terms, does 
not 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

[[Page 73914]]

19(b)(3)(A) of the Act \8\ and Rule 19b-4(f)(6) thereunder.\9\ The 
Exchange provided the Commission with written notice of its intent to 
file the proposed rule change, along with a brief description and text 
of the proposed rule change, at least five business days prior to the 
date of filing the proposed rule change as required by Rule 19b-
4(f)(6).
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \10\ normally 
does not become operative prior to 30 days after the date of the 
filing. 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. The Exchange 
believes that waiver of the 30-day operative delay is consistent with 
the protection of investors and the public interest because it will 
benefit market participants as it will allow the SPY Pilot Program to 
continue uninterrupted. The Commission believes that waiving the 30-day 
operative delay is consistent with the protection of investors and the 
public interest. Therefore, the Commission hereby waives the 30-day 
operative delay and designates the proposal operative upon filing.\12\
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    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ 17 CFR 240.19b-4(f)(6)(iii).
    \12\ 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 such 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 rule-comments@sec.gov. Please include 
File Number SR-ISE-2013-62 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-2013-62. 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-2013-62 and should be 
submitted on or before December 30, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-29258 Filed 12-6-13; 8:45 am]
BILLING CODE 8011-01-P


