
[Federal Register Volume 79, Number 152 (Thursday, August 7, 2014)]
[Notices]
[Pages 46288-46289]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-18634]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72739; File No. SR-ISEGemini-2014-15]


Self-Regulatory Organizations; ISE Gemini, LLC; Order Approving 
Proposed Rule Change on Bid/Offer Differentials for In-The-Money Option 
Series

August 1, 2014.

I. Introduction

    On June 4, 2014, the ISE Gemini, LLC (``ISE Gemini'') filed with 
the Securities and Exchange Commission (``Commission''), pursuant to 
Section 19(b)(1) of the Securities Exchange Act

[[Page 46289]]

of 1934 (``Act'')\1\ and Rule 19b-4 thereunder,\2\ a proposed rule 
change to amend its rules to require that market makers quoting certain 
in-the-money options series maintain quotes that are no wider than the 
spread between the national best bid and offer (``NBBO'') in the 
underlying security. The proposed rule change was published for comment 
in the Federal Register on June 20, 2014.\3\ The Commission received no 
comment letters on the proposed rule change. This order approves the 
proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 72398 (June 16, 
2014), 79 FR 35397 (June 20, 2014) (``Notice'').
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II. Description

    ISE Gemini Rule 803(b)(4)(i) presently permits market makers to 
submit quotes with wider bid/offer differentials for in-the-money 
options series where the market for the underlying security is wider 
than the market maker's regular quotation requirements. In particular, 
a market maker quoting an in-the-money options series may submit quotes 
that are as wide as the quotation on the primary market of the 
underlying security.
    ISE Gemini proposes to change this obligation to instead require 
that market makers quoting these in-the-money options series maintain 
quotes that are no wider than the spread between the NBBO in the 
underlying security. ISE Gemini believes that measuring the permissible 
width of a market maker's quote against the NBBO more accurately 
reflects the current trading environment where multiple trading venues 
contribute to the prevailing market price of a security underlying an 
options series traded on ISE Gemini. Further, ISE Gemini explains that 
a market maker quoting an in-the-money options series can hedge its 
position by trading in the underlying security at the NBBO, which may 
be narrower than the quotation on the primary market. In addition, ISE 
Gemini believes that requiring market makers to post tighter quotes 
will improve market quality.

III. Discussion and Commission Findings

    After carefully considering the proposal, the Commission finds that 
the proposed rule change is consistent with the requirements of the Act 
and the rules and regulations thereunder applicable to a national 
securities exchange.\4\ In particular, the Commission finds that the 
proposed rule change is consistent with Section 6(b)(5) of the Act,\5\ 
which requires, among other things, that the rules of a national 
securities exchange be designed to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in regulating 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 Commission notes that the proposal should improve 
market quality by narrowing spreads to the benefit of investors.
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    \4\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \5\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (SR-ISEGemini-2014-15), be, and hereby 
is, approved.
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    \6\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\6\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-18634 Filed 8-6-14; 8:45 am]
BILLING CODE 8011-01-P


