
[Federal Register Volume 80, Number 29 (Thursday, February 12, 2015)]
[Notices]
[Pages 7892-7893]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-02896]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74224; File No. SR-ISE-2015-05]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change To Extend the SPY Pilot Program

February 6, 2015.
    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 4, 2015, 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 the 
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 Exchange's Web 
site (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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Supplementary Material .01 to Rule 
412 and Supplementary Material .01 to Rule 414 to extend the duration 
of the SPY Pilot Program through July 12, 2015, consistent with 
proposed rule changes filed by other options exchanges.\3\ 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.
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release Nos. 73846 (December 16, 
2014), 79 FR 76415 (December 22, 2014) (SR-MIAX-2014-64); 73847 
(December 16, 2014), 79 FR 76426 (December 22, 2014) (SR-NYSEMKT-
2014-106); 72142 (May 9, 2014), 79 FR 27961 (May 15, 2014) (SR-
NASDAQ-2014-052); and 72143 (May 9, 2014), 79 FR 27963 (May 15, 
2014) (SR-BX-2014-025).
---------------------------------------------------------------------------

    With this proposed extension to the SPY Pilot Program, the Exchange 
has submitted a report to the Commission reflecting the trading of 
standardized SPY options without position limits from January through 
December, 2014. The report was prepared in the manner specified in the 
filing extending the SPY Pilot Program to the current pilot end date of 
February 5, 2015. The Exchange notes that it is unaware of any problems 
created by the SPY Pilot Program and does not foresee any as a result 
of the proposed extension.
    The Exchange represents that it will submit a new pilot report at 
least thirty (30) days before the end of the extended SPY Pilot 
Program, which will cover the extended pilot period. 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.
    Conditional on the findings in the Pilot Report, the Exchange will 
file with the Commission a proposal to extend the pilot program, adopt 
the pilot program on a permanent basis or terminate the pilot. If the 
SPY Pilot Program is not extended or adopted on a permanent basis by 
the expiration of the extended pilot, the position limits for SPY would 
revert to limits in effect at the commencement of the SPY Pilot 
Program.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder that are applicable to a national securities exchange, and, 
in particular, with the requirements of Section 6(b) of the Act.\4\ In 
particular, the proposal is consistent with Section 6(b)(5) of the 
Act,\5\ because it is designed to promote just and equitable principles 
of trade, to remove impediments to and perfect the mechanisms of a free 
and open market and a national market system and, in

[[Page 7893]]

general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    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. The Exchange also believes that 
economically equivalent products should be treated in an equivalent 
manner so as to avoid regulatory arbitrage, especially with respect to 
position limits. Treating SPY and SPX options differently by virtue of 
imposing different position limits is inconsistent with the notion of 
promoting just and equitable principles of trade and removing 
impediments to perfect the mechanisms of a free and open market. At the 
same time, the Exchange believes that the elimination of position 
limits for SPY options would not increase market volatility or 
facilitate the ability to manipulate the market.

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

    The Exchange believes the proposal is consistent with Section 
6(b)(8) of the Act \6\ in that it does not impose any burden on 
competition that is 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 as other 
SROs have adopted similar provisions.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

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 \7\ and Rule 19b-
4(f)(6) thereunder.\8\
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and the text of 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. The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \9\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \10\ permits the 
Commission to 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 so that 
the proposal may become operative immediately upon filing. The Exchange 
believes that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest because it would 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 operative delay and designates the 
proposed rule change operative upon filing.\11\
---------------------------------------------------------------------------

    \9\ 17 CFR 240.19b-4(f)(6).
    \10\ 17 CFR 240.19b-4(f)(6)(iii).
    \11\ 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).
---------------------------------------------------------------------------

    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 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 change 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-2015-05 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-ISE-2015-05. 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 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 information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-ISE-2015-05, and should be 
submitted on or before March 5, 2015.

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

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

Brent J. Fields,
Secretary.
[FR Doc. 2015-02896 Filed 2-11-15; 8:45 am]
BILLING CODE 8011-01-P


