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Notice

Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Regarding Market Maker Trading Licenses for Foreign Currency Options

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Start Preamble January 22, 2010.

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 January 14, 2010, 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 Exchange has filed the proposal as a “non-controversial” proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act [3] and Rule 19b-4(f)(6) thereunder.[4] The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

The Exchange proposes to amend its Rule 2213 regarding market maker trading licenses for the Exchange's foreign currency options. The text of the Start Printed Page 4892proposed 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

ISE proposes to amend its rules regarding Foreign Currency Options (“FX Options”) [5] traded on the Exchange. Specifically, ISE proposes to amend its Rule 2213 regarding market maker trading licenses for the Exchange's FX Options.

Under the Exchange's current rules, FX Primary Market Makers (“FXPMMs”) are required to purchase, through a sealed bid auction, a trading license in order to serve as a market maker in a particular foreign currency pair. FXPMMs must also provide market quality commitments regarding (i) the average quotation size it will disseminate in the foreign currency option, and (ii) the maximum quotation spread it will disseminate in such product at least ninety percent of the time. At the end of each auction, the Exchange determines the winning bidder for an FXPMM trading license based on bid amount and market quality commitment. There is only one FXPMM per currency pair. The minimum price for a FXPMM trading license is currently $5,000.

The Exchange also sells FX Competitive Marker Maker (“FXCMM”) trading licenses. Pursuant to Exchange rules, FXCMM trading licenses are sold pursuant to a “Dutch” auction.[6] FXCMMs are not required to submit any market quality commitments. The Exchange sells up to 10 FXCMM trading licenses per currency pair. The minimum price for a FXCMM trading license is currently $500.

The Exchange now proposes to eliminate the minimum bid requirement for both FXPMM and FXCMM trading licenses. ISE believes doing so will promote competition among market makers by allowing smaller firms to compete without the additional burden of a minimum fee. Further, some currency pairs are more popular than others so a minimum bid requirement for some of the lesser popular currency pairs invites less interest from potential market makers. While the minimum bid amounts do not amount to a large capital outlay, firms that are contemplating entry into the FX options business will be further incentivized to do so because their start-up costs will be reduced. FXPMMs will still be required to submit a monetary bid and market quality commitments and FXCMMs will still be required to submit only a monetary bid, to compete for a trading license to serve as a market maker in FX Options listed by the Exchange in the future.

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 under the Act applicable to a national securities exchange and, in particular, the requirements of Section 6(b) of the Act.[7] Specifically, the Exchange believes the proposed rule change is consistent with Section 6(b)(5) of the Act's [8] requirements that the rules of a national securities exchange be designed to promote just and equitable principles of trade, to prevent fraudulent and manipulative acts and, in general, to protect investors and the public interest. In particular, the proposed rule change will allow smaller firms to compete for a trading license without the additional burden of a minimum fee.

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

The proposed rule change does not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.

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 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 19(b)(3)(A) [9] of the Act and Rule 19b-4(f)(6) [10] thereunder. 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.

At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate 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.

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

Paper Comments

  • Send paper comments in triplicate to Elizabeth Murphy, Secretary, Securities and Exchange Commission, Start Printed Page 4893100 F Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-ISE-2010-05. This file number should be included on the subject line if e-mail 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 inspection and copying in the Commission's Public Reference Section, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of the filing will also 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-2010-05 and should be submitted on or before February 19, 2010.

Start Signature

For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.11

Florence E. Harmon,

Deputy Secretary.

End Signature End Preamble

Footnotes

5.  ISE began trading FX options on April 17, 2007 pursuant to Commission approval. See Securities Exchange Act Release No. 55575 (April 3, 2007), 72 FR 17963 (April 10, 2007) (SR-ISE-2006-59).

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6.  See ISE Rule 2213(g).

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[FR Doc. 2010-1853 Filed 1-28-10; 8:45 am]

BILLING CODE 8011-01-P