April 30, 2012.
On February 29, 2012, the International Securities Exchange, LLC (“Exchange” or “ISE”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 
and Rule 19b-4 thereunder,
a proposed rule change to amend ISE Rule 722, “Complex Orders,” to modify its procedures for executing the stock leg(s) of stock-option orders. The proposed rule change was published for comment in the Federal Register on March 19, 2012.
The Commission received no comment letters regarding the proposed rule change. This order approves the proposed rule change.
II. Description of the Proposal
Currently, ISE Rule 722, Supplementary Material .02 allows ISE members to elect to have ISE electronically transmit the stock leg(s) of a stock-option transaction to a designated broker-dealer for execution. To participate in this automated process, ISE members must enter into a brokerage agreement with the designated broker-dealer.
Members must enter into a brokerage agreement with ISE's designated broker-dealer to ensure that there is at least one common available broker-dealer through which the matched stock leg(s) of a stock-option transaction may be executed.
The proposal would allow ISE members to enter into brokerage agreements with one or more additional broker-dealers to which ISE will be able to route stock orders.
ISE will automatically transmit the stock leg(s) of a stock-option trade on behalf of a member to one or more broker-dealer(s) with which the member has an agreement for execution, using routing logic that considers objective factors such as execution cost, speed of execution, and fill rates.
Members may indicate preferred execution brokers, and these preferences will determine order routing priority whenever possible.
ISE will have no financial arrangements with the brokers with respect to routing stock orders to them,
and ISE receives no fees related to the stock portion of a stock-option trade.
As is the case currently, after ISE routes the stock leg(s) of a stock-option trade to a broker-dealer for execution, the broker-dealer will be responsible for determining whether the orders may be executed in accordance with applicable rules, including the Regulation NMS trade-through rules.
The proposal eliminates the manual process for executing the stock leg(s) of stock-option orders. ISE believes that it is fair, reasonable, and not discriminatory to eliminate the manual procedure for executing the stock leg(s) of stock option orders because, according to ISE, there is no demand from ISE members for the manual execution alternative.
III. Discussion and Commission's Findings
After careful review, 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.
In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act,
which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, 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 believes that the proposal should enhance the processing of stock-option orders by facilitating the automated processing of the stock component of a stock-option transaction. In addition, the Commission notes that other options exchanges have adopted similar requirements in connection with the processing of stock-option orders.
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (SR-ISE-2012-16) is approved.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17
Kevin M. O'Neill,
[FR Doc. 2012-10753 Filed 5-3-12; 8:45 am]
BILLING CODE 8011-01-P