This PDF is the current document as it appeared on Public Inspection on 03/14/2017 at 08:45 am.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), and Rule 19b-4 thereunder, notice is hereby given that on February 28, 2017, the International Securities Exchange, LLC (“ISE” or “Exchange”) 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 Exchange. 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 Rule 413 of the Exchange's Rules, as described in further detail below.
The text of the proposed rule change is available on the Exchange's Web site at 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 Exchange 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 Exchange 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
The purpose of the proposed rule change is to correct a typographical error. Rule 413(a) of the Rules of the Start Printed Page 13909Exchange (the “Rules”), which provides for exemptions from position limits, presently states that “hedge transactions and positions established pursuant to paragraphs eight (8) and nine (9)” thereunder are “subject to a position limit equal to five (5) times the standard limit established under Rule 412(d).” The reference in this text to paragraphs (8) and (9) is incorrect. The Rule text should properly reference paragraphs (6) and (8).
Paragraph (6) of Rule 413(a) provides for a position limit exemption for a long call position accompanied by a short put position with the same strike price and a short call position accompanied by a long put position with a different strike price (a “box spread”). Paragraph (8) provides for a position limit exemption for a listed option position hedged on a one-for-one basis with an over-the-counter (“OTC”) option position on the same underlying security. Meanwhile, paragraph (9) merely states that for strategies described under paragraphs (2)-(5) of subsection (a) of the Rule, one component of the option strategy can be an OTC option contract guaranteed or endorsed by the firm maintaining the proprietary position or carrying the customer account.
The Exchange notes that the position limit exemptions set forth in the rules of other options exchanges, including ISE's sister exchange, Phlx, as well as CBOE, provide for position limit exemptions for OTC and box spread hedges of up to five times the standard limits.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section 6(b) of the Act, in general, and furthers the objectives of Section 6(b)(5) of the Act, in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, 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 general, to protect investors and the public interest. The Exchange asserts that the proposed correction will serve the Act's goals by ensuring that the Exchange's Rules are accurate.
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 as it is designed to correct a typographical error.
C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
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)(iii) of the Act  and subparagraph (f)(6) of Rule 19b-4 thereunder.
A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the Act  normally does not become operative for 30 days after the date of its filing. However, Rule 19b-4(f)(6)(iii)  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 Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest because it will allow the Exchange to correct a typographical error immediately and therefore reduce confusion in the application of the Exchange's rules. Accordingly, the Commission hereby waives the operative delay and designates the proposal operative upon filing.
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: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) 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:
- Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
- Send an email to firstname.lastname@example.org. Please include File Number SR-ISE-2017-20 on the subject line.
- Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-ISE-2017-20. 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 Start Printed Page 1391010:00 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-2017-20 and should be submitted on or before April 5, 2017.Start Signature
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.11
Eduardo A. Aleman,
3. See PHLX Rule 1001(l) (providing that “[h]edge transactions and positions established pursuant to paragraphs (6) [OTC options hedges] and (7) [box spread hedges] below are subject to a position limit equal to five (5) times the standard limit . . .”); CBOE Rule 4.11, Interpretation .04(a) (providing that [h]edge transactions and positions established pursuant to paragraphs six (6) [box spread hedges] and seven (7) [OTC options hedges] are subject to a position limit equal to five (5) times the standard limit . . .”).Back to Citation
7. 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file 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.Back to Citation
10. For purposes only of waiving the 30-day operative delay, the Commission has also considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f).Back to Citation
[FR Doc. 2017-05083 Filed 3-14-17; 8:45 am]
BILLING CODE 8011-01-P