The International Securities Exchange, LLC (ISE) filed a proposed rule change with the Securities and Exchange Commission to adopt an interpretation to its rules related to the exposure of reserve orders. The purpose of the proposal is to adopt an interpretation to ISE Rule 717(d) and (e) to specify that the exposure requirement contained in these paragraphs is satisfied with respect to the non-displayed reserve portion of a reserve order if the displayable portion is displayed at its displayable price for one second.
A reserve order is an order for which only a portion of the full size is included in ISE’s disseminated quotation. The displayed size is executed according to ISE’s regular priority rules, and is refreshed with additional volume from the non-displayed portion of the order. The non-displayed portion of the reserve order is available for execution only after the displayed quote is fully exhausted. Under the proposed interpretation, after entering a reserve order, a member may enter a contra-side order for its own account or a contra-side order that was solicited from another broker-dealer that would execute against the displayable and non-displayed portions of the order as long as the displayable portion of the order was displayed on the ISE (i.e., the price of the order is at the ISE best bid and offer) for at least one second. The proposed rule change became effective upon filing.