On July 23, the International Securities Exchange (ISE) submitted a proposal to the Securities and Exchange Commission to amend the ISE rules regarding non-customer options orders. The ISE proposes to remove Rule 717(a), which prohibits members from entering (i) non-customer market orders and (ii) non-customer limit orders that cross the market and that cannot be executed within two minimum variations below the best bid or above the best offer. With the removal of other limitations on non-customer trading and advances in electronic options trading, such as improved intermarket linkage to provide trade-through protection, the ISE does not believe there is any reason to maintain the current restriction on non-customer market and marketable limit orders.
In addition to the removal of Rule 717(a), the ISE also proposes to amend its rules to clarify that market makers may enter market orders and fill-or-kill orders in the options classes to which they are appointed, as the ISE believes that allowing its market makers to utilize these orders types is consistent with its practice of not allowing market makers to have both standing limit orders and quotes in the same options class.
Because the proposal was filed as a non-controversial rule change, it was effective upon filing with the SEC but does not become operative for 30 days after the filing date.