International Securities Exchange (ISE)
ISE Establishes Alternative Primary Market Maker Program
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Mar 31, 2009 - 4:44:16 PM

ISE Establishes Alternative Primary Market Maker Program

Additional liquidity providers will support new product introductions

The International Securities Exchange (ISE) announced that it has established an Alternative Primary Market Maker program. Under this program, ISE’s Competitive Market Makers (CMM) will be eligible to serve as the Primary Market Maker (PMM) in certain options products and will assume the associated quoting responsibilities and order allocation privileges. By extending the number of firms who can act as PMM, ISE is broadening the pool of potential liquidity providers eligible to support new product introductions.

Boris Ilyevsky, Managing Director of ISE’s options exchange, said, “Through the Alternative Primary Market Maker program, we are adding greater flexibility to the product allocation and listing process. Since more firms can now qualify to act as primary liquidity providers, we expect

interest in listing products to increase.” Previously, ISE was only able to introduce a new listing if an existing PMM expressed interest in quoting the product. With the new program, existing PMMs retain the first right to any potential new listings. However, if existing PMMs do not have interest in quoting a new or existing product, CMMs who are participants in the Alternative Primary Market Maker program have the opportunity to be designated as PMM. The Alternative Primary Market Maker program applies to equity, ETF, and index options products.

ISE Publishes Proposal for U.S. Regulatory Reform

Recommendations Focus on Oversight of Market Operations and Trading Venues

ISE calls for creation of a new Financial Markets Commission (FMC) to oversee all U.S. financial markets and trading platforms.

- Regulatory regime should create a level playing field for all trading venues, regardless of exchange status.

- Regulation should be risk-based with a results-oriented focus on compliance to ensure comprehensiveness and promote efficiency.

The International Securities Exchange (ISE), the world’s largest equity options exchange, announced that it has published a proposal outlining its recommendations for reforming the regulation of U.S. financial markets. As one of only seven U.S. securities exchange operators, ISE brings a unique

perspective to the current public debate and has set forth recommendations that specifically focus on the oversight of market operations and trading venues. In the proposal, ISE details a risk-based regulatory framework built on clearly legislated regulatory objectives and designed to proactively maintain an orderly and efficient marketplace for all participants. This approach promotes comprehensive, consistent and ongoing oversight for all types of trading venues while addressing the global nature of the markets and promoting the innovative and competitive edge of the U.S. financial industry.

“In addition to joining others in identifying the need for a systemic risk regulator, ISE’s proposal outlines our views on the most effective approach to overseeing the proper functioning of the financial markets

and trading platforms – an equally vital, yet often overlooked, aspect of the current regulatory discussion,” said Gary Katz, ISE’s President and Chief Executive Officer. “We believe that all trading venues that

execute orders from public customers should be subject to consistent oversight and high standards for setting and enforcing trading rules in the marketplaces they operate. At the same time, there needs to be

a rationalization in the oversight of self-regulatory organizations (SROs) that oversee trading venues in order to encourage competitiveness and to bring more products into a transparent market environment that is overseen by a proactive, risk-based regulatory framework.”

ISE proposes a new regulatory structure that reallocates responsibilities by function among three aspects of financial regulation: (i) financial systemic risk (covering financial and capital matters involving commercial and investment banks, futures commission merchants, investment companies and hedge funds); (ii) disclosure (overseeing disclosure/risk analysis for investors and encompassing corporate issuers, investment companies and product-specific risk); and (iii) financial industry operations (covering the operation of financial markets, trading platforms and financial service providers, including but not limited to the services traditionally provided by broker-dealers, investment advisors, hedge funds and futures commission merchants). ISE’s specific recommendations focus on developing a risk-based framework for regulating financial industry operations that addresses the regulatory gaps and inconsistencies that exist today under the bifurcated regulatory structure in the U.S. financial markets.