[Federal Register Volume 65, Number 44 (Monday, March 6, 2000)]
[Notices]
[Pages 11820-11821]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-5379]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42475; File No. SR-ISE-00-04]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the International Securities Exchange LLC Relating to the 
Exposure of Orders on the Exchange

February 29, 2000.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on February 25, 2000, the International Securities Exchange LLC (the 
``Exchange'' or the ``ISE'') filed with the Securities and Exchange 
Commission (``SEC'' or ``Commission'') the proposed rule change as 
described in Items I, II, and III below, which Items have been prepared 
by the ISE. The Commission is publishing this notice to solicit

[[Page 11821]]

comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The ISE proposes to amend its crossing rules to reduce from two 
minutes to thirty seconds the amount of time that Electronic Access 
Members are required to expose orders on the Exchange before executing 
them as principal or executing them against solicited order. Proposed 
new language is in italics; proposed deletions are in brackets.
* * * * *
    Rule 717  Limitations on Orders
    (a) Principal Transactions.
    Electronic Access Members may not execute as principal orders they 
represent as agent unless (i) agency orders are first exposed on the 
Exchange for at least [two (2) minutes] thirty (30) seconds, (ii) the 
Electronic Access Member has been bidding or offering on the Exchange 
for at least [two (2) minutes] thirty (30) seconds prior to receiving 
an agency order that is executable against such bid or offer, or (ii) 
the Member utilizes the Facilitation Mechanism pursuant to Rule 716(d).
    (b) Solicitation Orders.
    Electronic Access Members must expose orders they represent as 
agent on the Exchange for at least [two (2) minutes] Thirty (30) 
seconds before such orders may be executed in whole or in part by 
orders solicited from Members and non-member broker-dealers to transact 
with such orders.

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 ISE 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 IIV below. The ISE 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

1. Purpose
    The Exchange is proposing to reduce from two minutes to 30 seconds 
the order exposure time required in paragraphs (d) and (e) of ISE Rule 
717. The purpose of the order exposure requirements is to assure that 
agency orders have an opportunity to interact on the Exchange before 
they are executed, either by the broker representing the order, or by 
another order solicited by the broker. However, market participants 
have indicated to the exchange that two minutes is too long to delay 
the execution of an order when there is a party willing to execute 
against the order.
    The Exchange has taken this view into consideration and weighed the 
need to assure that orders interact in the Exchange's electronic 
auction market system against the competing customer interest of 
receiving a speedy execution. In this respect, the Exchange recognizes 
the benefits of order interaction, as well as the risk that an order 
left unexecuted might ``miss the market.'' Upon reconsideration of the 
two minute exposure time, the Exchange believes that the objective of 
the exposure rule can be satisfied by a shorter time period, which will 
benefit limit orders by providing them an opportunity for a more rapid 
execution. The Exchange believes that exposing an order for 30 seconds 
will provide sufficient opportunity for orders to interact with other 
trading interest on the Exchange, and thereby preserve the benefits of 
the ISE's electronic auction market.\3\
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    \3\ The ISE concurrently is proposing to establish 30 seconds as 
the time given for market participants to respond to broadcasts 
requesting trading interest with respect to block-size orders. See 
SR-ISE-00-03. The Exchange believes that 30 seconds is sufficient 
for members to participate in the execution of these large-size 
orders, and that there is no reason to require a longer exposure 
time for smaller orders.
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2. Statutory Basis
    The ISE believes that the proposed rule change is consistent with 
the provisions of Section 6(b)(5) of the Act,\4\ which requires that an 
exchange have rules that are designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, 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.
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    \4\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The ISE does not believe that the proposed rule change will result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    Written comments on the proposed rule change were neither solicited 
nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the ISE consents, the Commission will:
    (A) By order approve the proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be 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. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549-
0609. 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 inspection and copying at the 
Commission's Public Reference Room. Copies of such filing will also be 
available for inspection and copying at the principal office of the 
ISE. All submissions should refer to File No. SR-ISE-00-04 and should 
be submitted by March 27, 2000.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-5379 Filed 3-3-00; 8:45 am]
BILLING CODE 8010-01-M