[Federal Register Volume 65, Number 172 (Tuesday, September 5, 2000)]
[Notices]
[Pages 53792-53793]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-22592]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43216; File No. SR-ISE-00-07]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the International Securities 
Exchange LLC Relating to Decimal Pricing

August 28, 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 August 3, 2000, the International Securities Exchange LLC 
(``ISE'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission'' or ``SEC'') the proposed rule change as 
described in Items I, II and III below, which Items have been prepared 
by the ISE. The Exchange filed the proposal pursuant to section 
19(b)(3)(A) of the Act, \3\ and Rule 19b-4(f)(6) thereunder, \4\ which 
renders the proposal effective upon filing with the Commission. \5\ The 
Commission is publishing this notice to solicit 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.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
    \5\ ISE provided written notice to the Commission on July 26, 
2000 of its intent to file this proposal. See Rule 19b-4(f)(6)(iii). 
17 CFR 240.19b-4(f)(6)(iii).
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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 rules to provide for the 
implementation of decimal pricing. The ISE believes the proposed rule 
change conforms to the uniform industry approach to implementing 
decimal pricing contained in the joint submission to the Commission by 
the ISE and other interested parties dated July 24, 2000, entitled 
``Decimals Implementation Plan for the Equities and Options Markets'' 
(``Decimals Plan''). The text of the Proposed rule change is below. 
Proposed new language is in italics. Deletions are in brackets.
    Rule 710. Minimum Pricing Variations [Fractional Changes]
    (a)-(c) No change.
    (d) Conversion to Decimal Pricing Increments. Notwithstanding any 
other provision of this Rule, the Exchange will convert to decimal 
pricing increments for all options traded on the Exchange by April 9, 
2001, or by such other date as the President of the Exchange shall 
determine consistent with any order issued by the Securities and 
Exchange Commission (SEC) or plan filed by the Exchange with the SEC. 
The President shall determine the schedule for this conversion, and 
shall designate those options that will trade in decimal increments 
during the conversion process. Decimal pricing increments shall be as 
follows: 
    (1) if the options contract is trading at less than $3,000 per 
option, $.05; and
    (2) if the options contract is trading at $3.00 per option or 
higher, $.10; 
    provided that the President shall have the ability to designate 
certain options as trading at an increment of $.01 as part of a pilot 
program conducted in conformity with a plan filed with the SEC. 
* * * * *

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 its proposal and discussed any 
comments it received regarding the proposal. The text of these 
statements may be examined at the places specified in Item IV below. 
The ISE has prepared summaries, set forth in Sections A, B and C below, 
of the most significant aspect of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change 

1. Purpose
    The Commission has ordered the securities exchanges and other 
interested parties to implement decimal

[[Page 53793]]

pricing in their markets.\6\ Pursuant to that Order, the Commission has 
required the exchanges to submit proposed rule changes implementing a 
uniform decimals phase-in schedule. The purpose of the proposed rule 
change is to implement the decimalization phase-in schedule that the 
exchanges and other interested parties have adopted in the Decimals 
Plan.
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    \6\ Securities Exchange Act Release No. 42914 (June 8, 2000), 65 
FR 38010 (June 19, 2000).
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2. Statutory Basis
    The ISE believes that the proposal is consistent with the 
provisions of section 6(b)(5) of the Act \7\ 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 for a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest.
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    \7\ 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 impose 
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 were neither solicited nor 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) of the Act \8\ and Rule 
19b-4(f)(6) thereunder.\9\ At any time within 60 days of the filing of 
the proposed rule change, the Commission may summarily abrogate such 
rule change if it appears to the Commission that such action is 
necessary or appropriate in the public interest, for the protection of 
investors, or otherwise in furtherance of the purposes of the Act.
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6).
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    The ISE has requested that the Commission accelerate the operative 
date. The Commission believes that it is consistent with the protection 
of investors and the public interest and therefore finds good cause to 
designate the proposal to become immediately operative upon filing.\10\ 
Acceleration of the operative date will ensure that the ISE is able to 
operate in accordance with the terms and conditions of the Decimals 
Plan. For these reasons, the Commission finds good cause to designate 
that the proposal become operative immediately upon filing.\11\
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    \10\ The Decimals Plan contemplates that the options exchanges 
may wish to consider a pilot program for one-cent minimum price 
variations for quoting in a limited number of options (``Penny 
Pilot'') at some point in the implementation process. The Commission 
expects that, before implementing a Penny Pilot, the options 
exchanges will carefully coordinate on such issues as the selection 
and number of options to be included in the pilot to ensure the 
continued orderly operation of the markets and clearing 
organizations. In particular, the Commission expects that the 
options exchanges will consult with the Commission regarding the 
impact on market-wide capacity. Before implementing a Penny Pilot, 
each options exchange should also submit appropriate rule filings to 
the Commission under Section 19(b) of the Exchange Act.
    \11\ For purposes only of accelerating the operative date of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposal is 
consistent with the Act. Persons making written submissions should file 
six copies thereof with the Secretary, Securities and Exchange 
Commission, 450 Fifth Street, NW., Washington, DC 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 in 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 number SR-ISE-00-07 and should be 
submitted by September 26, 2000.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-22592 Filed 9-1-00; 8:45 am]
BILLING CODE 8010-01-M