[Federal Register Volume 66, Number 57 (Friday, March 23, 2001)]
[Notices]
[Pages 16306-16307]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-7198]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44082; File No. SR-ISE-01-05]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto by 
the International Securities Exchange LLC Relating to Minimum Activity 
Fees

March 15, 2001.
    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 March 2, 2001, the International Securities Exchange LLC (the 
``Exchange'' or the ``ISE'') filed with the Securities and Exchange 
Commission (``Commission'') a proposed rule change. The Exchange 
submitted Amendment No. 1 to its proposed rule change on March 13, 
2001.\3\ The proposed rule change, as amended, is described in Items I, 
II, and III below, which items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, the Exchange amended the proposal to 
submit the proposed rule change pursuant to Rule 19b-4(f)(1). See 
Letter from Michael Simon, Senior Vice President and General 
Counsel, ISE, to Kathy England, Assistant Director, Division of 
Market Regulation, Commission, dated March 12, 2001.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange is proposing to delay the effectiveness of its fee 
regarding inactive primary market maker (``PMM'') memberships.

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 Exchange included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed by any comments it received on the proposed rule change. 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 aspects of such statements.

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

1. Purpose
    In November 2000, the Exchange adopted a change to its fee schedule 
that subjected PMMs to a $100,000 monthly fee if the group of options 
(``bins'') to which they are appointed has not been opened for trading. 
The purpose of this fee is to provide the Exchange with revenue that is 
foregone when a bin is inactive. In particular, the fee helps the 
Exchange recoup lost transaction and access charges. This inactive PMM 
fee became effective on January 1, 2001. At the time the fee was 
adopted, there were three PMM memberships that were inactive. Two of 
those memberships became active during January 2001, and accordingly 
were not subject to the $100,000 fee.
    With respect to the one remaining inactive PMM membership, the 
Exchange proposes to delay application of the $100,000 fee until May 7, 
2001 to give this membership additional time to begin trading. The two 
PMM memberships that began trading in January were owned or leased by 
ISE members that had been approved as market makers on the Exchange. 
Thus, the ability to initiate trading was completely within those 
members' control.
    In contrast, the one PMM membership that remains inactive is owned 
by an entity that is not a registered broker-dealer and therefore, 
could not itself initiate trading activities on the ISE. Moreover, this 
owner is affiliated with a member that is currently operating two PMM 
memberships and would therefore, be prohibited under ISE's 
concentration limits for operating a third membership. Accordingly, the 
PMM membership must be leased or sold to a registered broker-dealer 
member of the ISE that is an approved market maker before trading 
activities with respect to the membership can be initiated.
    The Exchange proposes to extend the effective date of the $100,000 
inactive PMM fee to May 7, 2001 with respect to any PMM membership that 
is owned by a person or entity that is prohibited from conducting 
trading activities under ISE Rules and the membership has not been 
leased to a member that is approved as a market maker on the Exchange. 
The one currently inactive PMM membership is the only membership that 
would be affected by the delayed effective date. While the Exchange 
forgoes revenue with respect to this membership, the activation of the 
membership is not completely within the control of the owner, as a 
qualified buyer or lessee for the membership must be identified. The 
Exchange therefore believes that an owner in this circumstance should 
be given additional time to activate the membership as compared to an 
entity that chooses not to exercise its trading rights.\4\
---------------------------------------------------------------------------

    \4\ This rule change will affect only PMMs on the exchange, and 
all PMMs whose trading activity either was affected by this fee or 
will be subject to the delay in the application of the fee have 
representatives on the Board of Directors. All such directors 
supported the adoption of this proposed rule change.
---------------------------------------------------------------------------

2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \5\ 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 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. In addition, the basis for the rule change is Section 
6(b)(4) \6\ of the Act that requires an exchange to have an equitable 
allocation of reasonable dues, fees and other charges among its members 
and other persons using its facilities.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78f(b)(5).
    \6\ 15 U.S.C. 78f(b)(4).

---------------------------------------------------------------------------

[[Page 16307]]

B. Self-Regulatory Organization's Statement on Burden on Competition

    The proposed rule change does not 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

    The Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any unsolicited written comments from members or other interested 
parties.

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

    The foregoing rule change constitutes a stated policy, practice, or 
interpretation with respect to the meaning, administration, or 
enforcement of an existing rule of the Exchange, and therefore, has 
become effective pursuant to Section 19(b)(3)(A)(i) of the Act \7\ and 
paragraph (f)(1) of Rule 19b-4.\8\ At any time within 60 days of the 
filing of such 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.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78s(b)(3)(A)(i).
    \8\ 17 CFR 240.19b-4(f)(1).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, 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 in the Commission's Public Room. Copies of such filing will 
also be available for inspection and copying at the principal office of 
ISE. All submissions should refer to File No. SR-ISE-01-05 and should 
be submitted by April 13, 2001.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
---------------------------------------------------------------------------

    \9\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jonathan G. Katz,
Secretary.
[FR Doc. 01-7198 Filed 3-22-01; 8:45 am]
BILLING CODE 8010-01-M