[Federal Register Volume 67, Number 4 (Monday, January 7, 2002)]
[Notices]
[Pages 760-761]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-286]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45220; File No. SR-ISE-2001-33]


Self Regulatory Organizations; International Securities Exchange 
LLC; Order Granting Accelerated Approval to a Proposed Rule Change and 
Amendment No. 1 and Notice of Filing and Order Granting Accelerated 
Approval to Amendment No. 2 to the Proposed Rule Change Revising the 
Original Listing Criteria for Underlying Securities in ISE Rule 502.

I. Introduction and Description of the Proposal

    On November 19, 2001, the International Securities Exchange LLC 
(``ISE'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission''), pursuant to section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'')\1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to amend ISE Rule 502(b)(5) to 
provide an alternative listing requirement for underlying securities 
that satisfy all of the initial listing requirements in ISE Rule 502, 
``Criteria for Underlying Securities,'' other than the requirement in 
ISE Rule 502(b)(5) that the market price per share of the underlying 
security be at least $7.50 per share for the majority of business days 
during the three calendar months preceding the date of selection. 
Specifically, the Exchange proposes to adopt ISE Rule 502(b)(5)(ii), 
which will permit the Exchange to list options on securities that 
satisfy all of the initial listing requirements other than the $7.50 
per share requirement so long as: (1) The underlying security meets the 
guidelines for continued approval in ISE Rule 503, ``Withdrawal of 
Approval of Underlying Securities;'' (2) options on the underlying 
security are traded on at least one other registered national 
securities exchange; and (3) the average daily trading volume for the 
options over the last three calendar months preceding the date of 
selection has been at least 5,000 contracts.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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    The proposed rule change was published for comment in the Federal 
Register on December 6, 2001.\3\ The Commission received no comments on 
the proposal. On December 6, 2001, the Exchange filed Amendment No. 1 
to the proposed rule change with the Commission.\4\ On December 31, 
2001, the Exchange filed Amendment No. 2 to the proposed rule change 
with the Commission.\5\ This order approves the proposed rule change, 
as amended, on an accelerated basis. In addition, the Commission is 
publishing notice to solicit comments on and is simultaneously 
approving, on an accelerated basis, Amendment No. 2 to the proposal.
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    \3\ See Securities Exchange Act Release No. 45119 (November 30, 
2001), 66 FR 63423.
    \4\ See letter from Michael Simon, Senior Vice President and 
General Counsel, ISE, to Nancy Sanow, Assistant Director, Division 
of Market Regulation (``Division''), Commission, dated December 4, 
2001 (``Amendment No. 1''). In Amendment No. 1, the Exchange added 
``trading'' to the proposed text of ISE Rule 502(b)(5)(ii) to 
clarify that the requirement in the third clause of ISE Rule 
502(b)(5)(ii) refers to the average daily trading volume of an 
option. This is a technical amendment and is not subject to notice 
and comment.
    \5\ See letter from Michael Simon, Senior Vice President and 
General Counsel, ISE, to Nancy Sanow, Assistant Director, Division, 
Commission, dated December 28, 2001 (``Amendment No. 2''). In 
Amendment No. 2, the Exchange requested that the Commission grant 
accelerated approval to the proposal.
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II. Discussion

    After careful review, the Commission finds that the proposed rule 
change, as amended, is consistent with the requirements of the Act and 
the rules and regulations thereunder applicable to a national 
securities exchange and, in particular, the requirements of section 6 
of the Act\6\ and the rules and regulations thereunder.,\7\ The 
Commission finds specifically that the proposed rule

[[Page 761]]

change is consistent with Section 6(b)(5) of the Act,\8\ which 
requires, among other things, that the rules of a national securities 
exchange be designed to promote just and equitable principles of trade, 
to remove impediments to and perfect the mechanisms of a free and open 
market and a national market system, and, in general, to promote 
investors and the public interest.
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    \6\ 15 U.S.C. 78f.
    \7\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78(b)(5).
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    The Commission believes that the ISE's proposal should benefit 
investors by enhancing competition and providing investors with an 
additional forum for trading options that are traded on at least one 
other registered national securities exchange and that satisfy the 
other criteria in ISE Rule 502(b)(5)(ii).\9\ Under the proposal, an 
underlying security must meet all of the requirements in ISE Rule 502 
other than the $7.50 per share requirement and must meet the guidelines 
for continued approval under ISE Rule 503. The Commission believes that 
these requirements should help to ensure that options traded on the ISE 
are based on securities of companies that are financially sound and 
subject to adequate minimum standards. In addition, because ISE Rule 
502(b)(5)(ii) requires that options on an underlying security trade at 
least one other registered national securities exchange, the proposal 
will not permit the trading of any additional options that are not 
currently traded on a registered national securities exchange.
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    \9\ As noted above, ISE Rule 502(b)(5)(ii) will permit the ISE 
to list options on an underlying security where: (1) The underlying 
security meets the guidelines for continued approval in ISE Rule 
503; (2) options on the underlying security are traded on at least 
one other registered national securities exchange; and (3) the 
average daily trading volume for the options over the last three 
calendar months preceding the date of selection has been at least 
5,000 contracts.
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    The ISE asked the Commission to approve the proposal of an 
accelerated basis to allow the ISE to begin to list several actively 
traded option classes that currently trade on other options exchanges 
prior to the January 2002 expiration.\10\ The Commission finds good 
cause for approving the proposed rule change and Amendment Nos. 1 and 2 
prior to the thirtieth day after the date of publication of notice of 
filing thereof in the Federal Register. Accelerating approval of the 
proposal will allow the ISE to promptly begin trading options that 
currently trade on other options exchanges, thereby providing investors 
with an additional forum for trading these options. In addition, the 
Commission notes that it received no comments on the proposed rule 
change. Amendment No. 1 strengthens the ISE's proposal by clarifying 
the text of ISE Rule 502(b)(5)(ii). Amendment No. 2 requests 
accelerated approval of the proposal and explains the ISE's reasons for 
requesting accelerated approval. Accordingly, the Commission finds that 
there is good cause, consistent with sections (6)(b)(5)A\11\ and 
19(b)(2) of the Act,\12\ to approve the proposal and Amendment Nos. 1 
and 2 on an accelerated basis.
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    \10\ See Amendment No. 2, supra note 5.
    \11\ 15 U.S.C. 78f(b)(5).
    \12\ 15 U.S.C. 78s(b)(2).
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III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning Amendment No. 2, including whether Amendment No. 2 
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-2001-33 and should be 
submitted by January 28, 2002.

IV. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\13\ that the proposed rule change (File No. SR-ISE-2001-33), as 
amended, is approved.
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    \13\ ID.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-286 Filed 1-4-02; 8:45 am]
BILLING CODE 8010-01-M