[Federal Register Volume 67, Number 202 (Friday, October 18, 2002)]
[Notices]
[Pages 64426-64428]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-26624]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46647; File No. SR-ISE-2002-21]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change by International 
Securities Exchange, Inc. Relating to Listing and Maintenance Standards

October 11, 2002.
    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 October 3, 2002, the International Securities Exchange, Inc. 
(``Exchange'' or ``ISE'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I and II 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.
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    \1\ 15 U.S.C 78s(b)(1)
    \2\ 17 CFR 24019b-4
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The ISE is proposing to amend its maintenance listing criteria for 
underlying securities contained in ISE Rule 503 to allow the Exchange 
to add series on underlying securities that fail to meet the $3 minimum 
trading price requirement so long as they are trading on another 
options exchange and met the $3 requirement at the time they were 
listed. The text of the rule amendment is below; proposed new language 
is italicized.
Rule 503. Withdrawal of Approval of Underlying Securities
* * * * *
    (c) In connection with paragraph (b)(4) of this Rule, the Exchange 
shall not open for trading any additional series of options contracts 
of the class covering an underlying security at any time (including on 
a next-day,

[[Page 64427]]

expiration or intra-day basis) when the market price per share of such 
underlying security closed less than $3 on the last trading day 
preceding the day on which such series are added, as measured by the 
closing price reported by the primary market in which the underlying 
security trades. In addition to closing at or above $3 on the last 
trading day preceding the day series are added, the Exchange shall not 
open for trading any additional series of options contracts on an 
intra-day basis unless the last reported trade in the primary market in 
which the underlying security trades is at least $3 at the time the 
Exchange determines to add the series. Notwithstanding the above, the 
Exchange may add a series if the additional series is traded on at 
least one other registered national securities exchange and, at the 
time the additional series was listed by such other registered national 
securities exchange, it met the $3 market price requirement.
* * * * *

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 III 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
    ISE Rule 503 contains the guidelines used to determine whether an 
underlying individual equity security previously approved for options 
trading meets the requirements for continued approval. ISE Rule 503 
currently provides that the Exchange may not list additional series for 
an options class unless the market price per share of the underlying 
security is at least $3 on the last trading day preceding the day on 
which such series are added, as measured by the closing price reported 
by the primary market in which the underlying security trades. In 
addition to closing at or above $3 on the last preceding trading day, 
the Exchange may not open any additional series on an intra-day basis 
unless the last reported trade in the primary market in which the 
underlying security trades is at least $3 at the time the Exchange 
determines to add the series.
    The Exchange proposes to amend ISE Rule 503 to permit the Exchange 
to add additional series of options regardless of the market price per 
share for underlying securities that satisfy all of the maintenance 
listing requirements other than the $3 per share price requirement, so 
long as such series are traded on at least one other registered 
national securities exchange, and at the time the additional series 
were listed by such other registered national securities exchange, the 
underlying security met the $3 market price requirement. Three of the 
five options exchanges have already adopted this change,\3\ and the ISE 
states that it seeks to keep its rules consistent with these other 
options exchanges to avoid any competitive disadvantage that might 
arise if the Exchange were unable to list series that are permitted to 
be listed on another exchange. The Exchange states that when an 
underlying security otherwise meets the maintenance listing standards 
and at least one other exchange trades the options series, the options 
already are available to the investing public. The Exchange believes 
that increased competition for order flow in these additional series of 
approved options classes will benefit investors and the marketplace for 
options and the respective underlying securities.\4\ Moreover, the 
Exchange believes that the maintenance listing standards other than 
price assure that options will be listed and traded on the securities 
of companies that are financially sound.\5\
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    \3\ See Securities Exchange Act Release Nos. 46375 (August 16, 
2002), 67 FR 54628 (August 26, 2002) (SR-AMEX-2002-68); 46406 
(August 23, 2002), 67 FR 55446 (SR-PCX-2002-51); and 46501 
(September 16, 2002), 67 FR 59585 (SR-CBOE-2002-52).
    \4\ The Exchange represents that this proposed rule change would 
not serve to introduce additional options series.
    \5\ The Exchange represents that it will continue to apply the 
other maintenance listing guidelines in Rule 503, which assure that 
(1) the underlying security consists of a large number of 
outstanding shares held by non-affiliates of the issuer; (2) the 
underlying security is actively-traded; (3) there is a large number 
of holders of the underlying security; and (4) the underlying 
security continues to be listed on a national securities exchange or 
traded through the facilities of a national securities association.
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2. Statutory Basis
    The Exchange believes the basis under the Act for this proposed 
rule change is the requirement under Section 6(b)(5) \6\ that an 
exchange have rules that are designed to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transaction 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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    \6\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that 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. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing. 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 No. SR-ISE-2002-21 and should 
be submitted by November 8, 2002.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    The Commission finds that the proposed rule change 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(b)(5) of the

[[Page 64428]]

Act.\7\ The Commission believes investors benefit from the competition 
among options exchanges that results when options are listed on more 
than one options exchange; and that investors are sufficiently 
protected, even though ISE will be permitted to list a series of option 
contracts when the market price of the underlying security is below $3, 
because the Exchange must comply with all of the other maintenance 
listing requirements, and the market price of the underlying security 
was at or above $3 when the options series was listed on the first 
options exchange.\8\ Therefore, the Commission finds that proposed rule 
change will promote just and equitable principles of trade, and, in 
general, protect investors and the public interest consistent with 
Section 6(b)(5) of the Act.\9\
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    \7\ Id.
    \8\ The Commission notes that such series must have been 
properly listed by the original options exchange.
    \9\ 15 U.S.C. 78f(b)(5). In approving this proposed rule change, 
the Commission notes that it has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
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    The ISE has requested that the proposed rule change be given 
accelerated approval pursuant to Section 19(b)(2) of the Act.\10\ The 
Commission believes accelerated approval of the proposal would enhance 
competition among the options exchanges. Accordingly, the Commission 
finds good cause, consistent with Section 19(b)(2) of the Act,\11\ to 
approve the proposed rule change prior to the thirtieth day after the 
date of publication of the notice of filing thereof in the Federal 
Register.
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    \10\ 15 U.S.C. 78s(b)(2).
    \11\ Id.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\12\ that the proposed rule change (SR-ISE-2002-21) is hereby 
approved on an accelerated basis.
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    \12\ Id.
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    For the Commission, by the Division of Market Regulation, pursuant 
to delegated authority.\13\
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    \13\ 17 CFR 240.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-26624 Filed 10-17-02; 8:45 am]
BILLING CODE 8010-01-P