[Federal Register Volume 67, Number 202 (Friday, October 18, 2002)]
[Notices]
[Pages 64428-64429]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-26625]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46646; File No. SR-ISE-2002-20]


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

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 1, 2002, the International Securities Exchange, Inc. (the 
``Exchange'' or the ``ISE''), filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the 
ISE.\3\ The Commission is publishing this notice to solicit comments on 
the proposed rule change from interested persons. For the reasons 
described below, the Commission is granting accelerated approval to the 
proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The Commission supplied additional text to the description 
of the proposed rule change, with the consent of the ISE, to reflect 
ISE's deletion of rules that otherwise permitted ``crossing'' of 
orders. Telephone conversation between Michael Simon, Senior Vice 
President and General Counsel, ISE, and Andrew Shipe, Special 
Counsel, Division of Market Regulation, Commission (October 10, 
2002).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The ISE is proposing permanent approval of its complex order rule, 
Rule 722 (the ``Rule''). The ISE also proposes to amend the Rule to 
delete the provisions allowing a Member to execute 40 percent of 
certain complex orders such Member entered without the need for the 
order to be exposed for 30 seconds.

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. 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
    On October 18, 2001, the Commission approved the ISE's Complex 
Order Rule.\4\ The Rule established priority and order handling 
principles for complex orders such as spreads and straddles. By its 
terms, the Rule was effective for one year, or until October 18, 2002. 
The purpose of this proposed rule change is to adopt the Rule on a 
permanent basis. The ISE's complex order rule is similar to those of 
the other exchanges with respect to order handling and priority 
afforded complex orders.\5\ The one provision that is unique to the ISE 
permits a Member to execute 40 percent of certain complex orders as 
principal, or as agent against an order solicited from a Member or non-
Member broker-dealer, without the need for the order to be exposed for 
30 seconds. The Exchange now proposes to delete that provision.
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    \4\ File No. SR-ISE-2002-18; Release No. 34-44955 (October 18, 
2001); 66 FR 53819 (October 24, 2001).
    \5\ Chicago Board Options Exchange (``CBOE'') Rule 6.45; 
American Stock Exchange (``Amex'') Rule 950(d), Commentary .01; 
Philadelphia Stock Exchange (``Phlx'') Rule 1033; Pacific Exchange 
Rule 6.75.
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    The ISE notes the complex order rule has been effective in 
providing a framework for the trading of complex orders. While the ISE 
continues to consider ways to improve upon the handling of complex 
orders, over the last year the basic trading mechanism and complex 
order priority structure have proven sound. The ISE therefore seeks 
approval of this rule on a permanent basis.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) 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 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.

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.

[[Page 64429]]

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, 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, 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-2002-20 and should 
be submitted by November 8, 2002.

IV. Commission's Findings and Order Granting Accelerated Approval of 
the 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, with the requirements of Section 6(b)(5).\6\ The Commission 
did not receive comments on the proposed rule change when the pilot was 
first proposed.\7\ Pursuant to Section 19(b)(2) of the Act,\8\ the 
Commission further finds good cause to approve the proposed rule change 
prior to the thirtieth day after the date of publication of notice of 
filing thereof in the Federal Register. The proposed rule change would 
eliminate the provisions of the Rule that permit members to execute 40% 
of certain complex orders without prior exposure to the market. The 
Commission believes that limiting such facilitation or crossing rights 
helps to adequately protect competitive pricing for all orders. 
Furthermore, this change makes the rule consistent with the rules of 
CBOE, Amex and Phlx. The Commission also believes that it is 
appropriate to permanently approve this heretofore-pilot program on an 
accelerated basis in order to ensure continuous operation of the ISE's 
framework for trading complex orders.
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    \6\ 15 U.S.C. 78f(b)(5).
    \7\ See fn. 4, supra.
    \8\ 15 U.S.C. 78s(b)(2).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\9\ that the proposed rule change (SR-ISE-2002-20) is hereby 
approved on an accelerated basis.
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    \9\ 15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Market Regulation, pursuant 
to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-26625 Filed 10-17-02; 8:45 am]
BILLING CODE 8010-01-P