[Federal Register Volume 67, Number 249 (Friday, December 27, 2002)]
[Notices]
[Pages 79202-79203]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-32640]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47035; File No. SR-ISE-2002-28]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the International Securities Exchange LLC to Increase the 
Number of Authorized Shares of Class B Common Stock, Series B-2 From 
100 to 130

December 19, 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 November 21, 2002, the International Securities Exchange, Inc. 
(``ISE'' or ``Exchange'') 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 
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 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The ISE proposes to increase the number of authorized shares of 
Class B Common Stock, Series B-2 from 100 to 130. This increase would 
result in the creation of 30 additional Competitive Market Maker 
(``CMM'') Memberships. The text of the proposed rule change is 
available at the ISE and at the Commission.

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 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
    The purpose of the proposed rule change is to increase the number 
of authorized shares of Class B Common Stock, Series B-2 from 100 to 
130. This increase would result in the creation of 30 additional CMM 
Memberships.\3\ CMMs are market makers that compete with a Primary 
Market Maker (``PMM'') and other CMMs to provide liquidity on the 
Exchange. The Exchange has allocated its listed options into 10 groups 
or ``Bins,'' and currently assigns one PMM and 10 CMMs to each Bin. 
Under this proposal, the Exchange would add three additional CMMs to 
each Bin.
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    \3\ ISE Rule 100(19) defines ``Membership'' as the ``trading 
privileges associated with a share of Class B Common Stock.''
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    The Board of Directors (the ``Board'') has established an Ad Hoc 
Committee on the Sale of CMM Trading Rights (the ``Committee'') to sell 
the additional Memberships, identifying both the purchasers of these 
Memberships and the price at which these Memberships would be sold. The 
Board's intent is that the new Memberships be sold to broker-

[[Page 79203]]

dealers that both would provide market making expertise and liquidity 
to the Exchange and that have significant customer order flow to send 
to the Exchange. There are no restrictions or limitations on the price 
at which the Memberships can be sold. The Exchange would distribute all 
proceeds received from these sales to holders of Class A Common Stock 
by way of a dividend.
    The ISE believes that the sale of 30 additional CMM Memberships 
would increase the depth and liquidity of the Exchange's market. It 
also would provide more broker-dealers with an opportunity to 
participate on the Exchange. The Exchange has carefully evaluated its 
system capacity and believes that it has more than sufficient capacity 
to be able to handle the increased number of CMM Members without any 
adverse effects. Finally, the Exchange would require that a purchaser 
of one of these new Memberships that is not already a CMM to meet all 
Exchange requirements currently applicable to CMM Members.\4\
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    \4\ The ISE believes that this proposed rule change is similar 
to a filing by the American Stock Exchange LLC to increase the 
number of its memberships. See Securities Exchange Act Release No. 
45130 (December 5, 2001), 66 FR 64324 (December 12, 2001).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \5\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act \6\ in particular, because it 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of change, 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.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    This proposed rule change does not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Exchange 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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will:
    (A) By order approve such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

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, 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-2002-28 and should be submitted by January 17, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 02-32640 Filed 12-26-02; 8:45 am]
BILLING CODE 8010-01-P