[Federal Register Volume 67, Number 250 (Monday, December 30, 2002)]
[Notices]
[Pages 79673-79674]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-32917]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47075; File No. SR-ISE-2002-29]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by International Securities 
Exchange, Inc., Relating to Fee Changes

December 20, 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 December 16, 2002, the International Securities Exchange, Inc. 
(``Exchange'' or ``ISE'') filed with the Securities and Exchange 
Commission (``SEC'' or ``Commission'') the proposed rule change as 
described in Items I, II, and III below, which items have been prepared 
by the self-regulatory organization. On December 20, 2002, the Exchange 
submitted Amendment No. 1 to the proposal.\3\ 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\ See letter from Michael J. Simon, Senior Vice President and 
General Counsel, ISE, to Nancy J. Sanow, Assistant Direction, 
Division of Market Regulation, Commission, dated December 20, 2002 
(``Amendment No. 1''). In Amendment No. 1, the Exchange amended the 
schedule of fees to list the specific ETFs based on indexes 
developed by the Frank Russell Company that ISE either has listed or 
have been allocated to a Primary Market Maker and will soon be 
listed for trading. The Exchange also clarified the fee schedule by 
stating that public customer orders are exempted from the proposed 
fee. The Commission notes that this is consistent with the manner in 
which the fee has been imposed with respect to options on the Nasdaq 
100 Index Tracking Stock and the Nasdaq Biotechnology Index, and 
represents only a change in terminology.
---------------------------------------------------------------------------

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

    The Exchange is proposing to establish a $.10 surcharge for non-
Public Customer transactions in options on certain exchange traded 
funds (``ETFs'') based on indexes developed by the Frank Russell 
Company (``Russell'').

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 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 Exchange 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 Exchange has entered into a license agreement to use various 
indexes and trademarks of Russell in connection with the listing and 
trading of options on certain ETFs based on Russell indexes. The 
purpose of this proposed rule change is to adopt a fee for trading in 
five of these options that the ISE either has listed or have been 
allocated to a Primary Market Maker and will soon be listed for 
trading.\4\ The ISE believes that charging the participants that trade 
in options on these instruments is the most equitable means of 
recovering the costs of the license. However, because competitive 
pressures in the industry have resulted in the waiver of all 
transaction fees for customer transactions, we do not propose to charge 
this additional fee with respect to customer transactions. 
Specifically, Public Customer Orders will be exempted from the proposed 
surcharge.\5\
---------------------------------------------------------------------------

    \4\ The proposed fee will apply to options on the following 
ETFs: Russell 2000 iShares, Russell 2000 Value iShares, Russell 2000 
Growth iShares, Russell 1000 Growth iShares, and Russell 1000 Value 
iShares.
    \5\ Under ISE Rule 100, a Public Customer is a person that is 
not a broker or dealer in securities, and a Public Customer Order is 
an order for the account of a Public Customer. Accordingly the 
execution of orders for the account of a non-broker-dealer will not 
be subject to the proposed $.10 fee. All other orders, i.e., orders 
for the account of a broker-dealer, will be subject to the proposed 
fee.
---------------------------------------------------------------------------

    This fee would be charged to the executing member of the ISE if the 
order is for the account of a broker-dealer. For example, if broker A 
has a Public Customer Order that broker A gives to broker B (an ISE 
electronic access member) to execute on the ISE, broker B will not be 
charged the proposed $.10 fee. On the other hand, if broker A gives 
broker B (an ISE electronic access

[[Page 79674]]

member) an order for the account of broker A (or another broker-
dealer), broker B will be charged the $.10 fee.
2. Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(4) of the Act that an exchange have an 
equitable allocation of reasonable dues, fees and other charges among 
its members and other persons using its facilities.\6\
---------------------------------------------------------------------------

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

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 amended rule change has become effective pursuant to 
Section 19(b)(3)(A) of the Act \7\ and Rule 19b-4(f)(2)\8\ thereunder. 
At any time within 60 days of the filing of such amended 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).
    \8\ 17 CFR 19b-4(f)(2).
---------------------------------------------------------------------------

IV. 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 Section. 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-2002-29 and should 
be submitted by January 21, 2003.

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

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


Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-32917 Filed 12-27-02; 8:45 am]
BILLING CODE 8010-01-P