[Federal Register Volume 68, Number 58 (Wednesday, March 26, 2003)]
[Notices]
[Pages 14729-14730]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-7229]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47538; File No. SR-ISE-2003-09]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by International Securities 
Exchange, Inc., Relating to Limiting the Liability of Index Licensors 
for Options on Fund Shares

March 19, 2003.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and rule 19b-4\2\ thereunder, notice is hereby given that 
on March 12, 2003, the International Securities Exchange, Inc. (``ISE'' 
or ``Exchange'') submitted to 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. 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 is proposing to limit the liability of index licensors who 
grant the ISE a license to use their underlying indexes or portfolios 
in connection with the trading of options on Fund Shares. The text of 
the proposed rule change appears below. Proposed new language is 
italicized.
* * * * *
    Rule 507. Limitation on the Liability of Index Licensors for 
Options on Fund Shares.
    (a) The term ``index licensor'' as used in this Rule refers to any 
entity that grants the Exchange a license to use one or more indexes or 
portfolios in connection with the trading of options on Fund Shares (as 
defined in rule 502(h)).
    (b) No index licensor with respect to any index or portfolio 
underlying an option on Fund Shares traded on the Exchange makes any 
warranty, express or implied, as to the results to be obtained by any 
person or entity from the use of such index or portfolio, any opening, 
intra-day or closing value therefor, or any data included therein or 
relating thereto, in connection with the trading of any option contract 
on Fund Shares based thereon or for any other purpose. The index 
licensor shall obtain information for inclusion in, or for use in the 
calculation of, such index or portfolio from sources it believes to be 
reliable, but the index licensor does not guarantee the accuracy or 
completeness of such index or portfolio, any opening, intra-day or 
closing value therefor, or any data included therein or related 
thereto. The index licensor hereby disclaims all warranties of 
merchantability or fitness for a particular purpose or use with respect 
to any such index or portfolio, any opening, intra-day or closing value 
therefor, any data included therein or relating thereto, or any option 
contract on Fund Shares based thereon. The index licensor shall have no 
liability for any damages, claims, losses (including any indirect or 
consequential losses), expenses or delays, whether direct or indirect, 
foreseen or unforeseen, suffered by any person arising out of any 
circumstance or occurrence relating to the person's use of such index 
or portfolio, any opening, intra-day or closing value therefor, any 
data included therein or relating thereto, or any option contract on 
Fund Shares based thereon, or arising out of any errors or delays in 
calculating or disseminating such index or portfolio.
* * * * *

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 ISE proposes to limit the liability of index licensors who 
grant the ISE a license to use their underlying indexes or portfolios 
in connection with the trading of options on Fund Shares. The ISE 
recently entered into a license agreement with an index licensor, and 
that agreement calls for the ISE to adopt a rule limiting the index 
licensor's liability. This proposed rule is

[[Page 14730]]

substantially similar to Chicago Board Options Exchange rule 6.15.\3\
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    \3\ See Securities Exchange Act Release No. 45817 (April 24, 
2002), 67 FR 21785 (May 1, 2002) (SR-CBOE-2002-19).
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2. Statutory Basis
    The ISE believes that the proposed rule change is consistent with 
section 6(b)(5) of the Act \4\ in that it is 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.
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    \4\ 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 Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    The ISE has not solicited, and does not intend to solicit, comments 
in connection with this proposed rule change. The ISE 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 ISE has designated the foregoing rule change as effecting a 
change that: (1) Does not significantly affect the protection of 
investors or the public interest; (2) does not impose any significant 
burden on competition; and (3) by its terms does not become operative 
for 30 days from the date of filing. In addition, the ISE provided the 
Commission with written notice of its intent to file the proposed rule 
change at least five days prior to the filing date.\5\ Accordingly, the 
proposed rule change has become effective pursuant to section 
19(b)(3)(A) of the Act \6\ and rule 19b-4(f)(6) thereunder.\7\ At any 
time within 60 days of the filing of such 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.
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    \5\ As required under Securities Exchange Act rule 19b-
4(f)(6)(iii), the ISE provided the Commission with written notice of 
its intent to file the proposed rule change at least five business 
days prior to the filing date or such shorter period as designated 
by the Commission. See Prefiling Notice of Proposed Rule Change (SR-
ISE-2003-09), dated February 25, 2003.
    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4(f)(6).
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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 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-2003-09 and should 
be submitted by April 16, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-7229 Filed 3-25-03; 8:45 am]
BILLING CODE 8010-01-P