[Federal Register Volume 68, Number 187 (Friday, September 26, 2003)]
[Notices]
[Pages 55685-55686]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-24380]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48514; File No. ISE-2003-21]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the International Securities 
Exchange, Inc. Relating to the Extension of the Pilot Program for 
Quotation Spreads

September 22, 2003.
    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 September 22, 2003, the International Securities Exchange, Inc. 
(``ISE'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``SEC'' or ``Commission'') the proposed rule change as 
described in Items I and II below, which Items have been prepared by 
the ISE. The proposed rule change has been filed by the ISE under Rule 
19b-4(f)(6) of the Act.\3\ 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.
    \3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The ISE proposes to extend until January 31, 2004, a pilot program 
permitting the allowable quotation spread for options on up to 50 
equity securities to be $5, regardless of the price of the bid (``Pilot 
Program''). The ISE proposes no substantive changes to the Pilot 
Program other than extending its operation through January 31, 2004. 
Pursuant to Rule 19b-4(f)(6) under the Act, the ISE requests that the 
Commission waive the 30-day pre-operative requirement contained in Rule 
19b-4(f)(6)(iii).\4\
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    \4\ 17 CFR 240.19b-4(f)(6)(iii).
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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

[[Page 55686]]

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's rules contain maximum quotation spread requirements that 
vary from $.25 to $1.00, depending on the price of the option. On March 
19, 2003, the Commission approved a proposal to amend Supplementary 
Material .01 to ISE Rule 803, ``Obligations of Market Makers,'' to 
establish a six-month Pilot Program in which the allowable quotation 
spread for options on up to 50 underlying equity securities would be 
$5, regardless of the price of the bid.\5\ The Pilot Program expires on 
September 19, 2003. As required by the Pilot Program Approval Order, 
the ISE has submitted to the Commission a report detailing the ISE's 
experience with the Pilot Program.
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    \5\ See Securities Exchange Act Release No. 47532, 68 FR 14728 
(March 26, 2003) (order approving File No. SR-ISE-2001-15) (``Pilot 
Program Approval Order'').
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    The ISE believes that the Pilot Program has been successful, and 
the ISE intends to file a proposal with the Commission to make the 
quote spread Pilot Program permanent and to apply it to all ISE listed 
equity options. The purpose of the current proposal is to extend the 
Pilot Program in its present form until January 31, 2004, while the 
Commission reviews the ISE's Pilot Program report and considers the 
ISE's proposal to make the Pilot Program permanent.
2. Statutory Basis
    According to the ISE, the statutory basis for the proposal is the 
requirement under section 6(b)(5) of the Act \6\ that a national 
securities exchange have rules that are designed 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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    \6\ 15 U.S.C. 78f(b)(5).
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    The ISE does not believe that the proposed rule change imposes 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 
on the proposed rule change. The ISE has not received any unsolicited 
written comments from members or other interested persons.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The ISE has filed the proposed rule change pursuant to section 
19(b)(3)(A) of the Act \7\ and subparagraph (f)(6) of Rule 19b-4 
thereunder.\8\ Because the foregoing proposed rule change: (1) Does not 
significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
and (3) 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, the proposed rule change has become effective 
pursuant to section 19(b)(3)(A) of the Act and Rule 19b-4(f)(6) 
thereunder.
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative prior to 30 days after the date of filing. 
However, Rule 19b-4(f)(6)(iii) permits the Commission to designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest. The ISE has requested that the 
Commission waive the 30-day operative delay to prevent a lapse in the 
operation of the Pilot Program.
    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because it will permit the Pilot Program to continue without 
interruption through January 31, 2004. For this reason, the Commission 
designates the proposal to be operative upon filing with the 
Commission.\9\
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    \9\ For purposes only of accelerating the operative date of this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
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    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.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether it 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 at 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-2003-21 and should be 
submitted by October 17, 2003.

    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. 03-24380 Filed 9-25-03; 8:45 am]
BILLING CODE 8010-01-P