[Federal Register Volume 68, Number 232 (Wednesday, December 3, 2003)]
[Notices]
[Pages 67711-67712]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-30059]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48840; File No. SR-ISE-2003-29]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by International Securities 
Exchange Inc., Relating to Requiring the Fingerprinting of Exchange 
Employees and Independent Contractors and Other Service Providers

November 25, 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 November 18, 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, II, and III below, which Items have been prepared 
by the ISE. ISE filed the proposed rule change pursuant to Section 
19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6) thereunder,\4\ which 
renders the proposal effective upon filing with the Commission. 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\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 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 Exchange is proposing to adopt a new rule pursuant to which it 
will obtain fingerprints from prospective and current employees, and 
independent contractors and other service providers, submit those 
fingerprints to the Attorney General of the United States or his or her 
designee for identification and processing, and receive criminal 
history record information from the Attorney General of the United 
States or his or her designee for evaluation and use in protecting the 
Exchange's facilities, records, systems, data and other information. 
The text of the rule amendment is available at the Office of the 
Secretary of the Exchange 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, 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 Exchange proposes to require the fingerprinting of prospective 
and current employees, and independent contractors and other service 
providers of the Exchange. The events of September 11, 2001, including 
the resulting temporary disruption in the securities markets, have led 
national exchanges and lawmakers alike to evaluate various security 
requirements, with the objective of enhancing investor protection, 
business continuity and workplace safety. To that end, the Commission 
has approved fingerprinting rules for the National Association of 
Securities Dealers, Inc. (``NASD'') with respect to employees and 
independent contractors of The Nasdaq Stock Market, Inc. (``Nasdaq'') 
\5\ and for the New York Stock Exchange (``NYSE'') with respect to 
prospective and current employees, temporary personnel, independent 
contractors and service providers of each of the Exchange and its 
principal subsidiaries.\6\ ISE is proposing to adopt a rule 
establishing a fingerprint-based program that is substantially similar 
to the Nasdaq and NYSE programs.
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    \5\ See Release No. 34-47240 (January 23, 2003), 68 FR 4810 
(January 30, 2003) (SR-NASD-2002-113).
    \6\ See Release No. 34-48118 (July 1, 2003) 68 FR 41033 (July 9, 
2003) (SR-NYSE-2003-18).
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    The proposed rule is consistent with Section 17(f)(2) of Act \7\ 
and Rule 17f-2 thereunder,\8\ which require, subject to certain 
exemptions, a variety of securities industry personnel to be 
fingerprinted, including every member of a national securities 
exchange; brokers, dealers, transfer agents, and clearing agencies; and 
employees of such entities. Although Section 17(f)(2) does not require 
the Exchange or other self-regulatory organizations to fingerprint 
their own employees and non-employee service providers, it permits 
self-regulatory organizations designated by the SEC to have access to

[[Page 67712]]

``all criminal history record information.''\9\
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    \7\ 15 U.S.C. 78q(f)(2).
    \8\ 17 CFR 240.17f-2.
    \9\ 15 U.S.C. 78q(f)(2).
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    The proposed rule is also consistent with the laws of the State of 
New York, where ISE maintains its principal offices. In August 2002, 
New York State amended its general business law to require fingerprint-
based background checks of employees of national securities exchanges 
who are regularly employed in New York State.\10\ The New York law also 
requires fingerprint-based background checks of non-employees who 
provide services to the exchange if those individuals have ``access to 
records * * * or other material or secure buildings or secure property, 
which place the security of such organization at risk.'' The proposed 
rule will facilitate the Exchange's compliance with New York State law 
by facilitating the Exchange's access to criminal history record 
information maintained by the Federal Bureau of Investigation 
(``FBI'').
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    \10\ N.Y. Gen. Bus. Law 359-e (12-a) (McKinney 2003).
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    Moreover, fingerprint-based background checks will enhance the 
Exchange's ability to adequately screen employees and non-employee 
service providers to better determine whether there are unacceptable 
risks associated with granting such persons access to the Exchange's 
facilities, records, systems, data and other information. The proposed 
rule will permit the Exchange to receive arrest-based criminal history 
record information from the FBI, which includes conviction, sentencing, 
probation and parole information. Thus, the information obtained 
through fingerprint-based background checks will provide a more 
exhaustive and reliable profile of the criminal records of prospective 
employees and non-employee service providers, and thereby better 
facilitate risk assessment, than information provided directly by such 
persons.
    As stated in the proposed rule change, the Exchange will comply 
with all applicable laws relating to the use and dissemination of 
criminal history record information obtained from the FBI.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \11\ that an exchange have rules that 
are designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, 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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    \11\ 15 U.S.C. 78f(b)(5).
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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 anticipate soliciting, 
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 Exchange 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 Exchange provided 
the Commission with written notice of its intent to file the proposed 
rule change at least five days prior to the filing date. Accordingly, 
the proposed rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \12\ and Rule 19b-4(f)(6) thereunder.\13\ 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 Exchange Act.
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 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-2003-29 and should 
be submitted by December 24, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-30059 Filed 12-2-03; 8:45 am]
BILLING CODE 8010-01-P