[Federal Register Volume 68, Number 249 (Tuesday, December 30, 2003)]
[Notices]
[Pages 75296-75298]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-31950]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48959; File No. SR-ISE-2003-38]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the International Securities Exchange, Inc. To Increase the 
Number of Authorized Shares of Class B Common Stock, Series B-2 from 
130 to 160

December 18, 2003.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on December 11, 2003, the International Securities Exchange, Inc. 
(``Exchange'' or ``ISE'') filed with the Securities and Exchange

[[Page 75297]]

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 proposes to increase the number of authorized shares of 
Class B Common Stock, Series B-2 from 130 to 160. 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 Office of the Secretary, 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 ISE proposes to increase the number of authorized shares of 
Class B Common Stock, Series B-2 from 130 to 160. 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 13 CMMs to each Bin. Under this proposal, the 
Exchange will 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 (``Board'') has established a committee of 
three directors 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-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 net 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 states that this proposed rule change is the same as 
a previous proposal to increase the number of Exchange CMM 
Memberships approved by the Commission. See Securities Exchange Act 
Release No. 47289 (January 30, 2003), 68 FR 5947 (February 5, 2003) 
(order approving SR-ISE-2002-28).
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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 trade, 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. The Exchange believes that the sale of 30 additional 
CMM Memberships would increase the depth and liquidity of the 
Exchange's market and provide more broker-dealers with an opportunity 
to participate on the Exchange as market makers.
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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. The Exchange believes that the proposal will increase 
competition on the Exchange by increasing the number of market makers.

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. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549. 
Comments may also be submitted electronically at the following e-mail 
address: [email protected]. All comment letters should refer to 
File No. SR-ISE-2003-38. This file number should be included on the 
subject line if e-mail is used. To help the Commission process and 
review your comments more efficiently, comments should be sent in 
hardcopy or by e-mail but not by both methods. 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-2003-38 and should be 
submitted by January 20, 2004.


[[Page 75298]]


    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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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-31950 Filed 12-29-03; 8:45 am]
BILLING CODE 8010-01-P