[Federal Register Volume 69, Number 37 (Wednesday, February 25, 2004)]
[Notices]
[Pages 8716-8717]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-4122]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49278; File No. SR-ISE-2003-34]


Self-Regulatory Organizations; Order Granting Approval to 
Proposed Rule Change and Amendment No. 1 Thereto by the International 
Securities Exchange, Inc. Relating to Firm Quotations

February 19, 2004.
    On November 20, 2003, the International Securities Exchange, Inc. 
(``ISE'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to require ISE market makers to 
be firm for the stated size of their quotations in all instances. The 
ISE submitted Amendment No. 1 to the proposed rule change on December 
3, 2003.\3\ Currently, a market maker's disseminated quotation is 
required to be firm at its stated size for all incoming orders, except 
when quotes of two ISE market makers interact. In these cases, a market 
maker may limit its exposure to one contract, regardless of the size of 
its disseminated quotation.\4\ This proposed rule change will eliminate 
that exception.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from Michael Simon, Senior Vice President and 
General Counsel, ISE, to Nancy Sanow, Assistant Director, Division 
of Market Regulation, Commission, dated December 2, 2003. Amendment 
No. 1 deleted a reference to ``Order Execution Size''--a term no 
longer used in the rule--and substituted the term ``a bid or 
offer.''
    \4\ See Securities Exchange Act Release No. 47220 (January 21, 
2003), 68 FR 4260 (January 28, 2003).
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    The proposed rule change, as amended, was published for comment in 
the Federal Register on December 16, 2003.\5\ The Commission received 
no comments on the proposed rule change.
    The Commission finds that the proposed rule change, as amended, is 
consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange 
and, in particular, the requirements of Section 6 of the Act.\6\ 
Specifically, the Commission finds that the proposal is consistent with 
Section 6(b)(5) of the Act,\7\ which requires that the rules of a 
national securities exchange be 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.\8\ The Commission believes that requiring market makers' 
quotes to be firm for the full stated size in all cases will further 
the development of the national market system by requiring ISE market 
makers to comply with the Quote Rule--Rule 11Ac1-1 under the Act.\9\
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    \5\ See Securities Exchange Act Release No. 48892 (December 8, 
2003), 68 FR 70058.
    \6\ 15 U.S.C. 78f.
    \7\ 15 U.S.C. 78f(b)(5).
    \8\ In approving this proposed rule change, the Commission notes 
that it has considered the proposed rule's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
    \9\ Rule 11Ac1-1 sets forth requirements for the dissemination 
of quotations and responsibilities of broker-dealers. 17 CFR 
240.11Ac1-1. By letter dated January 21, 2003, the Commission 
granted responsible brokers and dealers on the ISE a limited 
exemption from the Quote Rule to permit an ISE market maker to be 
firm for only one contract when its quotations interact with those 
of other ISE market makers. See letter from Robert L.D. Colby, 
Deputy Director, Division of Market Regulation, Commission, to 
Michael J. Simon, Senior Vice President and General Counsel, ISE, 
dated January 21, 2003. Concurrent with approval of this proposed 
rule change, the Commission is revoking the ISE's limited exemption 
to the Quote Rule. See letter from Robert L.D. Colby, Deputy 
Director, Division of Market Regulation, Commission, to Michael J. 
Simon, Senior Vice President and General Counsel, ISE, dated January 
21, 2003. Concurrent with approval of t this proposed rule change, 
the Commission is revoking the ISE's limited exemption to the Quote 
Rule. See letter from Robert L.D. Colby, Deputy Director, Division 
of Market Regulation, Commission, to Michael J. Simon, Senior Vice 
President and General Counsel, ISE, dated February 19, 2004.

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[[Page 8717]]

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change, as amended (SR-ISE-2003-34) be, 
and hereby is, approved.
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    \10\ 15 U.S.C. 78s(b)(2).

For the Commission, by the Division of Market Regulation, pursuant 
to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-4122 Filed 2-24-04; 8:45 am]
BILLING CODE 8010-01-P