[Federal Register Volume 69, Number 120 (Wednesday, June 23, 2004)]
[Notices]
[Pages 35087-35088]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-14141]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49853; File No. SR-ISE-2004-15]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto by 
the International Securities Exchange, Inc., Relating to Fee Changes

June 14, 2004.
    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 May 18, 2004, the International Securities Exchange, Inc. (the 
``Exchange'' or the ``ISE'') filed with 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. 
On June 4, 2004, the ISE submitted Amendment No. 1 to the proposed rule 
change.\3\ The Commission is publishing this notice to solicit comments 
on the amended 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\ See letter from Michael Simon, Senior Vice President and 
General Counsel, ISE, to Nancy J. Sanow, Assistant Director, 
Division of Market Regulation, Commission, dated June 3, 2004 
(``Amendment No. 1''). Amendment No. 1 replaces and supersedes the 
Exchange's original filing in its entirety. For purposes of 
calculating the 60-day abrogation period, the Commission considers 
the period to have commenced on June 4, 2004, the date the ISE filed 
Amendment No. 1.
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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 amend its Schedule of Fees to extend waiver 
reductions on certain fees, and to amend the fee for use of the 
Facilitation Mechanism. The text of the amended proposed rule change is 
available at the Commission and the ISE.

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 self-regulatory organization 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 purpose of this proposed rule change is to amend the ISE 
Schedule of Fees as follows, as well as to remove references to fee 
waivers that have expired:
     Waiver of Customer Transaction and Comparison Fees: The 
Exchange currently waives customer transaction and comparison fees, 
with such waivers scheduled to expire on June 30, 2004.\4\ In order to 
remain competitive in the market place, the ISE proposes to extend 
these waivers through June 30, 2005.
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    \4\ See Securities Exchange Act Release Nos. 42473 (February 29, 
2000), 65 FR 11818 (March 6, 2000), and 48129 (July 3, 2003), 68 FR 
41409 (July 11, 2003).
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     Waiver of the CLICK Terminal and Session Fees: ``CLICK'' 
is the front-end order-entry terminal the ISE provides to members. 
Currently, the Exchange waives software license and maintenance fees, 
as well as API/Session fees (based on member log-ins), for a member's 
second and subsequent CLICK terminals. These waivers also are scheduled 
to expire on June 30, 2004.\5\ The Exchange believes that these waiver 
programs encourage firms to install and use multiple CLICKs and thus 
the Exchange proposes to extend these waivers for an additional year 
through June 30, 2005.
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    \5\ See Securities Exchange Act Release Nos. 45840 (April 29, 
2002), 67 FR 30408 (May 6, 2002), and 48129 (July 3, 2003), 68 FR 
41409 (July 11, 2003).
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     Discount on QQQ Fees: In November of 2003, the ISE 
instituted a six-month discount program in order to attract order flow 
in the Nasdaq 100 Tracking Stock (``QQQ''), according to the Exchange, 
the most actively-traded equity option.\6\ The Exchange triggers the 
discount based on two progressive milestones for firms entering non 
customer orders (since customer orders already are fee-exempt). 
Attaining the first milestone, a monthly average daily trading volume 
(``ADV'') of 8,000, enables the firm to receive a $0.10 reduction in 
transaction fees for contracts traded above this amount and up to the 
next target ADV. Surpassing the second milestone, a monthly ADV of 
10,000, entitles the market makers to trade all additional volume with 
no transaction or comparison fee. In order to continue the marketing 
efforts to attract order flow in the QQQ's, the ISE

[[Page 35088]]

proposes extending this discount until November 30, 2004.
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    \6\ See Securities Exchange Act Release No. 49147 (January 29, 
2004), 69 FR 5629 (February 5, 2004).
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     Facilitation Fee: The Exchange currently charges 
transaction fees on a sliding scale, depending on the Exchange's 
overall trading volume. These fees range from $.21 a contract to $.12 a 
contract.\7\ As an alternative, the ISE also imposes a flat $.15 a 
contract fee for use of the Facilitation Mechanism (when firms provide 
liquidity for the customers' block-sized orders). The Exchange 
originally established the $.15 fee to be a discount from the standard 
transaction fee charge. However, as volume has increased, there are 
months in which the standard transaction fee is less than the 
Facilitation fee. Thus, the Exchange proposes to amend the fee schedule 
to establish the charge for Facilitation trades as the lesser of the 
prevailing transaction fee or $.15.\8\
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    \7\ The Commission notes that the fee is based on the Exchange's 
ADV, with the transaction fees decreasing as ADV increases.
    \8\ The Commission notes that the proposal also removes 
references in its Schedule of Fees to certain index option fee 
waivers that have already expired. See Exhibit A of the proposed 
rule change.
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2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act,\9\ in general and Section 6(b)(4) of the Act,\10\ in 
particular, in that it provides for the equitable allocation of 
reasonable dues, fees and other charges among its members and other 
persons using its facilities. In particular, the Exchange believes that 
the amended proposed rule change would generally extend current waivers 
or otherwise lower fees.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
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 intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any unsolicited written comments from members or other interested 
parties with respect to the proposed rule change.

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

    The foregoing amended proposed rule change has become effective 
pursuant to Section 19(b)(3)(A)(ii) of the Act \11\ and Rule 19b-
4(f)(2) thereunder,\12\ because it changes a fee imposed by the 
Exchange. At any time within 60 days of the filing of the amended 
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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    \11\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \12\ 17 CFR 240.19b-4(f)(2).
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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 amended 
proposed rule change is consistent with the Act. Comments may be 
submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-ISE-2004-15 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609. All submissions should refer to File Number 
SR-ISE-2004-15. 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, please use only one method. The Commission 
will post all comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). 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 Section, 450 Fifth Street, NW., Washington, DC 20549-0609. 
Copies of such filing also will be available for inspection and copying 
at the principal office of the ISE. All comments received will be 
posted without change; the Commission does not edit personal 
identifying information from submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-ISE-2004-15 and should be submitted on 
or before July 14, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-14141 Filed 6-22-04; 8:45 am]
BILLING CODE 8010-01-P