[Federal Register Volume 69, Number 130 (Thursday, July 8, 2004)]
[Notices]
[Pages 41318-41319]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-15487]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49957; File No. SR-ISE-2004-22]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the International Securities 
Exchange, Inc., Relating to Fee Changes

July 1, 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 June 1, 2004, the International Securities Exchange, Inc. 
(``ISE'' or ``Exchange'') filed with the Securities and Exchange 
Commission (the ``Commission'') the proposed rule change as described 
in Items I, II, and III below, which Items have been prepared by the 
Exchange. The ISE submitted Amendment No. 1 to the proposed rule change 
on June 21, 2004.\3\ The Commission is publishing this notice to 
solicit comments on the proposed rule change, as amended, from 
interested persons.
---------------------------------------------------------------------------

    \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 June 18, 2004 (``Amendment 
No. 1''). Amendment No. 1 replaced and superceded the original 
filing in its entirety. In Amendment No. 1, the Exchange provided 
additional clarification regarding its proposed changes and made a 
correction to the proposed fee schedule.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to amend its Schedule of Fees to adopt a 
$.10 per contract surcharge and temporary fee waivers for certain 
transactions in options based on the S&P MidCap 400 Index.

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 Exchange included statements 
concerning the purpose of, and basis for, the proposed rule change, as 
amended, and noted that it did not solicit or receive comments on the 
proposed rule change. The text of these statements may be examined at 
the places specified in Item IV below. The Exchange 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 is proposing to amend its Schedule of Fees to adopt a 
$.10 per contract surcharge and temporary fee waivers for certain 
transactions in options based on the S&P MidCap 400 Index.
    The Exchange's Schedule of Fees currently has in place a surcharge 
fee item that calls for a $.10 per contract fee for transactions in 
certain licensed products. The Exchange has entered into a license 
agreement to use various indexes and trademarks of Standard & Poor's, a 
division of The McGraw-Hill Companies, Inc., in connection with the 
listing and trading of index options on the S&P MidCap 400 Index. As 
with

[[Page 41319]]

licensed equity options, the Exchange is adopting a fee for trading in 
these options to defray the licensing costs. The Exchange believes that 
charging the participants that trade these instruments is the most 
equitable means of recovering the costs of the license. However, 
because competitive pressures in the industry have resulted in the 
waiver of all transaction fees for customers, the Exchange proposes to 
exclude Public Customer Orders \4\ from this surcharge fee. 
Accordingly, this surcharge fee will only be charged with respect to 
non-Public Customer Orders (i.e., Market Maker and Firm Proprietary 
orders).
---------------------------------------------------------------------------

    \4\ Public Customer Order is defined in Exchange Rule 100(a)(33) 
as an order for the account of a Public Customer. Public Customer is 
defined in Exchange Rule 100(a)(32) as a person that is not a broker 
or dealer in securities.
---------------------------------------------------------------------------

    Additionally, for competitive purposes and in an attempt to 
generate trading interest, the Exchange is proposing to temporarily 
waive all transaction fees for non-Public Customer Orders in S&P MidCap 
400 Index options. Specifically, the Exchange is proposing to waive the 
following transaction fees for non-Public Customer Orders in S&P MidCap 
400 Index options until November 25, 2004: (i) The market maker and 
firm proprietary execution fee; (ii) the surcharge fee; and (iii) the 
comparison fee.
    The Exchange is also proposing to make certain non-substantive 
clarifications to its Schedule of Fees. Specifically, the Exchange 
proposes to clarify its Note under the Comparison Fee section of its 
Schedule of Fees.\5\ The Exchange seeks to clarify that its comparison 
fees apply to both equity and index options. The Exchange further 
proposes to amend the text in the note to the Comparison Fee relating 
to the waiver of the fee for Public Customer Orders in order to achieve 
consistency of terms within the Schedule of Fees. Finally, the Exchange 
proposes to reinsert relevant text related to a fee waiver contained in 
the Notes under the Market Maker and Firm Proprietary section that was 
inadvertently deleted in a prior rule filing.\6\
---------------------------------------------------------------------------

    \5\ The Commission notes that the Comparison Fee originally was 
published for notice and comment as part of the ISE's adoption of 
its Schedule of Fees, and that the fee initially was waived for 
customer trades for a period of six months. See Securities Exchange 
Act Release No. 42473 (Feb. 29, 2000), 65 FR 11818 (Mar. 6, 2000) 
(notice of SR-ISE-00-02) and 42730 (Apr. 28, 2000) 65 FR 26256 (May 
5, 2000) (approval order of SR-ISE-00-02).
    \6\ See Securities Exchange Act Release No. 49853 (June 16, 
2004) (notice of SR-ISE-2004-15).
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposed rule change, as amended, is 
consistent with the provisions of section 6(b) of the Act,\7\ in 
general, and section 6(b)(4) of the Act,\8\ 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.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change, as 
amended, 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, as amended. 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 foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act \9\ and Rule 19b-4(f)(2) \10\ thereunder 
because it establishes or changes a due, fee, or other charge imposed 
by the Exchange. At any time within 60 days of the filing of the 
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.\11\
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \10\ 17 CFR 240.19b-4(f)(2).
    \11\ For purposes of calculating the 60-day period within which 
the Commission may summarily abrogate the proposed rule change under 
section 19(b)(3)(C) of the Act, the Commission considers that period 
to commence on June 21, 2004, the date the ISE filed Amendment No. 
1. See 15 U.S.C. 78s(b)(3)(C).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, 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-2004-22 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-2004-22. 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. Copies of such filing also will be 
available for inspection and copying at the principal offices 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-
2004-22 and should be submitted on or before July 29, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
---------------------------------------------------------------------------

    \12\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-15487 Filed 7-7-04; 8:45 am]
BILLING CODE 8010-01-P