[Federal Register Volume 70, Number 125 (Thursday, June 30, 2005)]
[Notices]
[Pages 37878-37880]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-12886]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51902; File No. SR-ISE-2005-19]


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

    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 April 15, 2005, the International Securities Exchange (``ISE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items

[[Page 37879]]

have been prepared by the Exchange. The proposed rule change has been 
filed by ISE as establishing or changing a due, fee, or other charge, 
pursuant to Section 19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2) 
\4\ thereunder, which renders the proposal effective upon filing with 
the Commission. On June 15, 2005, the Exchange filed Amendment No. 1 to 
the proposed rule change.\5\ The Commission is publishing this notice 
to solicit comments on the proposed rule change, as amended, 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)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
    \5\ Amendment No. 1 made minor, non-substantive clarifying 
changes to the purpose section and Exhibit 5. These changes to the 
proposed rule change did not affect the fees originally proposed. 
The effective date of the original proposed rule change is April 15, 
2005, and the effective date of the amendment is June 15, 2005. For 
purposes of calculating the 60-day period within which the 
Commission may summarily abrogate the proposed rule change, as 
amended, under Section 19(b)(3)(C) of the Act, the Commission 
considers the period to commence on June 15, 2005, the date on which 
the Exchange submitted Amendment No. 1. See 15 U.S.C. 78s(b)(3)(C).
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1. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The ISE proposes to amend its Schedule of Fees to (i) institute a 
monthly percentage fee for computer gateways provided to members 
instead of a flat fee, (ii) increase certain computer network fees to 
cover associated equipment costs, and (iii) delete references to an 
expired ``refresh'' program. The text of the proposed rule change is 
available on the ISE's Web site (http://www.iseoptions.com), at the 
ISE's Office of the Secretary, and at the Commission's Public Reference 
Room.

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 purpose of this proposed rule change is to amend the Exchange's 
Schedule of Fees to (i) institute a monthly percentage fee for computer 
gateways provided to members instead of a flat fee, (ii) increase 
certain computer network fees to cover associated equipment costs, and 
(iii) delete references to an expired ``refresh'' program.
     Gateway Fees: The Exchange provides its members with 
``gateway'' equipment which includes switches, servers and routers that 
they use to connect to the ISE. The Exchange finances these gateways 
through a lease with a vendor. The Exchange currently charges its 
members a flat monthly fee for these gateways. If a member returns 
these gateways to ISE early, ISE remains obligated under its lease with 
the vendor, which results in additional cost to the Exchange. The 
proposed fee schedule will enable ISE to increase the number of 
different configurations of gateway equipment available to members. As 
a result, members will not be able to obtain gateway equipment that 
best suits their needs. Additionally, the proposed fee schedule will 
also allow ISE to offset any increased cost that the Exchange may incur 
in the event a member returns any gateway equipment early and to cover 
the Exchange's administrative costs. Accordingly, ISE proposes charging 
members a monthly fee of 4.75 percent of ISE's costs of leasing the 
gateway equipment from its vendor.\6\ The Exchange believes that this 
proposed change will enable it to maintain control over price 
fluctuations, technology changes in equipment, and the costs associated 
with early equipment returns. The Exchange also proposes to add a level 
of granularity to its equipment installation, change, and removal fees. 
Rather than applying the fees to cabinets generally, the Exchange 
proposes to charge per piece of equipment. The Exchange expects the 
proposed fee change to have minimal impact to its members. For example, 
the monthly fee for member that currently leases 2 routers with 2 T-1 
lines, 2 switches and 2 gateways will decrease by $29. Whereas, the 
monthly fee for a member who leases the same configuration above but 
with 4 gateways will increase by $86.\7\
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    \6\ The commission notes that in Amendment No. 1, ISE added 
language to Exhibit 5 to clarify that the 4.75% fee is based solely 
on the cost of the specific equipment leased by such member.
    \7\ These are just two examples of fees charged by the Exchange. 
Members have many options in the gateway equipment they lease from 
the Exchange based on their business model. The fee charged by the 
Exchange is entirely dependent on the number and type of gateway 
equipment leased by a member.
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     Network Fees. The Exchange proposes to increase its line 
connection charges for T-1 and T-3 lines to cover the cost of routers 
that enable members to link with the Exchange and the Exchange to link 
with its telecommunications provider. Until now, the Exchange had not 
charged members a fee to cover the cost of these routers. Accordingly, 
ISE proposes to change the T-1 line connection fee from $250 to $300, 
and the T-3 line connection fee from $1,250 to $1,500. Additionally, 
the Exchange proposes to extend the ``megabit fee'' charged to members 
who connect via Ethernet to members who connect via all third-party 
managed service providers.
     Expired ``Refresh'' Program. The Exchange is deleting 
references to an expired member ``refresh'' program. That program, 
which was approved by the Commission on November 12, 2004,\8\ expired 
on November 30, 2004.
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    \8\ See Securities Exchange Act Release No. 50658 (November 12, 
2004), 69 FR 67768 (November 19, 2004).
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2. Statutory basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\9\ in general, and furthers the 
objectives of Seciton 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.
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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.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has neither solicited nor received comments on the 
proposed rule change.

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

    The proposed rule change has become effective upon filing pursuant 
to Section 19(b)(3)(A)(ii) of the Act \11\ and subparagraph (f)(2) of 
Rule 19b-4 thereunder,\12\ because it establishes or changes a due, 
fee, or other charge imposed by the ISE. At any time within 60 days of 
the filing of the amended proposed rule change, the Commission may 
summarily abrogate such rule

[[Page 37880]]

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.\13\
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    \11\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \12\ 17 CFR 240.19b-4(f)(2).
    \13\ See supra note 3.
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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, as amended, is consistent with the Act. Comments may be 
sumitted 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-2005-19 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.
    All submissions should refer to File Number SR-ISE-2005-19. 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, 100 F Street, 
NE., Washington, DC 20549. Copies of the 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-2005-19 and should be 
submitted on or before July 21, 2005.

    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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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 05-12886 Filed 6-29-05; 8:45 am]
BILLING CODE 8010-01-M