[Federal Register Volume 70, Number 131 (Monday, July 11, 2005)]
[Notices]
[Pages 39832-39833]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-3623]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51948; File No. SR-ISE-2005-28]


Self-Regulatory Organizations; International Securities Exchange, 
Inc.; Notice of Filing of Proposed Rule Change and Amendment No. 1 
Thereto Relating to Fee Changes for Transactions in Options on the 
Standard & Poor's Depository Receipts [reg] on a Retroactive Basis

June 30, 2005.
    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 May 20, 2005, the International Securities Exchange, Inc. 
(``Exchange'' or ``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 
Exchange. On June 15, 2005, the Exchange filed Amendment No. 1 to the 
proposed rule change.\3\ 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\ In Amendment No. 1, the Exchange made non-substantive 
changes to clarify the purpose for the fee change.
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I. 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 adopt a $.10 per 
contract surcharge for certain transactions in options based on the 
Standard & Poor's Depository Receipts([reg]), or SPDRs([reg]) 
(``SPDRs'') to become effective retroactively as of January 10, 
2005.\4\ The text of the proposed rule change, as amended, is available 
on the Exchange's Internet Web site (http://www.iseoptions.com), at the 
Exchange's Office of the Secretary, and at the Commission's Public 
Reference Room.
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    \4\ The Exchange filed with the Commission an identical proposed 
revision to its Schedule of Fees on May 20, 2005 (SR-ISE-2005-06), 
which was immediately effective as of that date under Section 
19(b)(3)(A) of the Act and Rule 19b-4(f)(2) thereunder. The Exchange 
filed Amendment No. 1 thereto on June 15, 2005. That proposal was 
published in Exchange Act Release No. 51901 (June 22, 2005), 70 FR 
37455 (June 29, 2005). Because the Exchange seeks to apply the 
surcharge to its Schedule of Fees on a retroactive basis as of 
January 10, 2005, the Exchange is submitting this proposal to the 
Commission under Section 19(b)(2) of the Act, to be published for 
notice and comment.
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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 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 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 proposes to amend its Schedule of Fees to 
retroactively establish, as of January 10, 2005, a $.10 per contract 
surcharge fee for certain transactions in options on SPDRs \5\ that 
became effective on May 20, 2005 pursuant to a previous proposed rule 
change submitted by the Exchange.\6\
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    \5\ The Exchange represents that these fees will be charged only 
to Exchange members.
    \6\ See supra note 4.
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    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 entered into a license 
agreement with Standard and Poor's, a unit of McGraw-Hill Companies, 
Inc., authorizing the Exchange to list SPDR options. The Exchange is 
adopting this fee for transactions in SPDR 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

[[Page 39833]]

of the license. However, because competitive pressures in the industry 
have resulted in the waiver of transaction fees for Public 
Customers,\7\ the Exchange proposes to exclude Public Customer Orders 
\8\ from this surcharge fee. Accordingly, this surcharge fee will only 
be charged to Exchange members with respect to non-Public Customer 
Orders (e.g., Market Maker and Firm Proprietary orders) and shall apply 
to Linkage Orders under a pilot program that is set to expire on July 
31, 2005.\9\
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    \7\ Public Customer is defined in ISE Rule 100(a)(32) as a 
person that is not a broker or dealer in securities.
    \8\ Public Customer Order is defined in ISE Rule 100(a)(33) as 
an order for the account of a Public Customer.
    \9\ See ISE Rule 1900(10) (defining Linkage Orders). The 
surcharge fee will apply to the following Linkage Orders: Principal 
Acting as Agent Orders and Principal Orders.
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    Additionally, if it is concluded by the courts, after all avenues 
of appeal, that no license from Standard and Poor's was required by the 
Exchange to list SPDR options, then upon any refund by Standard and 
Poor's, the Exchange shall submit a rule filing to the Commission 
providing for a reimbursement of the surcharge fees paid by members to 
the Exchange as a result of this surcharge fee.
    The Exchange now proposes to extend this surcharge fee 
retroactively to all applicable transactions occurring since January 
10, 2005.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \10\ in general, and furthers the 
objectives of 6(b)(4) of the Act \11\ 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.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 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 this proposed rule change.

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, as amended, or
    (B) institute proceedings to determine whether the proposed rule 
change, as amended, should be disapproved.

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-2005-28 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-9303.
    All submissions should refer to File Number SR-ISE-2005-28. 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 Room. Copies of the 
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-2005-28 
and should be submitted on or before August 1, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-3623 Filed 7-8-05; 8:45 am]
BILLING CODE 8010-01-P