[Federal Register Volume 70, Number 138 (Wednesday, July 20, 2005)]
[Notices]
[Pages 41804-41805]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-3863]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52027; File No. SR-ISE-2005-30]


Self-Regulatory Organizations; International Securities Exchange, 
Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change and Amendment No. 1 Thereto Relating to a One-Year Pilot 
Extension for the Price Improvement Mechanism

July 13, 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 July 8, 2005, 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 and II below, which Items have been prepared by the ISE. On 
July 13, 2005, the ISE submitted Amendment No. 1 to the proposed rule 
change.\3\ The Exchange has designated the proposed rule change as 
``non-controversial'' under Section 19(b)(3)(A) of the Act \4\ and Rule 
19b-4(f)(6) thereunder,\5\ which renders the proposal effective upon 
filing with the Commission. The Commission is publishing this notice to 
solicit comments on the 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\ In Amendment No. 1, the Exchange made corrections to the 
proposal's rule text. The effective date of the original proposed 
rule change is July 8, 2005, and the effective date of Amendment No. 
1 is July 13, 2005. 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 the period to commence on July 13, 2005, the date on which 
the ISE filed Amendment No. 1. See 15 U.S.C. 78s(b)(3)(C).
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to extend the pilot periods contained in 
paragraphs .03 and .05 of the Supplemental Material to ISE Rule 723. 
Below is the text of the proposed rule change, as amended. Proposed new 
language is italicized; proposed deletions are in [brackets].
* * * * *

Rule 723. Price Improvement Mechanism for Crossing Transactions

    (a) through (d) no change.

Supplementary Material to Rule 723

    .01 through .02 no change.
    .03 Initially, and for at least a Pilot Period expiring on July 18, 
[2005] 2006, there will be no minimum size requirements for orders to 
be eligible for the Price Improvement Mechanism. During the Pilot 
Period, the Exchange will submit certain data, periodically as required 
by the Commission, to provide supporting evidence that, among other 
things, there is meaningful competition for all size orders within the 
Price Improvement Mechanism, that there is significant price 
improvement for all orders executed through the Price Improvement 
Mechanism, and there is an active and liquid market functioning on the 
Exchange outside of the Price Improvement Mechanism. Any data which is 
submitted to the Commission will be provided on a confidential basis.
    .04 no change.
    .05 Paragraphs (c)(5), (d)(5) and (d)(6) will be effective for a 
Pilot Period expiring on July 18, [2005] 2006. During the Pilot Period, 
the Exchange will submit certain data relating to the frequency with 
which the exposure period is terminated by unrelated orders. Any data 
which is submitted to the Commission will be provided on a confidential 
basis.
* * * * *

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 Exchange has prepared summaries, set forth in

[[Page 41805]]

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 pilot periods provided in paragraphs .03 and .05 of the 
Supplementary Material to ISE Rule 723 expire on July 18, 2005.\6\ 
Paragraph .03 provides that there is no minimum size requirement for 
orders to be eligible for the Price Improvement Mechanism. Paragraph 
.05 concerns the termination of the exposure period by unrelated 
orders. The Exchange proposes to extend these pilots for one year to 
give the Exchange and the Commission additional time to evaluate the 
effects of the provisions before requesting permanent approval of the 
rules.
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    \6\ See Securities Exchange Act Release Nos. 50819 (December 8, 
2004), 69 FR 75093 (December 15, 2004); and 51424 (March 23, 2005), 
70 FR 16321 (March 30, 2005).
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2. Statutory Basis
    The Exchange believes that the proposed rule change, as amended, is 
consistent with Section 6(b) of the Act,\7\ in general, and furthers 
the objectives of Section 6(b)(5) of the Act,\8\ in particular, in that 
it is designed to promote just and equitable principles of trade, 
remove impediments to and perfect the mechanisms of a free and open 
market and a national market system and, in general, to protect 
investors and the public interest. Since the Price Improvement 
Mechanism has only been operating for a few months, the Exchange 
believes it is appropriate to extend the pilot periods to provide the 
Exchange and the Commission more data upon which to evaluate the rules.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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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. The Exchange has not received 
any written comments from members or other interested parties.

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

    The Exchange asserts that the foregoing proposed rule change, as 
amended, has become effective upon filing pursuant to Section 
19(b)(3)(A) of the Act \9\ and Rule 19b-4(f)(6) thereunder \10\ because 
it does not:
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
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    (i) Significantly affect the protection of investors or the public 
interest;
    (ii) impose any significant burden on competition; and
    (iii) become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate if 
consistent with the protection of investors and the public interest; 
provided that the Exchange has given the Commission written notice of 
its intent to file the proposed rule change at least five business days 
prior to the filing date of the proposal.\11\
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    \11\ As required under Rule 19b-4(f)(6)(iii), the Exchange 
provided the Commission with notice of its intent to file the 
proposed rule change at least five business days prior to the date 
of filing of the proposal.
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    A proposed rule change filed under Rule 19b-4(f)(6) normally may 
not become operative prior to 30 days after the date of filing.\12\ 
However, Rule 19b-4(f)(6)(iii) \13\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange has requested that the 
Commission waive the 30-day pre-operative period, which would make the 
rule change operative immediately. The Commission believes that waiving 
the 30-day operative delay is consistent with the protection of 
investors and the public interest, because it will allow the pilot 
periods to continue without interruption until July 18, 2006.\14\ For 
this reason, the Commission designates that the proposal become 
operative immediately.
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    \12\ 17 CFR 240.19b-4(f)(6)(iii).
    \13\ Id.
    \14\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    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.

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-2005-30 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-2005-30. 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 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-2005-30 and should be submitted on or before August 
10, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E5-3863 Filed 7-19-05; 8:45 am]
BILLING CODE 8010-01-P