[Federal Register Volume 70, Number 143 (Wednesday, July 27, 2005)]
[Notices]
[Pages 43481-43485]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-3998]



[[Page 43481]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52084; File No. SR-ISE-2005-27]


Self-Regulatory Organizations; International Securities Exchange, 
Inc.; Notice of Filing of a Proposed Rule Change and Amendment No. 1 
Thereto Relating to Generic Listing Standards and Position Limits for 
Broad-Based Index Options

July 20, 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 19, 2005, the International Securities Exchange, Inc. (``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 have been prepared by the ISE. On July 13, 
2005, the ISE 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 ISE made technical corrections to 
the filing and clarified certain issues raised by Commission Staff.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The ISE hereby proposes to amend its rules to adopt generic listing 
standards and position limits for broad-based index options. The text 
of the proposed rule change appears below. Additions are italicized.

Rule 2002. Designation of an Index

    (a)-(c) No Change.
    (d) The Exchange may trade options on a broad-based index pursuant 
to Rule 19b-4(e) of the Securities Exchange Act of 1934, if each of the 
following conditions is satisfied:
    (1) The index is broad-based, as defined in Rule 2001(j);
    (2) Options on the index are designated as A.M.-settled;
    (3) The index is capitalization-weighted, modified capitalization-
weighted, price-weighted, or equal dollar-weighted;
    (4) The index consists of 50 or more component securities;
    (5) Component securities that account for at least ninety-five 
percent (95%) of the weight of the index have a market capitalization 
of at least $75 million, except that component securities that account 
for at least sixty-five percent (65%) of the weight of the index have a 
market capitalization of at least $100 million;
    (6) Component securities that account for at least eighty percent 
(80%) of the weight of the index satisfy the requirements of Rule 502 
applicable to individual underlying securities;
    (7) Each component security that accounts for at least one percent 
(1%) of the weight of the index has an average daily trading volume of 
at least 90,000 shares during the last six month period;
    (8) No single component security accounts for more than ten percent 
(10%) of the weight of the index, and the five highest weighted 
component securities in the index do not, in the aggregate, account for 
more than thirty-three percent (33%) of the weight of the index;
    (9) All component securities are ``reported securities,'' as 
defined in Rule 11Aa3-1 under the Exchange Act;
    (10) Non-U.S. component securities (stocks or ADRs) that are not 
subject to comprehensive surveillance agreements do not, in the 
aggregate, represent more than twenty percent (20%) of the weight of 
the index;
    (11) The current index value is widely disseminated at least once 
every fifteen (15) seconds by one or more major market data vendors 
during the time options on the index are traded on the Exchange;
    (12) The Exchange reasonably believes it has adequate system 
capacity to support the trading of options on the index, based on a 
calculation of the Exchange's current ISCA allocation and the number of 
new messages per second expected to be generated by options on such 
index;
    (13) An equal dollar-weighted index is rebalanced at least once 
every calendar quarter;
    (14) If an index is maintained by a broker-dealer, the index is 
calculated by a third-party who is not a broker-dealer, and the broker-
dealer has erected an informational barrier around its personnel who 
have access to information concerning changes in, and adjustments to, 
the index;
    (15) The Exchange has written surveillance procedures in place with 
respect to surveillance of trading of options on the index.
    (e) The following maintenance listing standards shall apply to each 
class of index options originally listed pursuant to paragraph (d) 
above:
    (1) The requirements set forth in subparagraphs (d)(1)-(d)(3) and 
(d)(9)-(d)(15) must continue to be satisfied. The requirements set 
forth in subparagraphs (d)(5)-(d)(8) must be satisfied only as of the 
first day of January and July in each year;
    (2) The total number of component securities in the index may not 
increase or decrease by more than ten percent (10%) from the number of 
component securities in the index at the time of its initial listing.
    In the event a class of index options listed on the Exchange fails 
to satisfy the maintenance listing standards set forth herein, the 
Exchange shall not open for trading any additional series of options of 
that class unless the continued listing of that class of index options 
has been approved by the SEC under Section 19(b)(2) of the Exchange 
Act.

Rule 2004. Position Limits for Broad-Based Index Options

    (a) Rule 412 generally shall govern position limits for broad-based 
index options, as modified by this Rule 2004. There may be no position 
limit for certain Specified (as provided in Rule 2000) broad-based 
index options contracts. Except as otherwise indicated below, the 
position limit for a broad-based index option shall be 25,000 
contracts. All other broad-based index options contracts shall be 
subject to a contract limitation fixed by the Exchange, which shall not 
be larger than the limits provided in the chart below.

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                                         Standard limit
                                        (on the same side
    Broad-based  underlying index        of the market)                         Restrictions
                                           (contracts)
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S&P SmallCap 600 Index...............             100,000  No more than 60,000 near-term.
S&P MidCap 400 Index.................              45,000  No more than 25,000 near-term.
Reduced Value S&P 1000 Index.........              50,000  No more than 30,000 near-term.

[[Page 43482]]

 
Micro S&P 1000 Index.................             500,000  No more than 300,000 near-term.
Nasdaq 100 Index.....................              75,000  None.
Mini Nasdaq 100 Index................             750,000  None.
Russell 3000 Index...................              50,000  No more than 30,000 near-term.
Mini Russell 3000 Index..............             500,000  No more than 300,000 near-term.
Russell 3000 Value Index.............              50,000  No more than 30,000 near-term.
Mini Russell 3000 Value Index........             500,000  No more than 300,000 near-term.
Russell 3000 Growth Index............              50,000  No more than 30,000 near-term.
Mini Russell 3000 Growth Index.......             500,000  No more than 300,000 near-term.
Russell 2500 Index...................              50,000  No more than 30,000 near-term.
Mini Russell 2500 Index..............             500,000  No more than 300,000 near-term.
Russell 2500 Value Index.............              50,000  No more than 30,000 near-term.
Mini Russell 2500 Value Index........             500,000  No more than 300,000 near-term.
Russell 2500 Growth Index............              50,000  No more than 30,000 near-term.
Mini Russell 2500 Growth Index.......             500,000  No more than 300,000 near-term.
Russell 2000 Index...................              50,000  No more than 30,000 near-term.
Mini Russell 2000 Index..............             500,000  No more than 300,000 near-term.
Russell 2000 Value Index.............              50,000  No more than 30,000 near-term.
Mini Russell 2000 Value Index........             500,000  No more than 300,000 near-term.
Russell 2000 Growth Index............              50,000  No more than 30,000 near-term.
Mini Russell 2000 Growth Index.......             500,000  No more than 300,000 near-term.
Russell 1000 Index...................              50,000  No more than 30,000 near-term.
Mini Russell 1000 Index..............             500,000  No more than 300,000 near-term.
Russell 1000 Value Index.............              50,000  No more than 30,000 near-term.
Mini Russell 1000 Value Index........             500,000  No more than 300,000 near-term.
Russell 1000 Growth Index............              50,000  No more than 30,000 near-term.
Mini Russell 1000 Growth Index.......             500,000  No more than 300,000 near-term.
Russell Top 200 Index................              50,000  No more than 30,000 near-term.
Mini Russell Top 200 Index...........             500,000  No more than 300,000 near-term.
Russell Top 200 Value Index..........              50,000  No more than 30,000 near-term.
Mini Russell Top 200 Value Index.....             500,000  No more than 300,000 near-term.
Russell Top 200 Growth Index.........              50,000  No more than 30,000 near-term.
Mini Russell Top 200 Growth Index....             500,000  No more than 300,000 near-term.
Russell MidCap Index.................              50,000  No more than 30,000 near-term.
Mini Russell MidCap Index............             500,000  No more than 300,000 near-term.
Russell MidCap Value Index...........              50,000  No more than 30,000 near-term.
Mini Russell MidCap Value Index......             500,000  No more than 300,000 near-term.
Russell MidCap Growth Index..........              50,000  No more than 30,000 near-term.
Mini Russell MidCap Growth Index.....             500,000  No more than 300,000 near-term.
Russell Small Cap Completeness Index.              50,000  No more than 30,000 near-term.
Mini Russell Small Cap Completeness               500,000  No more than 300,000 near-term.
 Index.
Russell Small Cap Completeness Value               50,000  No more than 30,000 near-term.
 Index.
Mini Russell Small Cap Completeness               500,000  No more than 300,000 near-term.
 Value Index.
Russell Small Cap Completeness Growth              50,000  No more than 30,000 near-term.
 Index.
Mini Russell Small Cap Completeness               500,000  No more than 300,000 near-term.
 Growth Index.
Mini NYSE U.S. 100 Index.............              50,000  No more than 30,000 near-term.
Micro NYSE U.S. 100 Index............             500,000  No more than 300,000 near-term.
Mini NYSE International 100 Index....              50,000  No more than 30,000 near-term.
Micro NYSE International 100 Index...             500,000  No more than 300,000 near-term.
Mini NYSE World Leaders Index........              50,000  No more than 30,000 near-term.
Micro NYSE World Leaders Index.......             500,000  No more than 300,000 near-term.
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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 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 Exchange proposes to amend its rules to adopt generic listing 
standards and position limits for broad-based index options. In 
particular, the Exchange proposes to adopt (i) ISE Rule 2002(d), which 
contains generic initial listing standards for broad-based index 
options, (ii) ISE Rule 2002(e), which contains generic maintenance 
standards for broad-based index options listed pursuant to proposed ISE 
Rule 2002(d), and (iii) an amendment to ISE Rule 2004(a), to provide 
position limits for broad-based index options listed pursuant to 
proposed ISE Rule 2002(d). This rule change would enable the Exchange 
to list broad-based index options pursuant to Rule 19b-4(e) \4\ of

[[Page 43483]]

the Act if each of the conditions set forth in ISE Rule 2002(d) are 
satisfied. The proposed rule change would further provide ongoing 
maintenance standards and position limits for broad-based index options 
listed pursuant to proposed ISE Rule 2002(d). Such options would, in 
all other respects, be traded pursuant to the Exchange's trading rules 
and procedures applicable to index options and be covered under the 
Exchange's surveillance program for index options. The Exchange notes 
that it and other options exchanges currently have rules that ain 
``generic'' listing standards pursuant to Rule 19b-4(e) and position 
limits for narrow-based index options.\5\ The Exchange also notes that 
CBOE currently has rules that contain generic listing standards and 
position limits for micro narrow-based index options.\6\ The standards 
contained in these proposed generic listing standards and position 
limits for broad-based index options are based on the standards 
contained in the generic listing standards and position limits for 
narrow-based index options and micro narrow-based index options that 
were previously approved by the Commission but have been adapted to 
reflect the characteristics of broad-based index options.
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    \4\ 17 CFR 240.19b-4(e). Rule 19b-4(e) provides that the listing 
and trading of a new derivative securities product by a self-
regulatory organization (``SRO'') shall not be deemed a proposed 
rule change, pursuant to paragraph (c)(1) of Rule 19b-4, if the 
Commission has approved, pursuant to Section 19(b) of the Act, the 
SRO's trading rules, procedures and listing standards for the 
product class that include the new derivative securities product and 
the SRO has a surveillance program for the product class. When 
relying on Rule 19b-4(e), the SRO must submit Form 19b-4(e) to the 
Commission within five business days after the exchange begins 
trading the new derivative securities products. See Securities 
Exchange Act Release No. 40761 (December 8, 1998), 63 FR 70952 
(December 22, 1998).
    \5\ See ISE Rules 2002(b), 2002(c) and 2005; Chicago Board 
Options Exchange (``CBOE'') Rules 24.2(b), 24.2(c) and 24.4A; 
American Stock Exchange Rules 901C Commentary .02 and 904C(c); 
Pacific Stock Exchange Rules 5.13 and 5.16; and Philadelphia Stock 
Exchange Rules 1009A(b), 1009A(c) and 1001A(b).
    \6\ See CBOE Rules 24.2(d), 24.2(e) and 24.4B.
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    Generic Initial Listing Standards for Broad-Based Index Options
    In order to list broad-based index options pursuant to the generic 
Rule 19b-4(e) listing standards, the underlying index must satisfy all 
of the conditions contained in proposed ISE Rule 2002(d). If the 
underlying index does not satisfy all of the conditions, the Exchange 
would be required to file a proposed rule change with the Commission on 
Form 19b-4 pursuant to Section 19(b)(2) of the Act \7\ and obtain 
Commission approval in order to list options on that index. Following 
are the conditions contained in proposed ISE Rule 2002(d).
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    \7\ 15 U.S.C. 78s(b)(2).
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     Under proposed ISE Rule 2002(d)(1), the index must be 
``broad-based,'' as defined in ISE Rule 2001(j). Rule 2001(j) defines 
the term ``broad-based'' as an index designed to be representative of a 
stock market as a whole or of a range of companies in unrelated 
industries.
     Under proposed ISE Rule 2002(d)(2),\8\ options on the 
index must be designated as A.M.-settled.
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    \8\ Proposed ISE Rule 2002(d)(2) is based on ISE Rule 
2002(b)(1).
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     Under proposed ISE Rule 2002(d)(3),\9\ the index must be 
capitalization-weighted, modified capitalization-weighted, price-
weighted, or equal dollar-weighted.
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    \9\ Proposed ISE Rule 2002(d)(3) is based on ISE Rule 
2002(b)(2).
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     Under proposed ISE Rule 2002(d)(4),\10\ the index must 
consist of 50 or more component securities. The Exchange believes that 
a 50 component minimum is reasonable for broad-based indexes, and, when 
applied in conjunction with the other listing requirements, will result 
in indexes that are sufficiently broad-based in scope and not readily 
subject to manipulation. The Exchange notes that there are currently a 
number of broad-based indexes that consist of fewer than 50 components, 
such as, the Dow Jones Industrial Average Index (30 components) and the 
Amex Major Market Index (20 components). The Exchange further notes 
that, while broad-based index options generally have more components 
than narrow-based index options, the generic listing standards for 
narrow-based index options are more liberal, requiring an index to 
consist of only 10 or more component securities.
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    \10\ Proposed ISE Rule 2002(d)(4) is based on ISE Rule 
2002(b)(2).
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     Under proposed ISE Rule 2002(d)(5),\11\ component 
securities comprising at least 95 percent of the index, by weight, must 
have a minimum market capitalization of $75 million. In addition, 
component securities comprising at least 65 percent of the index, by 
weight, must have a minimum market capitalization of $100 million.
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    \11\ Proposed ISE Rule 2002(d)(5) is based on ISE Rule 
2002(b)(3).
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     Under proposed ISE Rule 2002(d)(6),\12\ component 
securities that account for at least eighty percent (80%) of the weight 
of the index must satisfy the requirements of ISE Rule 502. That is, 
those securities must be ``options eligible,'' meaning they must have, 
for example, at least a 7 million share float, 2000 holders, total 
annual trading volume of 2,400,000 shares, a minimum price of $3 per 
share, and the issuer must be in compliance with its obligations under 
the Act. The Exchange believes that an 80% weighting is reasonable for 
broad-based indexes, and, when applied in conjunction with the other 
listing requirements, will result in indexes that contain components 
that are sufficiently liquid and not readily subject to manipulation. 
The Exchange notes that broad-based indexes may consist of thousands of 
components (for example, the Russell 3000 Index), and the components 
comprising the bottom 10% to 20% of the weight of the index generally 
are the smallest capitalized stocks and tend not to meet the 
requirements of ISE Rule 502. The Exchange further notes that the 
generic listing standards pursuant to Rule 19b-4(e) for narrow-based 
index options are less liberal, requiring a 90% weighting.
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    \12\ Proposed ISE Rule 2002(d)(6) is based on ISE Rule 
2002(b)(7).
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     Under proposed ISE Rule 2002(d)(7),\13\ each component 
security that accounts for at least one percent (1%) of the weight of 
the index must have an average daily trading volume, or ADTV, of at 
least 90,000 shares over the prior six month period. The Exchange 
believes that 90,000 ADTV is reasonable for broad-based indexes, and, 
when applied in conjunction with the other listing requirements, will 
result in indexes in which the more-heavily weighted components are 
sufficiently liquid and not readily subject to manipulation.
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    \13\ Proposed ISE Rule 2002(d)(7) is based on ISE Rule 
2002(b)(4).
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     Under proposed ISE Rule 2002(d)(8),\14\ no single 
component security may account for more than ten percent (10%) of the 
weight of an index, and the five highest weighted component securities 
in the index may not, in the aggregate, account for more than thirty-
three percent (33%) of the weight of an index. The Exchange believes 
that the 10% and 33% weighting concentration caps are reasonable for 
broad-based indexes, and, when applied in conjunction with the other 
listing requirements, will result in indexes that are not unreasonably 
dominated by a few heavily-weighted components.\15\ The Exchange notes 
that

[[Page 43484]]

the generic listing standards for narrow-based index options are more 
liberal, establishing 30% and 50% weighting concentration caps.
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    \14\ Proposed ISE Rule 2002(d)(8) is based on ISE Rule 
2002(b)(6).
    \15\ There are a number of broad-based indexes with component 
weighting concentrations that approach the limits proposed by the 
Exchange. See, for example, as of February 22, 2005, Morgan Stanley 
Multinational Company Index--50 components, top 5 account for 
33.24%; S&P 100 Index--100 components, top 5 account for 25.02%; 
Nasdaq 100 Index--100 components, top 5 account for 24.32%; GSTI 
Composite Index--178 components, top 5 account for 33.68%; Dow Jones 
Industrial Average Index--30 components; top 5 account for 29.92%; 
and Amex Major Market Index--20 components, top 5 account for 
37.14%.
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     Under proposed ISE Rule 2002(d)(9),\16\ all component 
securities must be ``reported securities,'' as defined in Rule 11Aa3-1 
under the Act.\17\
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    \16\ Proposed ISE Rule 2002(d)(9) is based on ISE Rule 
2002(b)(8).
    \17\ 17 CFR 240.11Aa3-1. A ``reported security'' is defined in 
paragraph (a)(4) of this rule as any listed equity security or 
NASDAQ security for which transaction reports are required to be 
made on a real-time basis pursuant to an effective transaction 
reporting plan. A ``transaction reporting plan'' is defined in 
paragraph (a)(2) of this rule as ``any plan for collecting, 
processing, making available or disseminating transaction reports 
with respect to transactions in reported securities filed with the 
Commission pursuant to, and meeting the requirements of, this 
section.''
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     Under proposed ISE Rule 2002(d)(10),\18\ no more than 20 
percent of the securities in the index, by weight, may be comprised of 
foreign securities or American depository receipts (``ADRs'') overlying 
foreign securities that are not subject to comprehensive surveillance 
sharing agreements.
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    \18\ Proposed ISE Rule 2002(d)(10) is based on ISE Rule 
2002(b)(9).
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     Under proposed ISE Rule 2002(d)(11),\19\ the current index 
value must be widely disseminated at least once every fifteen (15) 
seconds by one or more major market data vendors during the time 
options on the index are traded on the Exchange.
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    \19\ Proposed ISE Rule 2002(d)(11) is based on ISE Rule 
2002(b)(10).
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 Under proposed ISE Rule 2002(d)(12),\20\ the Exchange must 
reasonably believe that it has adequate system capacity to support the 
trading of options on the index. That belief must be based on the 
performance of a calculation by the Exchange that takes into account 
the Exchange's current Independent System Capacity Advisor (``ISCA'') 
allocation and the number of new peak messages per second expected to 
be generated by options on such index. The Exchange notes that it 
currently performs this calculation for all new broad-based index 
options that it lists under its current rules and represents it would 
use the same calculation for all broad-based index options listed 
pursuant to proposed ISE Rule 2002(d).
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    \20\ Proposed ISE Rule 2002(d)(12) is not based on a current ISE 
rule, but codifies its current practice with respect to the listing 
of a broad-based index option under its current rules.
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     Under proposed ISE Rule 2002(d)(13),\21\ an equal dollar-
weighted index must be rebalanced at least once every calendar quarter.
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    \21\ Proposed ISE Rule 2002(d)(13) is based on ISE Rule 
2002(b)(11).
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     Under proposed ISE Rule 2002(d)(14),\22\ if the index is 
maintained by a broker-dealer, it must be calculated by a third-party 
who is not a broker-dealer. Further, the broker-dealer must establish 
appropriate procedures to ensure that the broker-dealer will not 
possess or be able to misuse any informational advantages with respect 
to changes in, and adjustments to, an index. Such procedures must 
include, for example, the establishment of appropriate informational 
barriers.
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    \22\ Proposed ISE Rule 2002(d)(14) is based on ISE Rule 
2002(b)(12).
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     Under proposed ISE Rule 2002(d)(15),\23\ the Exchange must 
have written surveillance procedures in place with respect to 
surveillance of trading of options on the index.
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    \23\ Proposed ISE Rule 2002(d)(15) is not based on a current ISE 
rule, but codifies its current practice with respect to the listing 
of a broad-based index option under its current rules.
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Generic Maintenance Standards for Broad-Based Index Options Listed 
Pursuant to Proposed ISE Rule 2002(d)

    Following the listing of a broad-based index option pursuant to 
proposed ISE Rule 2002(d), the underlying index must continue to 
satisfy the maintenance standards contained in proposed ISE Rule 
2002(e) in the manner prescribed in proposed ISE Rule 2002(e). If the 
underlying index fails to satisfy the maintenance standards, the 
Exchange may not open for trading any additional series of options on 
that class of index options unless the continued listing of that class 
of index options has been approved by the Commission pursuant to 
section 19(b)(2) of the Act. Following are the maintenance standards 
contained in proposed ISE Rule 2002(e).
     Under proposed ISE Rule 2002(e)(1),\24\ the requirements 
of proposed ISE Rule 2002(d)(1)-(3) and (9)-(15) must continue to be 
satisfied. In addition, the requirements of proposed ISE Rule 
2002(d)(5)-(8) must be satisfied only as of the first day of January 
and July of each year. The Exchange believes that these maintenance 
standards are reasonable for broad-based indexes in as much as they 
strike an appropriate balance between the obligation to continually 
monitor and maintain critical attributes of the index, and the 
obligation to, at certain intervals, monitor and maintain non-critical 
attributes of the index, especially in light of the number of component 
securities that comprise broad-based indexes.
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    \24\ Proposed ISE Rule 2002(e)(1) is based on ISE Rule 
2002(c)(1).
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     Under proposed ISE Rule 2002(e)(2),\25\ the number of 
component securities in the index may not increase or decrease by more 
than ten percent (10%) from the number of component securities in the 
index at the time of its initial listing. The Exchange believes that 
this maintenance standard is reasonable for broad-based indexes, and, 
when applied in conjunction with the other maintenance requirements, 
will result in indexes that remain sufficiently broad-based and not 
readily subject to manipulation. The Exchange notes that the generic 
maintenance standards for narrow-based index options are more liberal, 
establishing a 33\1/3\% increase or decrease maximum.
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    \25\ Proposed ISE Rule 2002(e)(2) is based on ISE Rule 
2002(c)(2).
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Position Limits for Broad-Based Index Options Listed Pursuant to 
Proposed ISE Rule 2002(d)

    Following the listing of a broad-based index option pursuant to 
proposed ISE Rule 2002(d), trading in the broad-based index option 
shall be subject to position limits. If the Exchange sought to apply a 
different position limit, the Exchange would be required to file a 
proposed rule change with the Commission on Form 19b-4 pursuant to 
section 19(b)(2) of the Act and obtain Commission approval in order to 
apply the different position limit. The position limit for broad-based 
index options listed pursuant to proposed ISE rule 2002(d) shall be 
25,000 contracts. The Exchange believes that this position limit is 
reasonable for broad-based indexes and

[[Page 43485]]

will result in indexes that are not readily subject to manipulation.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the requirement under section 6(b)(5) \26\ to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest.
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    \26\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The proposed rule change does not 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.

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 ISE consents, the Commission will:
    (A) By order approve such proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change 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-2005-27 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-2005-27. 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-2005-27 and should be submitted on or before August 
17, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\27\
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    \27\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5-3998 Filed 7-26-05; 8:45 am]
BILLING CODE 8010-01-P