[Federal Register Volume 70, Number 168 (Wednesday, August 31, 2005)]
[Notices]
[Pages 51854-51855]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-4730]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52327; File No. SR-ISE-2004-33]


Self-Regulatory Organizations; International Securities Exchange, 
Inc.; Order Approving Proposed Rule Change and Amendment No. 1 Relating 
to the Entry of Complex Orders Into the Facilitation Mechanism

August 24, 2005.

I. Introduction

    On November 16, 2004, the International Securities Exchange, Inc. 
(``ISE'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to amend ISE Rule 716(d), 
``Facilitation Mechanism,'' to allow Electronic Access Members 
(``EAMs'') to enter complex orders into the ISE's facilitation 
mechanism. On December 14, 2004, the ISE submitted Amendment No. 1 to 
the proposal.\3\ The proposed rule change, as amended, was published 
for comment in the Federal Register on July 12, 2005.\4\ The Commission 
received no comments regarding the proposal. This

[[Page 51855]]

order approves the proposed rule change, as amended.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 made a technical revision to the text of the 
proposed rule change.
    \4\ See Securities Exchange Act Release No. 51968 (July 1, 
2005), 70 FR 40089.
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II. Description of the Proposal

    Currently, an EAM may not use the ISE's facilitation mechanism to 
facilitate a complex order. The ISE proposes to amend ISE Rule 716(d) 
to allow EAMs to use the facilitation mechanism to facilitate complex 
orders. Under the proposal, each leg of the complex order must be for 
at least 50 contracts. After an EAM enters a complex order into the 
facilitation mechanism, ISE members will be able to enter at net prices 
indications at which they would be willing to participate in the 
facilitation of the order. Complex orders entered into the facilitation 
mechanism will be executed pursuant to ISE Rule 716(d)(4), and the 
priority rules for complex orders in ISE Rule 722(b)(2) will apply.\5\ 
If a complex order entered into the facilitation mechanism could 
receive an improved net price from bids and offers for the individual 
legs of the order in the ISE's auction market, then the complex order 
will be executed at the better net price.
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    \5\ ISE Rule 722(b)(2) provides, in part, that a complex order 
may be executed at a total credit or debit price with another ISE 
member without giving priority to established bids or offers in the 
market that are not better than the bids or offers comprising such 
net debit or credit, provided that if any of the established bids or 
offers consists of a public customer limit order, the price of at 
least one leg of the complex order must trade at a price that is 
better than the corresponding bid or offer in the marketplace.
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III. Discussion

    The Commission finds that the proposed rule change, as amended, is 
consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange.\6\ 
In particular, the Commission finds that the proposed rule change is 
consistent with Section 6(b)(5) of the Act,\7\ which requires, among 
other things, that the rules of a national securities exchange be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, 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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    \6\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \7\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that the proposal could facilitate the 
execution of complex orders. The Commission notes that the priority 
rules in ISE Rule 722(b)(2) will apply to complex orders entered into 
the facilitation mechanism. In addition, if bids and offers in the 
ISE's auction market for the individual legs of the complex order being 
facilitated could produce a better net price for the order, then the 
complex order will receive an execution at the better net price.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\8\ that the proposed rule change (SR-ISE-2004-33), as amended, is 
approved.
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    \8\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-4730 Filed 8-30-05; 8:45 am]
BILLING CODE 8010-01-P